The article discusses the tax implications of the recent Supreme Court decision in United States v. Quality Stores, Inc., which held that FICA tax liability applies to severance payments in most circumstances. The article notes that it is still possible to avoid FICA tax liability on certain severance payments in the context of a reduction in force or a corporate transaction if the payments are sufficiently linked to state unemployment compensation benefits. You may want to keep this in mind in representing employers (or executives) with respect to the design or negotiation of severance arrangements or in connection with a corporate transaction or other event resulting in a reduction in force.

*This article is reprinted with the permission of Tax Management Inc., a Bloomberg BNA Company, Arlington, VA. All rights reserved.

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