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Page Number: 15

12 

UNITED STATES v. QUALITY STORES, INC. 

Opinion of the Court 

signed  to  supplement  the  receipt  of  state  unemployment 
compensation and are actually tied to state unemployment
benefits”);  ibid.  (“SUB-pay  plans  must  be  designed  to
supplement unemployment benefits . . .”).

Once  this  background  is  understood,  the  Court  of  Ap-
peals’  interpretation  of  §3402(o)  as  standing  for  some 
broad  definitional  principle  is  shown  to  be  incorrect.
Although  Congress  need  not  have  agreed  with  the  Reve-
nue  Rulings  to  enact  §3402(o),  its  purpose  to  eliminate 
the  withholding  problem  caused  by  the  differential  treat-
ment  of  severance  payments  is  the  necessary  background
to  understand  the  meaning  and  purpose  of  the  provision. 
The problem Congress sought to resolve was the prospect 
that  terminated  employees  would  owe  large  payments  in
taxes at the end of the year as a result of the IRS’ exemp-
tion of certain SUBs from withholding.  It remained possi-
ble that the IRS would determine that other forms of SUB 
plans,  perhaps  linked  differently  to  state  unemployment 
benefits, should be exempt from withholding.  If Congress
had  only  incorporated  the  Revenue  Rulings  already  in
effect,  that  response  may  have  risked  the  withholding 
problem arising once again.  On the other hand, by draw-
ing  a  withholding  requirement  that  was  broader  than
then-current  IRS  exemptions,  Congress  avoided  these 
practical  problems.    A  requirement  that  a  form  of  remu-
neration  already  included  as  wages  be  treated  “as  if ”  it
were wages created no administrative difficulties. 

The  Court  of  Appeals  understood  Congress’  decision  to
include  within  §3402(o)  a  larger  set  of  SUBs  than  was
already  exempt  from  withholding  under  IRS  Revenue 
Rulings  to  mean  that  all  SUBs  were  excluded  from  the
definition of wages.  But that assumption, although in the 
abstract  not  necessarily  an  illogical  inference,  is  unsus-
tainable,  considering  the  regulatory  background  against 
which  §3402(o)  was  enacted.    Congress  interpreted  the 
Revenue  Rulings  not  at  all  as  a  definitive  gloss  on  the