Opinion ID: 475230
Heading Depth: 1
Heading Rank: 4

Heading: Retroactive Validation of Tax Paid Under 65-208

Text: 33 We now consider whether FICA taxes paid in conformity with Revenue Ruling 65-208 were retroactively validated by Congress in 1984. Our discussion begins with the 1983 decoupling provision: 34 Nothing in the regulations prescribed for purposes of chapter 24 (relating to income tax withholding) which provides an exclusion from wages as used in such chapter shall be construed to require a similar exclusion from wages in the regulations prescribed for purposes of this [FICA] chapter. 35 26 U.S.C. Sec. 3121(a) (Supp. I 1983). By this provision it is apparent that Congress intended to overturn the underlying premise of Rowan by permitting the Treasury Department to interpret the term wages differently from FICA and for income-tax withholding purposes, thereby validating prospectively regulations that had been invalid because of divergent interpretation. 10 We next turn to the 1984 provision: 36 The amendments made by subsection (b) ... [the 1983 FICA decoupling provision] shall apply to remuneration ... paid after March 4, 1983, and to any such remuneration paid on or before such date which the employer treated as wages when paid. 37 1984 Act Sec. 2662(g) (emphasis added). 38 It is manifest that this 1984 provision makes the validating function of the 1983 decoupling clause retroactively applicable to remuneration paid on or before [March 4, 1983] which the employer treated as wages when paid. And remuneration ... treated as wages when paid can only refer to remuneration that when paid was subject to taxation as wages pursuant to regulations previously unlawful under Rowan. So, the provision by its literal terms retroactively validates taxation previously unlawful because levied under regulations in conflict with Rowan. 39 The legislative history makes it clear, however, that Congress enacted the 1984 provision because of its concern as to the possible impact of Rowan on the validity of 65-208, and its concern that refunds of taxes paid in conformity with that ruling might be required: 40 If the 1965 revenue ruling [65-208] were determined to be invalid, then employers and employees would be eligible for refunds for open years because taxable wages would be lower. In addition, wages for benefit computation purposes would be reduced, leading in some cases to reduction of social security benefits being paid to current beneficiaries and recoupment of a portion of benefits which have been paid in recent years on the basis of wage records which included the salary reduction contributions. 41 H.R.Rep. No. 432, 98th Cong., 2d Sess. 1658, reprinted in 1984 U.S.Code Cong. & Ad.News 697, 1280 (emphasis added). Congress also wished to avoid the possibility that the originally prospective effective dates of the 1983 decoupling provisions 42 could be cited as demonstrating Congressional intent that the reasoning of the Rowan decision should generally apply before these dates to types of remuneration other than meals and lodging ... e.g., to contributions under a salary reduction agreement to tax-sheltered annuities (sec. 403(b)). 43 Id. (emphasis added). Thus, we think it evident that Congress intended to preclude the possibility of refunds of FICA taxes paid in conformity with 65-208 on amounts contributed under section 403(b) salary reduction plans. 44 As we have previously indicated, the 1984 provision, by its literal terms, retroactively validates only taxes levied in conformity with regulations previously invalid under Rowan. However, we find the legislative intent so clear as to prevail. Statutory language is ordinarily regarded as conclusive [a]bsent a clearly expressed legislative intention to the contrary. Consumer Product Safety Commission v. GTE Sylvania, Inc., 447 U.S. 102, 108, 100 S.Ct. 2051, 2056, 64 L.Ed.2d 766 (1980) (emphasis added); accord Dickerson v. New Banner Institute, Inc., 460 U.S. 103, 110, 103 S.Ct. 986, 990, 74 L.Ed.2d 845 (1983) (same). The literal wording of the statute is not the sole index to legislative intent. It cannot prevail over strong contrary indications in the legislative history.... Lange v. United States, 443 F.2d 720, 722-23 (D.C.Cir.1971) (footnote omitted); accord Bob Jones University v. United States, 461 U.S. 574, 586, 103 S.Ct. 2017, 2025, 76 L.Ed.2d 157 (1983) (court should go beyond the literal language of statute if reliance on language would defeat plain purpose of statute); In re Adamo, 619 F.2d 216, 222 (2d Cir.) (court would not apply statute in accord with its literal meaning where that would pervert its manifest purpose), cert. denied, 449 U.S. 843, 101 S.Ct. 125, 66 L.Ed.2d 52 (1980); In re Miracle Mart, Inc., 396 F.2d 62, 64 (2d Cir.1968) (literal language of statute not relied upon where congressional intent would be nullified). Here, the legislative history is very clear.... [that] Congress intended, through the 1984 amendments, to eliminate the very type of refund sought in the instant case. Temple University v. United States, supra, 769 F.2d at 133 (emphasis in original). 45 In short, we conclude that the 1984 provision retroactively validated previously unlawful FICA taxes paid on amounts contributed under salary reduction plans in conformity with Revenue Ruling 65-208. We now consider whether such retroactive validation is constitutional.