Opinion ID: 480545
Heading Depth: 1
Heading Rank: 2

Heading: the revenue ruling

Text: 5 During the period for which the Hospital seeks a refund--from 1980 to 1982--the statutes contained nearly identical definitions of wages subject to FICA taxes and income tax withholding. For income tax withholding, wages were defined as all remuneration (other than fees paid to a public official) for services performed by an employee for his employer, including the cash value of all remuneration paid in any medium other than cash. I.R.C. Sec. 3401 (1982). Wages were defined for FICA taxes as all remuneration for employment, including the cash value of all remuneration paid in any medium other than cash. I.R.C. Sec. 3121(a). 6 The FICA and income tax provisions also contained similarly worded exclusions from taxable wages for contributions to annuity plans. For an annuity contract purchased by a section 501(c)(3) employer for its employees, the statute provided that amounts contributed by such employer for such annuity contract ... shall be excluded from the gross income of the employee until the fund is distributed as long as the contributions did not exceed the designated allowance. I.R.C. Sec. 403(b). Similarly, the amount of any payment (including any amount paid by an employer for insurance or annuities, or into a fund, to provide for any such payment) made to, or on behalf of, an employee ... on account of ... retirement shall be excluded from FICA taxes. I.R.C. Sec. 3121(a)(2). Despite the similarity of the wording of these provisions, in Revenue Ruling 65-208 the Treasury took the position that, although employers did not have to withhold income taxes from contributions to salary reduction annuity plans under section 403(b), they did have to withhold and pay FICA taxes on those amounts under section 3121(a)(2). Rev.Rul. 65-208, 1965-2 C.B. 383. 7 We agree with the Second Circuit's conclusion that this position was in conflict not only with the plain language of the exclusion from FICA wages for the amount 'paid by an employer' but also with the interpretation accorded to the similar statutory language in section 403(b). Canisius College v. United States, 799 F.2d at 23. When interpreting legislation, a statute's plain language is the primary indicator of its meaning. Massachusetts Financial Services, Inc. v. Securities Investor Protection Corp., 545 F.2d 754, 756 (1st Cir.1976), cert. denied, 431 U.S. 904, 97 S.Ct. 1696, 52 L.Ed.2d 388 (1977). Section 3121(a) did not distinguish between salary reductions and salary supplements. The exclusion applied to any amount paid by an employer under an annuity retirement plan. I.R.C. Sec. 3121(a)(2). Moreover, the House Report said that payments were to be excluded even though the amount or possibility of such payments is taken into consideration in fixing the amount of remuneration. H.R.Rep. No. 728, 76th Cong., 1st Sess., reprinted in 1939-2 C.B. 538, 548. It seems clear that Congress intended to exclude salary reduction plans as well as salary supplement plans. See Canisius College v. United States, 799 F.2d at 22-23. 8 The Treasury's interpretation of similar statutes in different ways so as to exclude contributions to salary reduction plans from income tax withholding but not from FICA taxes is also contrary to Rowan Cos., Inc. v. United States, 452 U.S. 247, 101 S.Ct. 2288, 68 L.Ed.2d 814 (1981). In Rowan, the Supreme Court invalidated Treasury regulations that required the value of meals and lodging provided by employers to their employees to be included for FICA and Federal Unemployment Tax Act (FUTA) purposes, but not for income tax withholding purposes. Id. at 249-50, 101 S.Ct. at 2290-91. The Court found no indication in the legislative history that Congress intended substantially identical definitions of taxable wages to have different meanings. Id. at 255-62, 101 S.Ct. at 2293-97. It held that Congress intended its definition to be interpreted in the same manner for FICA and FUTA as for income-tax withholding. Id. at 263, 101 S.Ct. at 2297. 9 The Treasury's position in Revenue Ruling 65-208, therefore, was only justified if there was a sound basis for concluding that Congress meant something different by very similar provisions. The only basis for the distinction set forth in Revenue Ruling 65-208 was the conclusion that the gross income and FICA exclusions had substantially different purposes. But there is no indication that Congress had such different purposes in mind for the exclusions when it enacted the statutes. The Third Circuit concluded that in the absence of an explicit exclusion, the Treasury's position was justified because of the long-standing congressional intent to restrict the forms of compensation excluded from the FICA wage base. Temple Univ. v. United States, 769 F.2d at 130. The court was persuaded by a Senate Report accompanying the 1983 amendments that said: 10 The social security program aims to replace the income of beneficiaries when that income is reduced on account of retirement and disability. Thus, the amount of wages is the measure used both to define income which should be replaced and to compute FICA tax liability. Since the security system has objectives which are significantly different from the objective underlying the income tax withholding rules, the committee believes that amounts exempt from income tax withholding should not be exempt from FICA unless Congress provides an explicit FICA tax exclusion. 11 S.Rep. No. 23, 98th Cong., 1st Sess. 42, reprinted in 1983 U.S. Code Cong. & Ad.News 143, 183, quoted in Temple Univ. v. United States, 769 F.2d at 130. These concerns certainly justified Congress' modifying the statutes to adopt the Treasury's position. But in discerning Congress' intent in enacting the statutes, the opinion of the 1983 Congress on this matter is not entitled to as much weight as the contemporary legislative history. See Cannon v. University of Chicago, 441 U.S. 677, 687 n. 7, 93 S.Ct. 1764, 1768 n. 7, 36 L.Ed.2d 583 (1979). The Supreme Court has said that the views of a subsequent Congress form a hazardous basis for inferring the intent of an earlier one. United States v. Price, 361 U.S. 304, 313, 80 S.Ct. 326, 331, 4 L.Ed.2d 334 (1960); see also Estate of Ceppi v. Commissioner, 698 F.2d 17, 20 (1st Cir.) (statements of subsequent Congress are dubious support for statutory interpretation), cert. denied, 462 U.S. 1120, 103 S.Ct. 3088, 77 L.Ed.2d 1350 (1983). In 1983, Congress was looking to solidify the social security system in the face of serious concerns about its solvency, concerns that would motivate it to preclude possible claims for refunds. See H.R.Rep. No. 25, 98th Cong., 1st Sess., reprinted in 1983 U.S.Code Cong. & Ad.News 219. When the statutes were enacted in 1936, however, Congress wanted to encourage employers to provide retirement benefit plans even if it meant a reduction in contributions to the FICA system. See Canisius College v. United States, 799 F.2d at 23. The House Report said that [t]he reason for the exclusion was to save employers time and money but what is more important is that it will eliminate any reluctance on the part of the employer to establish such plans due to the additional tax cost. H.R.Rep. No. 728, 76th Cong., 1st Sess., reprinted in 1939-2 C.B. 538, 543. Although subjecting salary reduction plans to FICA taxes would be consistent with Congress' goals in 1983 and 1984, it would be contrary to Congress' goals when it created the exclusions. Because there is no indication that when the statutes were enacted Congress intended that the nearly identical provisions be interpreted differently, we conclude that Revenue Ruling 65-208 was an incorrect interpretation of the law and had no statutory basis.