Internal Revenue Bulletin 2001-31 (PDF rendition): IRS Announcements

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EXEMPT ORGANIZATIONS
Announcement 2001–79, page 97.
A list is provided of organizations now classified as private
foundations.
EMPLOYMENT TAX
Ct. D. 2070, page 90.
FICA and FUTA taxes. The Supreme Court has concluded
that, under sections 3111 and 3301 of the Code, back
wages are subject to FICA and FUTA taxes by reference to
the year the wages are in fact paid. United States v.
Cleveland Indians Baseball Co.
ADMINISTRATIVE
Announcement 2001–80, page 98.
The Service announces a reduction in the backup withholding
rate under section 3406(a)(1) of the Code on reportable pay-
ments paid after August 6, 2001. The announcement also pro-
vides a listing of tax products that will be revised to reflect the
reduced rate.
Internal Revenue
bbuulllleettiinn
Bulletin No. 2001–31
July 30, 2001
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
Department of the Treasury
Internal Revenue Service
Finding Lists begin on page ii.
Actions Relating to Court Decisions is on the page following the Introduction.
Finding Lists begin on page ii.

July 30, 20012001–31 I.R.B.
The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing offi-
cial rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, legislation, court decisions, and other items of
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The Bulletin is divided into four parts as follows:
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This part includes rulings and decisions based on provisions
of the Internal Revenue Code of 1986.
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To the extent practicable, pertinent cross references to
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The IRS Mission
Provide America’s taxpayers top quality service by help-
ing them understand and meet their tax responsibilities
and by applying the tax law with integrity and fairness to
all.
Introduction
The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402.

2001–31 I.R.B.July 30, 2001
It is the policy of the Internal Revenue
Service to announce at an early date
whether it will follow the holdings in cer-
tain cases. An Action on Decision is the
document making such an announcement.
An Action on Decision will be issued at
the discretion of the Service only on un-
appealed issues decided adverse to the
government. Generally, an Action on De-
cision is issued where its guidance would
be helpful to Service personnel working
with the same or similar issues. Unlike a
Treasury Regulation or a Revenue Ruling,
an Action on Decision is not an affirma-
tive statement of Service position. It is not
intended to serve as public guidance and
may not be cited as precedent.
Actions on Decisions shall be relied
upon within the Service only as conclu-
sions applying the law to the facts in the
particular case at the time the Action on
Decision was issued. Caution should be
exercised in extending the recommenda-
tion of the Action on Decision to similar
cases where the facts are different. More-
over, the recommendation in the Action
on Decision may be superseded by new
legislation, regulations, rulings, cases, or
Actions on Decisions.
Prior to 1991, the Service published ac-
quiescence or nonacquiescence only in
certain regular Tax Court opinions. The
Service has expanded its acquiescence
program to include other civil tax cases
where guidance is determined to be help-
ful. Accordingly, the Service now may ac-
quiesce or nonacquiesce in the holdings
of memorandum Tax Court opinions, as
well as those of the United States District
Courts, Claims Court, and Circuit Courts
of Appeal. Regardless of the court decid-
ing the case, the recommendation of any
Action on Decision will be published in
the Internal Revenue Bulletin.
The recommendation in every Action
on Decision will be summarized as ac-
quiescence, acquiescence in result only,
or nonacquiescence. Both “acquies-
cence” and “acquiescence in result only”
mean that the Service accepts the holding
of the court in a case and that the Service
will follow it in disposing of cases with
the same controlling facts. However, “ac-
quiescence” indicates neither approval
nor disapproval of the reasons assigned
by the court for its conclusions; whereas,
“acquiescence in result only” indicates
disagreement or concern with some or all
of those reasons. “Nonacquiescence” sig-
nifies that, although no further review
was sought, the Service does not agree
with the holding of the court and, gener-
ally, will not follow the decision in dis-
posing of cases involving other taxpay-
ers. In reference to an opinion of a circuit
court of appeals, a “nonacquiescence” in-
dicates that the Service will not follow
the holding on a nationwide basis. How-
ever, the Service will recognize the
precedential impact of the opinion on
cases arising within the venue of the de-
ciding circuit.
The Actions on Decisions published in
the weekly Internal Revenue Bulletin are
consolidated semiannually and appear in
the first Bulletin for July and the Cumu-
lative Bulletin for the first half of the
year. A semiannual consolidation also ap-
pears in the first Bulletin for the follow-
ing January and in the Cumulative Bul-
letin for the last half of the year.
The Commissioner ACQUIESCES in
result only in the following decision:
Exxon v. Commissioner,
1
113 T.C. 338 (1999)
(Dkt. Nos. 23331–95, 16692–97)
Actions Relating to Decisions of the Tax Court
1
Acquiescence in result only relating to whether the U.K. Petroleum Revenue Tax (PRT) is a creditable income tax under section 901.

Section 3111.—Rate of Tax
Ct. D. 2070
SUPREME COURT OF
THE UNITED STATES
No. 00–203
UNITED STATES v. CLEVELAND
INDIANS BASEBALL CO.
CERTIORARI TO THE UNITED
STATES COURT OF APPEALS FOR
THE SIXTH CIRCUIT
April 17, 2001
Syllabus
Under a grievance settlement agreement,
respondent Cleveland Indians Baseball
Company (Company) owed 8 players back-
pay for wages due in 1986 and 14 players
backpay for wages due in 1987. The Com-
pany paid the back wages in 1994. This case
presents the question whether, under the
Federal Insurance Contributions Act (FICA)
and the Federal Unemployment Tax Act
(FUTA), the back wages should be taxed by
reference to the year they were actually paid
(1994) or, instead, by reference to the years
they should have been paid (1986 and
1987). Both tax rates and the amount of the
wages subject to tax (the wage base) have
risen over time. Consequently, allocating
the 1994 payments back to 1986 and 1987
would generate no additional FICA or
FUTA tax liability for the Company and its
former employees, while treating the back
wages as taxable in 1994 would subject
both the Company and the employees to
significant tax liability. The Company paid
its share of employment taxes on the back
wages according to 1994 tax rates and wage
bases. After the Internal Revenue Service
denied its claims for a refund of those pay-
ments, the Company initiated this action in
District Court. The Company relied on
Sixth Circuit precedent holding that a settle-
ment for back wages should not be allocated
to the period when the employer finally
pays but to the periods when the wages
were not paid as usual. The District Court,
bound by that precedent, entered judgment
for the Company and ordered the Govern-
ment to refund FICA and FUTA taxes. The
Sixth Circuit affirmed.
Held:Back wages are subject to FICA
and FUTA taxes by reference to the year the
wages are in fact paid. Pp. 5-19.
(a) The Internal Revenue Code imposes
FICA and FUTA taxes “on every employer
. . . equal to [a percentage of] wages . . .
paid by him with respect to employment.”
26 U.S.C. Sections 3111(a), 3111(b), 3301.
The Social Security tax provision, Sec.
3111(a), prescribes tax rates applicable to
“wages paid during” each year from 1984
onward. The Medicare tax provision, Sec.
3111(b)(6), sets the tax rate “with respect
to wages paid after December 31, 1985.”
And the FUTA tax provision, Sec. 3301,
sets the rate as a percentage “in the case of
calendar years 1988 through 2007 . . . of
the total wages . . . paid by [the employer]
during the calendar year.” Section 3121(a)
establishes the annual ceiling on wages
subject to Social Security tax by defining
“wages” to exclude any remuneration
“paid to [an] individual by [an] employer
during [a] calendar year” that exceeds
“remuneration . . . equal to the contribution
and benefit base . . . paid to [such] individ-
ual . . . during the calendar year with
respect to which such contribution and
benefit base is effective.” Section
3306(b)(1) similarly limits annual wages
subject to FUTA tax. Pp. 5-6.
(b) The Government calls attention to
these provisions’ constant references to
wages paid during a calendar yearas the
touchstone for determining the applicable
tax rate and wage base. The meaning of
this language, the Government contends, is
plain: Wages are taxed according to the cal-
endar year they are in fact paid, regardless
of when they should have been paid. The
Court agrees with the Company that Social
Security Bd. v. Nierotko, 327 U.S. 358,
undermines the Government’s plain lan-
guage argument. The NierotkoCourt con-
cluded that, for purposes of determining a
wrongfully discharged worker’s eligibility
for Social Security benefits under Sec.
209(g), as that provision was formulated in
the 1939 Amendments to the Social
Security Act, a backpay award had to be
allocated as wages to calendar quarters of
the year “when the regular wages were not
paid as usual.” Id.at 370, and n. 25. The
Court found no conflict between this allo-
cation-back rule and language in Sec.
209(g) tying benefits eligibility to the num-
ber of calendar quarters “in which” a mini-
mum amount of “wages” “has been paid.”
Nierotko’sallocation holding for benefits
eligibility purposes, which the Government
does not here urge the Court to overrule,
thus turned on an implicit construction of
Sec. 209(g)’s terms — “wages” “paid” “in”
“a calendar quarter” — to include “regular
wages” that should have been paid but
“were not paid as usual,” 327 U.S. at 370.
Given this construction, it cannot be said
that the FICA and FUTA provisions pre-
scribing tax rates based on wages paid dur-
ing a calendar yearhave a plain meaning
that precludes allocation of backpay to the
year it should have been paid. Pp. 6-10.
(c) However, the Court rejects the
Company’s contention that, because
Nierotkoread the 1939 “wages paid” lan-
guage for benefits eligibility purposes to
accommodate an allocation-back rule for
backpay, the identical 1939 “wages paid”
language for tax purposes must be read the
same way. Nierotkodealt specifically and
only with Social Security benefits eligibili-
ty, not with taxation. The Court’s allocation
holding in Nierotkoin all likelihood reflect-
ed concern that the benefits scheme created
in 1939 would be disserved by allowing an
employer’s wrongdoing to reduce the quar-
ters of coverage an employee would other-
wise be entitled to claim toward eligibility.
No similar concern underlies the tax provi-
sions. The legislative history demonstrates
that the 1939 Amendments adopting the
“wages paid” rule for taxation were
designed to address Congress’ worry that,
as tax rates increased from year to year,
administrative difficulties and confusion
would attend the taxation of wages payable
in one year, but not actually paid until
another year.
(d) The Court is not persuaded Congress
incorporated Nierotko’streatment of back-
pay into the tax provisions when it amend-
ed the Social Security Act shortly after
Nierotkowas decided. Prior to 1946, the
FICA and FUTA wage bases were defined
in terms of remuneration paid with respect
to employment during a given year. The
1946 law amended Sec. 209(a), which
defines the Social Security wage base for
purposes of benefits calculation, by adopt-
ing the “wages paid” language already pre-
sent in Sec. 209(g), the provision construed
in Nierotko. Congress also used identical
July 30, 2001902001–31 I.R.B.
Part I. Rulings and Decisions Under the Internal Revenue Code of 1986

“wages paid” language in redefining the
FICA and FUTA wage bases for tax pur-
poses. Although the legislative history
makes clear that Congress sought to
achieve conformity between the tax and
benefits provisions, the conformity
Congress sought had nothing to do with
Nierotko’streatment of backpay. Rather,
Congress’ purpose in amending the FICA
and FUTA wage bases for tax and benefits
purposes was to define the yardstick for
measuring “wages” as the amount paid dur-
ing the calendar year without regard to the
year in which the employment occurred.
Because the concern that animates
Nierotko’streatment of backpay in the ben-
efits context has no relevance to the tax
side, it makes no sense to attribute to
Congress a desire for conformity not only
with respect to the general rule for measur-
ing “wages,” but also with respect to
Nierotko’sbackpay exception. Pp. 10-14.
(e) There is some force to the Company’s
contention that the Government’s refusal to
allocate back wages to the year they should
have been paid creates inequities in taxation
and incentives for strategic behavior that
Congress did not intend. But this case pre-
sents no structural unfairness in taxation
comparable to the structural inequity in
Nierotko’scontext. In Nierotko, an inflexi-
ble rule allocating backpay to the year it is
actually paid would never work to the
employee’s advantage; it could inure only
to the detriment of the employee, counter to
the thrust of the benefits eligibility provi-
sions. Here, by contrast, the Government’s
rule sometimes disadvantages the taxpayer,
as in this case; other times it works to the
disadvantage of the fisc. Anomalous results
must be considered in light of Congress’
evident interest in reducing complexity and
minimizing administrative confusion with-
in the FICA and FUTA tax schemes. Given
these concerns, it cannot be said that the
Government’s rule is incompatible with the
statutory scheme. The most that can be said
is that Congress intended the tax provisions
to be both efficiently administrable and fair,
and that this case reveals the tension that
sometimes exists when Congress seeks to
meet those twin aims. Pp. 14-17.
(f) Confronted with this tension, the
Court defers to the Internal Revenue
Service’s interpretation. The Court does
not sit as a committee of revision to perfect
the administration of the tax laws. United
States v. Correll, 389 U.S. 299, 306–307.
Instead, it defers to the Commissioner’s
regulations as long as they implement the
congressional mandate in a reasonable
manner. Id., at 307. The Internal Revenue
Service has long maintained regulations
interpreting the FICA and FUTA tax provi-
sions. In their current form, the regulations
specify that wages must be taxed according
to the year they are actually paid. Echoing
the language in 26 U.S.C. Sec. 3111(a)
(FICA) and Sec. 3301 (FUTA), these regu-
lations have continued unchanged in their
basic substance since 1940. Although the
regulations, like the statute, do not specifi-
cally address backpay, the Service has con-
sistently interpreted them to require taxa-
tion of back wages according to the year the
wages are actually paid, regardless of when
those wages were earned or should have
been paid. The Court need not decide
whether the Revenue Rulings themselves
are entitled to deference. In this case, the
Rulings simply reflect the agency’s long-
standing interpretation of its own regula-
tions. Because that interpretation is reason-
able, it attracts substantial judicial
deference. Thomas Jefferson Univ. v.
Shalala, 512 U.S. 504, 512. Pp. 17-18.
215 F.3d 1325, reversed.
GINSBURG, J., delivered the opinion of
the Court, in which REHNQUIST, C.J., and
STEVENS, O’CONNOR, KENNEDY,
SOUTER, THOMAS, and BREYER, JJ.,
joined. SCALIA, J., filed an opinion con-
curring in the judgment.
SUPREME COURT OF
THE UNITED STATES
No. 00–203
UNITED STATES, PETITIONER v.
CLEVELAND INDIANS BASEBALL
COMPANY
ON WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF
APPEALS FOR THE SIXTH CIRCUIT
[April 17, 2001]
JUSTICE GINSBURG delivered the
opinion of the Court.
The Federal Insurance Contributions
Act (FICA) and the Federal Unemploy-
ment Tax Act (FUTA) impose excise
taxes on employee wages to fund Social
Security, Medicare, and unemployment
compensation programs. This case con-
cerns the application of FICA and FUTA
taxes to payments of back wages. The In-
ternal Revenue Service has consistently
maintained that, for tax purposes, back-
pay awards should be attributed to the
year the award is actually paid. Respon-
dent Cleveland Indians Baseball Com-
pany (Company) urges, and the Court of
Appeals for the Sixth Circuit held, that
such awards must be allocated, as they are
for purposes of Social Security benefits
eligibility, to the periods in which the
wages should have been paid. According
due respect to the Service’s reasonable,
longstanding construction of the govern-
ing statutes and its own regulations, we
hold that back wages are subject to FICA
and FUTA taxes by reference to the year
the wages are in fact paid.
I
Pursuant to a settlement of grievances
asserted by the Major League Baseball
Players Association concerning players’
free agency rights, several Major League
Baseball clubs agreed to pay $280 million
to players with valid claims for salary dam-
ages. Under the agreement, the Company
owed 8 players a total of $610,000 in salary
damages for 1986, and it owed 14 players a
total of $1,457,848 in salary damages for
1987. The Company paid the awards in
1994. No award recipient was a Company
employee in that year.
This case concerns the proper FICA
and FUTA tax treatment of the 1994 pay-
ments. Under FICA, both employees and
employers must pay tax on wages to fund
Social Security and Medicare; under
FUTA, employers (but not employees)
must pay tax on wages to fund unemploy-
ment benefits. For purposes of this litiga-
tion, the Government and the Company
stipulated that the settlement payments
awarded to the players qualify as “wages”
within the meaning of FICA and FUTA.
The question presented is whether those
payments, characterized as back wages,
should be taxed by reference to the year
they were actually paid (1994), as the
Government urges, or by reference to the
years they should have been paid (1986
and 1987), as the Company and its sup-
porting amicus, the Major League
Baseball Players Association, contend.
In any given year, the amount of FICA
and FUTA tax owed depends on two deter-
2001–31 I.R.B.91July 30, 2001

July 30, 2001922001–31 I.R.B.
minants. The first is the tax rate. 26
U.S.C. Sections 3101, 3111 (FICA), Sec.
3301 (FUTA). The second is the statutory
ceiling on taxable wages (also called the
wage base), which limits the amount of
annual wages subject to tax. Sec.
3121(a)(1) (FICA), Sec. 3306(b)(1)
(FUTA). Both determinants have
increased over time. In 1986, the Social
Security tax on employees and employers
was 5.7 percent on wages up to $42,000;
1
in 1987, it was 5.7 percent on wages up to
$43,800;
2
and in 1994, 6.2 percent on
wages up to $60,600.
3
Although the
Medicare tax on employees and employers
remained constant at 1.45 percent from
1986 to 1994,
4
the taxable wage base rose
from $42,000 in 1986 to $43,800 in 1987,
5
and by 1994, Congress had abolished the
wage ceiling, thereby subjecting all wages
to the Medicare tax.
6
In 1986 and 1987,
the FUTA tax was 6.0 percent on wages up
to $7,000;
7
in 1994, it was 6.2 percent on
wages up to $7,000.
8
In this case, allocating the 1994 pay-
ments back to 1986 and 1987 works to the
advantage of the Company and its former
employees. The reason is that all but one
of the employees who received back
wages in 1994 had already collected
wages from the Company exceeding the
taxable maximum in 1986 and 1987.
Because those employees as well as the
Company paid the maximum amount of
employment taxes chargeable in 1986 and
1987, allocating the 1994 payments back
to those years would generate no addi-
tional FICA or FUTA tax liability. By
contrast, treating the back wages as tax-
able in 1994 would subject both the
Company and its former employees to
significant tax liability. The Company
paid none of the employees any other
wages in 1994,
9
and FICA and FUTA
taxes attributable to that year would be
calculated according to tax rates and wage
bases higher than their levels in 1986 and
1987.
Uncertain about the proper rule of taxa-
tion, the Company paid its share of
employment taxes on the back wages
according to 1994 tax rates and wage
bases. Its FICA payment totaled $99,382,
and its FUTA payment totaled $1,008.
10
After the Internal Revenue Service denied
its claims for a refund of those payments,
the Company initiated this action in
District Court, relying on Bowman v.
United States, 824 F.2d 528 (CA6 1987).
In Bowman, the Sixth Circuit held that “[a]
settlement for back wages should not be
allocated to the period when the employer
finally pays but ‘should be allocated to the
periods when the regular wages were not
paid as usual.’” Id., at 530 (quoting Social
Security Bd. v. Nierotko, 327 U.S. 358, 370
(1946)). The District Court, bound by
Bowman, entered judgment for the
Company and ordered the Government to
refund $97,202 in FICA and FUTA taxes.
11
On appeal, the Government observed
that two Courts of Appeals have held, in
disagreement with Bowman, that under
the law as implemented by Treasury
Regulations, wages are to be taxed for
FICA purposes in the year they are actual-
ly received. Walker v. United States, 202
F.3d 1290, 1292–1293 (CA10 2000)
(finding Nierotko“inapposite” and
Bowman“unpersuasive”); Hemelt v.
United States, 122 F.3d 204, 210 (CA4
1997) (finding it “clear under the Treasury
Regulations that ‘wages’ are to be taxed
for FICA purposes in the year in which
they are received”). The Court of Appeals
for the Sixth Circuit nevertheless affirmed
on the authority of Bowman. 215 F.3d
1325 (2000) (judgt. order).
We granted certiorari to resolve the
conflict among the Courts of Appeals, 531
U.S. 943 (2000), and now reverse the
Sixth Circuit’s judgment.
II
The Internal Revenue Code imposes
employment taxes “on every employer . . .
equal to [a percentage of] wages . . . paid
by him with respect to employment.” 26
U.S.C. Secs. 3111(a), 3111(b), 3301. The
Social Security tax provision, Sec.
3111(a), contains a table prescribing tax
rates applicable to “wages paid during”
each year from 1984 onward (e.g., “In
cases of wages paid during . . . 1990 or
thereafter . . . [t]he rate shall be . . . 6.2 per-
cent.”). The Medicare tax provision, Sec.
3111(b)(6), says “with respect to wages
paid after December 31, 1985, the rate
shall be 1.45 percent.” And the FUTA tax
provision, 26 U.S.C. Sec. 3301 (1994 ed.,
Supp. IV), says the rate shall be “6.2 per-
cent in the case of calendar years 1988
through 2007 . . . of the total wages (as
defined in section 3306(b)) paid by [the
employer] during the calendar year.”
Section 3121(a) of the Code establishes
the annual ceiling on wages subject to
Social Security tax. It does so by defining
“wages” to exclude any remuneration
“paid to [an] individual by [an] employer
during [a] calendar year” that exceeds
“remuneration . . . equal to the contribu-
tion and benefit base . . . paid to [such]
individual by [such] employer during the
calendar year with respect to which such
contribution and benefit base is effective.”
Section 3306(b)(1) similarly limits annual
wages subject to FUTA tax by excluding
1
26 U.S.C. Secs. 3101(a), 3111(a), 3121(a)(1); 51
Fed. Reg. 40256, 40257 (1986).
2
Secs. 3101(a), 3111(a), 3121(a)(1); 50 Fed. Reg.
45558, 45559 (1985).
3
Secs. 3101(a), 3111(a), 3121(a)(1); 58 Fed. Reg.
58004, 58005 (1993).
4
Secs. 3101(b), 3111(b).
5
26 U.S.C. Sec. 3121(a)(1) (1982 ed.); 51 Fed. Reg.
40256, 40257 (1986); 50 Fed. Reg. 45558, 45559
(1985).
6
26 U.S.C. Sec. 3121(a)(1).
7
26 U.S.C. Secs. 3301, 3306(b)(1) (1982 ed. and
Supp. III).
8
26 U.S.C. Secs. 3301, 3306(b)(1).
9
If a player received wages in 1994 from another
employer in addition to receiving back wages from
the Company, the player — but not the Company —
would be entitled to a credit or refund of any Social
Security tax paid in excess of the amount of tax due
on a single taxable wage base ($60,600). 26 U.S.C.
Sec. 6413(c)(1). To illustrate, suppose a player
received $50,000 in back wages from the Cleveland
Indians and an additional $50,000 in wages from the
New York Mets in 1994. Assuming all $100,000 in
wages are taxed in 1994, the player would be entitled
to a credit or refund of Social Security tax paid in
excess of the amount of tax due on $60,600. By con-
trast, the Indians and the Mets would eachbe liable
for Social Security taxes on $50,000 in wages paid to
that player. 26 U.S.C. Sec. 3111 (Social Security tax
is “an excise tax, with respect to having individuals
in his employ”). Thus, under the Government’s pro-
posed rule, the Cleveland Indians would owe Social
Security taxes on all amounts up to $60,600 that it
paid to each player in 1994, regardless of whether
the players themselves had reached or exceeded the
$60,600 ceiling through multiple wage sources.
10
Although the Company also withheld $99,382 to
pay the employees’ share of FICA taxes, it does not
seek to recover any taxes paid on behalf of the
employees in this suit.
11
This amount is slightly less than the total FICA
and FUTA taxes paid by the Company in 1994. The
reason is that one of the employees who received a
1994 payment for wages due in 1987 received no
wages from the Company in 1987. The Company
thus owed a small amount of FICA and FUTA taxes
on the back wages paid to him even when those
wages were allocated back to 1987.

2001–31 I.R.B.93July 30, 2001
from “wages” any remuneration “paid to
[an] individual by [an] employer during
[a] calendar year” that exceeds “remuner-
ation . . . equal to $7,000 . . . paid to [such]
individual by [such] employer during
[the] calendar year.”
Both sides in this controversy have
offered plausible interpretations of
Congress’ design. We set out next the par-
ties’ positions and explain why we ulti-
mately defer to the Internal Revenue
Service’s reasonable, consistent, and
longstanding interpretation of the FICA
and FUTA provisions in point. Under that
interpretation, wages must be taxed
according to the year they are actually
paid.
A
In the Government’s view, the text of
the controlling FICA and FUTA tax provi-
sions explicitly instructs that employment
taxes shall be computed by applying the
tax rate and wage base in effect when
wages are actually paid. In particular, the
Government calls attention to the statute’s
constant references to wages paid during
a calendar yearas the touchstone for
determining the applicable tax rate and
wage base. 26 U.S.C. Sec. 3111(a) (set-
ting Social Security tax rates for “wages
paid during” particular calendar years);
Sec. 3121(a) (defining Social Security
wage base in terms of “remuneration . . .
paid . . . during the calendar year”); Sec.
3301 (setting FUTA tax rate as a percent-
age of “wages . . . paid . . . during the cal-
endar year”); Sec. 3306(b)(1) (defining
FUTA wage base in terms of “remunera-
tion . . . paid . . . during any calendar
year”). The meaning of this language, the
Government contends, is plain: Wages
are taxed according to the calendar year
they are in fact paid, regardless of when
they should have been paid.
In support of this reading, the Govern-
ment observes that Congress chose the
words in the current statute specifically to
replace language in the original 1935 So-
cial Security Act providing that FICA and
FUTA tax rates applied to wages paid or
received “with respect to employment
during the calendar year.” Social Secu-
rity Act (1935 Act), Secs. 801, 804, 901,
49 Stat. 636–637, 639 (emphasis added).
The Treasury Department had interpreted
this 1935 language to mean that wages are
taxed at “the rate in effect at the time of
the performance of the servicesfor which
the wages were paid.” Treas. Regs. 91,
Arts. 202, 302 (1936) (emphasis added).
In 1939, Congress amended the 1935 Act
to provide that FICA and FUTA tax rates
would no longer apply on the basis of
when services were performed, but would
instead apply “with respect to wages paid
during the calendar yea[r].” Social Se-
curity Act Amendments of 1939 (1939
Amendments), Secs. 604, 608, 53 Stat.
1383, 1387 (emphasis added). This 1939
language remains essentially unchanged
in the current FICA and FUTA tax provi-
sions, 26 U.S.C. Secs. 3111(a) and 3301.
Acknowledging that the 1939 Amend-
ments established a “wages paid” rule for
FICA and FUTA taxation, the Company
nevertheless argues that Social Security
Bd. v. Nierotko, 327 U.S. 358 (1946), un-
dermines the Government’s plain lan-
guage argument. According due weight
to our precedent, we agree.
In Nierotko, the National Labor
Relations Board had ordered the reinstate-
ment of a wrongfully discharged employ-
ee with “back pay” covering wages lost
during the period from February 1937 to
September 1939. Id., at 359. The
employer paid the award in July 1941.
Id., at 359–360. The primary question
presented and aired in the Court’s opinion
was whether backpay for a time in which
the employee was not on the job should
nevertheless count as “wages” in deter-
mining the employee’s eligibility for
Social Security benefits. Id., at 359.
Notwithstanding the contrary view of the
Social Security Board and the Bureau of
Internal Revenue, the Court held that
backpay covering the wrongful discharge
period met the definition of “wages” in
the 1935 Act. Id., at 360–370.
In the final two paragraphs of the
Nierotkoopinion, the Court took up the
question of how the backpay award
should be allocated for purposes of deter-
mining the worker’s eligibility for bene-
fits. As originally enacted, the Social
Security Act extended benefits to persons
over 65 who had earned at least $2,000 in
wages in each of any five years after
1936. 1935 Act, Secs. 201(a), 210(c), 49
Stat. 622, 625. In 1939, however,
Congress introduced a new scheme,
which remains in place today, tying eligi-
bility for benefits to the number of calen-
dar-year “quarters of coverage” accumu-
lated by an individual. 1939 Amend-
ments, Secs. 209(g), (h), 53 Stat. 1376–
1377 (codified at 42 U.S.C. Secs.
413(a)(2), 414). Section 209(g) defined a
“quarter of coverage” as either “a calen-
dar quarter in which the individual has
been paid not less than $50 in wages” or
any quarter except the first “where an
individual has been paid in a calendar
year $3,000 or more in wages.” 53 Stat.
1377.
Nierotkoswiftly dispatched the ques-
tion whether “‘back pay’ must be allocat-
ed as wages . . . to the ‘calendar quarters’
of the year in which the money would
have been earned, if the employee had not
been wrongfully discharged.” 327 U.S.,
at 370. Rejecting the Government’s argu-
ment that such allocation was impermissi-
ble because the 1939 Amendments to the
benefits scheme refer to “‘wages’ to be
‘paid’ in certain ‘quarters,’” id., at 370,
and n. 25 (citingid., at 362, n. 7 (citing
Sec. 209(g))), the Court concluded: “If, as
we have held above, ‘back pay’ is to be
treated as wages, we have no doubt that it
should be allocated to the periods when
the regular wages were not paid as usual.”
Id., at 370.
Although the allocation question in
Nierotkowas a secondary issue addressed
summarily by the Court, we think the
Company is correct that Nierotkounder-
cuts the plain meaning argument urged by
the Government here. Nierotkofound no
conflict between an allocation-back rule
for backpay and the language in Sec.
209(g) tying benefits eligibility to the
number of calendar quarters “in which” a
minimum amount of “wages” “has been
paid.” The Court’s allocation holding for
benefits eligibility purposes, which the
Government does not urge us to overrule,
Tr. of Oral Arg. 9, thus turned on an
implicit construction of Sec. 209(g)’s
terms — “wages” “paid” “in” “a calendar
quarter” — to include “regular wages”
that should have been paid but “were not
paid as usual,” 327 U.S., at 370. Given
this construction of Sec. 209(g), now cod-
ified in 42 U.S.C. Sec. 413(a)(2), we can-
not say that the FICA and FUTA provi-
sions prescribing tax rates based on wages
paid during a calendar year, codified in
26 U.S.C. Secs. 3111(a), 3301, have a
plain meaning that precludes allocation of
backpay to the year it should have been
paid. Cf. Hilton v. South Carolina Public

Railways Comm’n, 502 U.S. 197, 205
(1991) (“stare decisisis most compelling”
where “a pure question of statutory con-
struction” is involved).
B
From here, we part ways with the
Company. Although we agree that
Nierotkoblocks the Government’s argu-
ment that the “wages paid” formulation in
26 U.S.C. Secs. 3111(a) and 3301 has a
dispositively plain meaning, we reject the
Company’s next contention. Because
Nierotkoread the 1939 “wages paid” lan-
guage for benefits eligibility purposes to
accommodate an allocation-back rule for
backpay, the Company urges, the identical
1939 “wages paid” language for tax pur-
poses must be read the same way. We do
not agree that the latter follows from the
former like the night, the day.
Nierotkodealt specifically and only
with Social Security benefits eligibility,
not with taxation. The Court’s allocation
holding in Nierotkoin all likelihood
reflected concern that the benefits scheme
created in 1939 would be disserved by
allowing an employer’s wrongdoing to
reduce the quarters of coverage an
employee would otherwise be entitled to
claim toward eligibility. No similar con-
cern underlies the tax provisions.
Although Social Security taxes are used to
pay for Social Security benefits in the
aggregate, there is no direct relation
between taxes and benefits at the level of
an individual employee. As the Company
itself acknowledges, “Social Security tax
‘contributions,’ unlike private pension
contributions, do not create in the contrib-
utor a property right to benefits against
the government, and wages rather than
[tax] contributions are the statutory basis
for calculating an individual’s benefits.”
Brief for Respondent 14.
Nierotkothus does not compel symmet-
rical construction of the “wages paid” lan-
guage in the discrete taxation and benefits
eligibility contexts. Although we generally
presume that “identical words used in dif-
ferent parts of the same act are intended to
have the same meaning,” Atlantic Cleaners
& Dyers, Inc. v. United States, 286 U.S.
427, 433 (1932), the presumption “is not
rigid,” and “the meaning [of the same
words] well may vary to meet the purposes
of the law,” ibid.Cf. Cook, “Substance”
and “Procedure” in the Conflict of Laws, 42
Yale L. J. 333, 337 (1933) (“The tendency
to assume that a word which appears in two
or more legal rules, and so in connection
with more than one purpose, has and should
have precisely the same scope in all of them
. . . has all the tenacity of original sin and
must constantly be guarded against.”). The
benefits scheme delineated in Title 42
would “no doubt” be set awry without an
allocation-back rule for back wages,
notwithstanding “accounting difficulties.”
Nierotko, 327 U.S. at 370. But that surely
cannot be said for the taxation scheme
described in Title 26, where Congress’ evi-
dent concern was not worker eligibility for
benefits, but fiscal administrability.
12
The 1939 Amendments adopting the
“wages paid” rule for taxation reflected
Congress’ worry that, as tax rates increase
from year to year, “difficulties and confu-
sion” would attend the taxation of wages
payable in one year, but not actually paid
until another year. S. Rep. No. 734, 76th
Cong., 1st Sess., 75–76; see also H.R.
Rep. No. 728, 76th Cong., 1st Sess.,
57–58. Congress understood that an
employee’s annual compensation may be
“based on a percentage of profits, or on
future royalties, the amount of which can-
not be determined until long after the
close of the year.” S. Rep. No. 734, 76th
Cong., 1st Sess., at 75. Requiring employ-
ers to “estimate unascertained amounts
and pay taxes and contributions on that
basis” would “cause a burden on employ-
ers and administrative authorities alike.”
Id., at 75–76. Congress correctly antici-
pated that “[t]he placing of [FICA and
FUTA] tax[es] on the ‘wages paid’ basis
[would] relieve this situation.” Id., at 76.
“Under the amendment the rate applicable
would be the rate in effect at the time that
the wages are paid and received without
reference to the rate which was in effect at
the time the services were performed.”
H.R. Rep. No.728, supra, at 58.
As an additional ground for construing
the tax and benefits provisions in pari mate-
ria, the Company insists that Congress
incorporated Nierotko’streatment of back-
pay into the tax provisions when it amend-
ed the Social Security Act shortly after
Nierotkowas decided. Prior to 1946, the
FICA and FUTA wage bases had been
defined in terms of remuneration “paid . . .
with respect to employment during” a given
year. 1935 Act, Sec. 811(a), 49 Stat. 639
(FICA); 1939 Amendments, Sec. 606, 53
Stat. 1383 (FUTA). Paralleling the 1939
Amendments to the tax rate provisions,
Congress in 1946 established the current
“wages paid” rule for identifying the wages
that compose the FICA and FUTA wage
bases in a given year. Social Security Act
Amendments of 1946 (1946 Amendments),
Secs. 412, 414, 60 Stat. 989-991 (codified
at 26 U.S.C. Secs. 3121(a), 3306(b)(1)).
The 1946 law amended Sec. 209(a), which
defines the Social Security wage base for
purposes of benefits calculation, by adopt-
ing the “wages paid” language already pre-
sent in Sec. 209(g), the provision construed
in Nierotko. Sec. 414, 60 Stat. 990–991.
Congress also used identical “wages paid”
language in redefining the FICA and FUTA
wage bases for tax purposes. Sec. 412, 60
Stat. 989. Relying on the presumption that
Sec. 209(a), as amended, incorporated
Nierotko’sconstruction of Sec. 209(g), see
Cannon v. University of Chicago, 441 U.S.
677, 696–699 (1979), and observing that
Congress redefined the wage bases for tax-
ation to “confor[m] with the changes in sec-
tion 209(a),” S. Rep. No. 1862, 79th Cong.,
2d Sess., 36 (1946); H.R. Rep. No. 2447,
79th Cong., 2d Sess., 35 (1946), the
Company urges that the amended benefits
and tax provisions codified Nierotko’s
backpay allocation rule.
We are unpersuaded. Even assuming
that the benefits provision, Sec. 209(a), is
properly construed as incorporating
Nierotko’sreading of Sec. 209(g), we think
the “confor[mity]” Congress sought to
achieve between the tax and benefits provi-
sions, S. Rep. No. 1862, supra, at 36; H.R.
July 30, 2001942001–31 I.R.B.
12
In determining that “accounting difficulties” were
“not . . . insuperable” to its allocation holding,
Nierotkonoted that “‘back pay’ is now treated dis-
tributively” under Sec. 119 of the Revenue Act of
1943. 327 U.S. at 370, and n. 26. Section 119 pro-
vided that backpay exceeding 15 percent of gross
income may be allocated to earlier periods for
income tax purposes if such allocation would reduce
the taxpayer’s liability. Sec. 119(a), 58 Stat. 39. But
Congress eliminated the 1943 backpay allocation
rule in 1964, see Pub. L. 88-272, Sec. 232(a), 78
Stat. 107, leaving behind the principle “too firmly
embedded in the income tax law to permit of any
question,” that “payments of compensation are
income to a taxpayer on a cash basis in the year of
receipt, as distinguished from the year in which the
compensation is earned,” 2 J. Mertens, Law of
Federal Income Taxation Sec. 12.42, p. 179 (1973).
The symmetry urged by the Company in construing
the tax and benefits provisions of FICA and FUTA
thus comes only at the expense of asymmetry in the
collection of income taxes and employment taxes.

Rep. No. 2447, supra, at 35, had nothing to
do with Nierotko’streatment of backpay.
The Committee Reports make clear that
Congress’ purpose in amending the FICA
and FUTA wage bases was to define the
“yardstick” for measuring “wages” as “the
amount paid during the calendar year . . . ,
without regard to the year in which the
employment occurred.” S. Rep. No. 1862,
supra, at 35 (emphasis added); H.R. Rep.
No. 2447, supra, at 35 (emphasis added). It
is with respect to this rule — measuring
“wages” based on “the amount paid during
the calendar year” — that Congress sought
conformity between the Title 26 tax provi-
sions and the Title 42 benefits provision.
See S. Rep. No. 1862, supra, at 36 (tax
wage base), 37 (benefits wage base); H.R.
Rep. No. 2447, supra, at 35 (tax wage
base), 36 (benefits wage base). Far from
indicating an intent to codify Nierotko,
those Reports suggest that Congress, if it
considered Nierotkoat all, considered it an
exception to the general rule for measuring
“wages” in a given year.
13
Because the
concern that animates Nierotko’streatment
of backpay in the benefits context has no
relevance to the tax side, supraat 10–11, it
makes no sense to attribute to Congress a
desire for conformity not only with respect
to the general rule for measuring “wages,”
but also with respect to Nierotko’sbackpay
exception.
C
Were the Company to rely solely on
arguments for symmetry in statutory con-
struction, we would be inclined to con-
clude, given Nierotko’slack of concern
with taxation, that the tax provisions
themselves, informed by legislative pur-
pose, require back wages to be taxed
according to the year they are actually
paid. But the Company has one more
arrow in its quiver.
Apart from its arguments for symmetry,
the Company contends that the
Government’s refusal to allocate back
wages to the year they should have been
paid creates inequities in taxation and
incentives for strategic behavior that
Congress did not intend. This contention is
not without force. Under the Government’s
rule, an employee who should have been
paid $100,000 in 1986, but is instead paid
$50,000 in 1986 and $50,000 in backpay in
1994, would owe more tax than if she had
been paid the full $100,000 due in 1986.
Conversely, a wrongdoing employer who
should have paid an employee $50,000 in
each of five years covered by a $250,000
backpay award would pay only one year’s
worth of employment taxes (limited by the
annual ceilings on taxable wages) in the
year the award is actually paid. The
Government’s rule thus appears to exempt
some wages that should be taxed and to tax
some wages that should be exempt.
Applying the Government’s rule to other
provisions of the Code produces similar
anomalies. Section 3121(a)(4), for exam-
ple, exempts disability benefits from FICA
tax if paid by an employer to an employee
more than six months after the employee
worked for the employer. 26 U.S.C. Sec.
3121(a)(4). Disability benefits included in
a backpay award would be exempt from
FICA tax if the employee had not worked
for the employer for six months prior to the
backpay award, even if the benefits should
have been paid within six months after the
employee stopped working for the employ-
er. According to the Company, such results
amount to tax windfalls, and invite employ-
ers wrongfully to withhold pay or benefits
in order to reap the advantages of a strate-
gically timed payment. See Brief for
Respondent 33–40 (additional examples of
windfalls and avoidance schemes). These
outcomes may be avoided, the Company
argues, by construing the tax provisions to
require taxation of back wages according to
the year the wages should have been paid.
It is, of course, true that statutory con-
struction “is a holistic endeavor” and that
the meaning of a provision is “clarified by
the remainder of the statutory scheme . . .
[when] only one of the permissible mean-
ings produces a substantive effect that is
compatible with the rest of the law.” United
Sav. Assn. of Tex. v. Timbers of Inwood
Forest Associates, Ltd., 484 U.S. 365, 371
(1988). The Company’s examples leave lit-
tle doubt that the Government’s rule gener-
ates a degree of arbitrariness in the operation
of the tax statutes. But in Nierotko’scontext,
an inflexible rule allocating backpay to the
year it is actually paid would never work to
the employee’s advantage; it could inure
onlyto the detriment of the employee,
counter to the thrust of the benefits eligibili-
ty provisions.
14
In this case, by contrast,
there is no comparable structural unfairness
in taxation. The Government’s rule some-
times disadvantages the taxpayer, as in this
case. Other times it works to the disadvan-
tage of the fisc, as the Company’s examples
show. The anomalous results to which the
Company points must be considered in light
of Congress’ evident interest in reducing
complexity and minimizing administrative
confusion within the FICA and FUTA tax
schemes. See supraat 11–12. Given the
practical administrability concerns that
underpin the tax provisions, we cannot say
that the Government’s rule is incompatible
with the statutory scheme. The most we can
say is that Congress intended the tax provi-
sions to be both efficiently administrable
and fair, and that this case reveals the ten-
sion that sometimes exists when Congress
seeks to meet those twin aims.
D
Confronted with this tension, “we do
not sit as a committee of revision to per-
fect the administration of the tax laws.”
United States v. Correll, 389 U.S. 299,
306–307 (1967). Instead, we defer to the
Commissioner’s regulations as long as
2001–31 I.R.B.95July 30, 2001
13
Indeed, the contemporaneous understanding of the
Commissioner of Internal Revenue was that the 1946
Amendments supplanted Nierotko’sallocation rule for
backpay. See Letter from Joseph D. Nunan, Jr.,
Commissioner of Internal Revenue, to Social Security
Administration, Bureau of Old-Age and Survivors
Insurance (Mar. 6, 1947) (“The Nierotkodecision
requiring your Agency to make an allocation of the
back pay award to prior periods was rendered on the
basis of the law in effect at that time. The Social
Security Act Amendments of 1946, having been enact-
ed subsequent to the date of the Nierotkodecision,
must be interpreted in the light of the language con-
tained in such Amendments and the Congressional
intent.”) (available in Lodging for Respondent, Exh.
F). Nevertheless, for benefits eligibility and calcula-
tion purposes, the Social Security Administration
(SSA) by regulation continues to apply the Nierotko
rule to “[b]ack pay under a statute,” 20 CFR Sec.
404.1242(b) (2000) (such backpay “is allocated to the
periods of time in which it should have been paid if the
employer had not violated the statute”), while declin-
ing to apply Nierotkoto “[b]ack pay not under a
statute,” Sec. 404.1242(c) (“This back pay cannot be
allocated to prior periods of time, but must be reported
by the employer for the period in which it is paid.”).
14
The SSA has interpreted its regulation governing
“[b]ack pay under a statute,” 20 CFR Sec.
404.1242(b) (2000), to allow the employee to choose
whether to allocate the back pay to the year it is paid
or to the year it should have been paid. Social
Security Administration, Reporting Back Pay and
Special Wage Payments to the Social Security
Administration 2, Pub. 957 (Sept. 1997).

they “implement the congressional man-
date in some reasonable manner.” Id., at
307. “We do this because Congress has
delegated to the [Commissioner], not to
the courts, the task of prescribing all need-
ful rules and regulations for the enforce-
ment of the Internal Revenue Code.”
National Muffler Dealers Assn., Inc. v.
United States, 440 U.S. 472, 477 (1979)
(citing Correll, 389 U.S. at 307 (citing 26
U.S.C. Sec. 7805(a))). This delegation
“helps guarantee that the rules will be
written by ‘masters of the subject’ . . . who
will be responsible for putting the rules
into effect.” 440 U.S., at 477 (quoting
United States v. Moore, 95 U.S. 760, 763
(1878)).
The Internal Revenue Service has long
maintained regulations interpreting the
FICA and FUTA tax provisions. In their
current form, the regulations specify that
the employer tax “attaches at the time that
the wages are paidby the employer,” 26
CFR Sec. 31.3111–3 (2000) (emphasis
added), and “is computed by applying to
the wages paid by the employer the rate in
effect at the time such wages are paid,”
Sec. 31.3111–2(c) (emphasis added); see
Secs. 31.3301–2, –3(b) (same for FUTA).
Echoing the language in 26 U.S.C. Secs.
3111(a) (FICA tax) and 3301 (FUTA tax),
these regulations have continued
unchanged in their basic substance since
1940. See T.D. 6516, 25 Fed. Reg. 13032
(1960); Treas. Regs. 107 (as amended by
T.D. 5566, 1947–2 Cum. Bull. 148); Treas.
Regs. 106 (as amended by T.D. 5566,
1947–2 Cum. Bull. 148); Treas. Regs. 106,
Secs. 402.301–.303, 402.401–.403 (1940).
Cf. National Muffler, 440 U.S. at 477 (“A
regulation may have particular force if it is
a substantially contemporaneous construc-
tion of the statute by those presumed to
have been aware of congressional
intent.”).
Although the regulations, like the
statute, do not specifically address back-
pay, the Internal Revenue Service has
consistently interpreted them to require
taxation of back wages according to the
year the wages are actually paid, regard-
less of when those wages were earned or
should have been paid. Rev. Rul. 89–35,
1989–1 Cum. Bull. 280; Rev. Rul.
78–336, 1978–2 Cum. Bull. 255. We
need not decide whether the Revenue
Rulings themselves are entitled to defer-
ence. In this case, the Rulings simply
reflect the agency’s longstanding interpre-
tation of its own regulations. Because that
interpretation is reasonable, it attracts
substantial judicial deference. Thomas
Jefferson Univ. v. Shalala, 512 U.S. 504,
512 (1994). We do not resist according
such deference in reviewing an agency’s
steady interpretation of its own 61-year-
old regulation implementing a 62-year-
old statute. “Treasury regulations and
interpretations long continued without
substantial change, applying to unamend-
ed or substantially reenacted statutes, are
deemed to have received congressional
approval and have the effect of law.”
Cottage Savings Assn. v. Commissioner,
499 U.S. 554, 561 (1991) (citing Correll,
389 U.S., at 305–306).
* * * *
In line with the text and administrative
history of the relevant taxation provisions,
we hold that, for FICA and FUTA tax pur-
poses, back wages should be attributed to
the year in which they are actually paid.
Accordingly, the judgment of the United
States Court of Appeals for the Sixth
Circuit is reversed.
It is so ordered.
SUPREME COURT OF
THE UNITED STATES
No. 00-203
UNITED STATES, PETITIONER v.
CLEVELAND INDIANS BASEBALL
COMPANY
ON WRIT OF CERTIORARI TO
THE UNITED STATES COURT
OF APPEALS FOR THE
SIXTH CIRCUIT
[April 17, 2001]
JUSTICE SCALIA, concurring in the
judgment.
If I believed that the text of the tax
statutes addressed the issue before us, I
might well find for the respondent, giving
that text the same meaning the Court found
it to have in the benefits provisions of the
Social Security Act. See Social Security
Bd. v. Nierotko, 327 U.S. 358, 370, and n.
25 (1946). The Court’s principal reason for
assigning the identical language a different
meaning in the present case — leaving
aside statements in testimony and
Committee Reports that I have no reason to
believe Congress was aware of — is that
tax assessments do not present the equitable
considerations implicated by the potential
arbitrary decrease of benefits in Nierotko.
See ante,at 10–11. But the Court acknowl-
edges that departing from Nierotkowill
produce arbitrary variations in tax liability.
See ante, at 15–16. As between an imme-
diate arbitrary increase in tax liability and a
deferred arbitrary decrease in benefits, I
cannot say the latter is the greater inequity.
The difference is at least not so stark as to
cause me to regard the two regulatory
schemes as different in kind, which I would
insist upon before giving different mean-
ings to identical statutory texts.
In fact, however, I do not think that the
text of the FICA and FUTA provisions, 26
U.S.C. Secs. 3111(a), 3111(b), 3301,
addresses the issue we face today. Those
provisions, which direct that taxes shall be
assessed against “wages paid” during the
calendar year, would be controlling if the
income we had before us were “wages”
within the normal meaning of that term;
but it is not. The question we face is
whether damages awards compensating
an employee for lost wagesshould be
regarded for tax purposes as wages paid
when the award is received, or rather as
wages paid when they would have been
paid but for the employer’s unlawful
actions. (The parties have stipulated that
the damages awards should be regarded as
taxable “wages paid” of some sort, see
also Social Security Bd. v. Nierotko,
supra, at 364–370.) The proper treatment
of such damages awards is an issue the
statute does not address, and hence it is an
issue left to the reasonable resolution of
the administering agency, here the
Internal Revenue Service. In Nierotko,
which we decided at a time when it was
common for courts to fill statutory gaps
that would now be left to the agency, we
provided one rule for purposes of the ben-
efits provisions. The Internal Revenue
Service has since provided another rule
for purposes of the tax provisions. Both
rules are reasonable; neither is compelled;
and neither involves a direct application
of the statutory term “wages paid” which
would require (or at least strongly sug-
gest) a uniform result. I therefore concur
in the Court’s judgment deferring to the
Government’s regulations.
July 30, 2001962001–31 I.R.B.

2001–31 I.R.B.97July 30, 2001
Foundations Status of Certain
Organizations
Announcement 2001–79
The following organizations have
failed to establish or have been unable to
maintain their status as public charities or
as operating foundations. Accordingly,
grantors and contributors may not, after
this date, rely on previous rulings or des-
ignations in the Cumulative List of Orga-
nizations (Publication 78), or on the pre-
sumption arising from the filing of notices
under section 508(b) of the Code. This
listing does notindicate that the organiza-
tions have lost their status as organiza-
tions described in section 501(c)(3), eligi-
ble to receive deductible contributions.
Former Public Charities.The follow-
ing organizations (which have been
treated as organizations that are not pri-
vate foundations described in section
509(a) of the Code) are now classified as
private foundations:
113 Calhoun Street Foundation, Inc.,
Charleston, SC
Advanced Community Educators, Inc.,
Decatur, GA
Aenon Evangelical Ministry, Trevose, PA
African-American Heritage Foundation,
Inc., Stone Mountain, GA
African American Women
Empowerment, Inc., Riviera Beach, FL
American Defense Coalition,
Mt. Pleasant, SC
American Dream Career Museum
Company, Mountaintop, PA
American Patriotic Charities, Inc.,
Augusta, GA
Atlanta Technical Assistant Organization,
Inc., Atlanta, GA
Autism Society of North Carolina, Inc.,
Raleigh, NC
Bankhead Courts RMC, Inc.,
Atlanta, GA
Barefoot Childrens Society, Inc.,
High Point, NC
Barnwell County Hospital Foundation,
Barnwell, SC
BBAM Community and Economic
Development Corporation, Tupelo, MS
Believers Outreach Ministries, Inc.,
Los Alamitos, CA
Blackburn Elementary School Parent
Teacher Organization, Newton, NC
Boys & Girls Club of Toombs Co., Inc.,
Vidalia, GA
British & International Sailors Society,
Mt. Pleasant, SC
Brothers II Residential Center,
Valdosta, GA
Cabrailsong School of Vocal Arts,
Columbia, SC
Callie Clark Seales Scholarship Fund,
Sumter, SC
Cape Cod Waves Girls Ice Hockey, Inc.,
Osterville, MA
Cape Sportsmans Society, Inc.,
Columbia, SC
Carolinas Volunteer Auxiliary, Inc.,
Florence, SC
Carpenters for Christ International,
Fair Play, SC
Casa Bonita Housing, Inc., A Non-Profit
Public Benefit Corporation,
Stockton, CA
Cause for Paws, Inc., Woodstock, GA
Chapss, Inc., Douglasville, GA
Cherokee Clean & Beautiful
Commission, Inc., Canton, GA
Chiefs Athletic Scholarship Fund, Inc.,
N. Myrtle Beach, SC
Circle of Reflection Enterprises, Inc.,
Atlanta, GA
Community Interactions, Inc.,
Metuchen, NJ
Community Service Group Foundation,
James Island, SC
Cross Cultural Institute of America, Inc.,
Spartansburg, SC
CSRA Breastfeeding Coalition,
Clearwater, SC
CSRA Share and Care Foundation, Inc.,
Washington, GA
Dekalb M.R. Homes II, Inc.,
Atlanta, GA
Disadvantaged Childrens Education
Fund, Inc., Greensboro, GA
Eastern Orangeburg County Enterprise
Community, Holly Hill, SC
Education Zone Network, Detroit, MI
Ethnographic and Environmental Science
Institute, Berkeley, CA
Family Assistance Management Service,
Inc., Charleston, SC
Family Health Institute, Lanham, MD
Family Life Education Center, Inc., An
Alternative to Child Abuse & Negl.,
Cedartown, GA
Feline Refuge, Mt. Pleasant, SC
Fertile Ground, Inc., Atlanta, GA
Filmmakers of Color Actors of Color,
Inc., Atlanta, GA
Fold, Inc., Asheville, NC
Forum to Stop Family Violence in
Clayton County, Inc., Decatur, GA
Fowler Middle School, Tigard, OR
Genessential, Inc., Stone Mountain, GA
Georgia Art Education Association, Inc.,
Marietta, GA
Give Us Hope, Inc., Norcross, GA
Golden Bells of Atlanta, Norcross, GA
Good Horseman Foundation,
Pine Lake, GA
Gospel Sound Ministries, Florence, SC
Grady Graves Annex, Inc., Atlanta, GA
Greater Atlanta Family Center, Inc.,
Decatur, GA
Greater Bethanyvine City Outreach
Community Service Ministry, Inc.,
Atlanta, GA
Healthy Kids of North Carolina, Inc.,
Raleigh, NC
Helping Youth Pursue Excellence, Inc.,
Atlanta, GA
Historical Society of Forsyth County,
Inc., Cumming, GA
Housing Ideas, Inc., Atlanta, GA
Institute for Human Development, Inc.,
Detroit, MI
International Hope Foundation,
West Palm Beach, FL
Invaders for Christ, Inc., Union City, GA
Itawa Retreat Center, Inc., Roswell, GA
Jericho Road Ministries, Longview, TX
Jones County Senior Citizens, Inc.,
Gray, GA
Judah Team Ministries, Inc., Smyrna, GA
Justice for Children, Summerville, SC
Life Signs, Inc., Pelion, SC
Listen Up-A Drug Prevention and
Education Company, College Park, GA
Live, Inc., Atlanta, GA
Live & Learn Counseling Center, Inc.,
Decatur, GA
Love in Action Ministries, Inc.,
Atlanta, GA
Lower Sampson Development Corp.,
Willard, NC
Mazzei Foundation, Inc., Tulsa, OK
Metro Outreach Project, Inc., Atlanta, GA
Midlands Foundation for Scholastic
Success, Columbia, SC
Midlands Wellness and Recreation
Institute, Swansea, SC
Mike Muth Basketball Scholarship Fund,
Inc., Williamston, SC
Part IV. Items of General Interest

July 30, 2001982001–31 I.R.B.
Miss-Lou Mental Health Association,
Natchez, MS
Mississippi Housing & Community
Services, Inc., Jackson, MS
Mt. Olive Housing, Inc., Myrtle Beach, SC
Naresh C. Jain Foundation, Buena Park, CA
Nathaniel House Personal Care Home,
Atlanta, GA
Nevada Testing Institute, Inc.,
North Las Vegas, NV
New Atlanta Early Learning Center, Inc.,
Atlanta, GA
New Dance Company of San Joaquin
Valley, Stockton, CA
New Directions Development
Corporation, Inc., Atlanta, GA
New Tyler Child Enrichment Center,
Incorporated, Memphis, TN
New York Retirees Association of
Georgia, Inc., Decatur, GA
North Carolina Indian Community
Development Corporation,
Raleigh, NC
North Carolina Peace Corps Association,
Durham, NC
Onesimus Foundation, Inc., Atlanta, GA
Operation Dignity, Inc., Decatur, GA
Options for Living-East One, Inc.,
Albany, GA
Options for Living-East Two, Inc.,
Albany, GA
Pain Foundation, Kansas City, MO
Palmetto Baseball League, Inc.,
Columbia, SC
Palmetto Girls Soccer Association,
Columbia, SC
Partners Advancing the Community, Inc.,
Hogansville, GA
Peaceworks, Charleston, SC
Peachstate Football Officials Association,
Atlanta, GA
Progressive Columbia, Inc.,
Atlanta, GA
Project Adopt, Inc., Stone Mountain, GA
Rabun County Real Life Crusade, Inc.,
Clayton, GA
Raduium Springs Foundation, Inc.,
Albany, GA
Recovery Center Foundation,
Hilton Head Island, SC
Reidville Historical Society,
Reidville, SC
Reins of Life Academy, Inc.,
Springfield, GA
Renewed Life, Inc., Blythewood, SC
Residents Working for Georgia, Inc.,
Macon, GA
Rippavilla, Inc., Columbia, TN
Rock County Family Coordinating
Council, Luverne, MN
Save Our Swamp, Inc., Conway, SC
S.C. Center for the Book,
Columbia, SC
Shandon Baptist Church Foundation,
Columbia, SC
Share International, Inc., Atlanta, GA
Somali Community Services of Seattle,
Seattle, WA
South Carolina Affiliate of the American
Geriatric Society, Rock Hill, SC
South Carolina Amateur Sports, Inc.,
Columbia, SC
Southern Hispanic Resource Center, Inc.,
Jonesboro, GA
Southwest Atlanta Community
Partnership, Inc., Atlanta, GA
St. Benedicts Society, Inc., Atlanta, GA
Star of Hope, Inc., New Orleans, LA
Stars of Heaven, Inc., Ellenwood, GA
Sumter Bluegrass Series, Inc.,
Manning, SC
Systas 4 Systas, Inc., East Orange, NJ
Tattnall Band Boosters, Inc.,
Reidsville, GA
Tenn-Vest, Incorporated, Memphis, TN
Tiger Band Booster Club, Smithville, TX
Tri-Community Collaborative, Inc.,
Atlanta, GA
Troup Shelter for Abused & Neglected
Children, LaGrange, KY
Urban Youth Enrichment Concepts, Inc.,
Atlanta, GA
Village Museum, McClellanville, SC
Waccamaw High School Athletic Booster
Club, Inc., Pawleys Island, SC
Wando High School Band Boosters,
Mt. Pleasant, SC
Washington County Golden Hawks
Athletic Association, Inc.,
Sandersville, GA
Wee-Love, Inc., Ladson, SC
William Henry Waldon Jr., Outreach
Ministry, Inc., Atlanta, GA
Wings of Love, Atlanta, GA
Word of Truth Community Housing
Association, Detroit, MI
If an organization listed above sub-
mits information that warrants the re-
newal of its classification as a public
charity or as a private operating founda-
tion, the Internal Revenue Service will
issue a ruling or determination letter
with the revised classification as to
foundation status. Grantors and contrib-
utors may thereafter rely upon such rul-
ing or determination letter as provided
in section 1.509(a)–7 of the Income Tax
Regulations. It is not the practice of the
Service to announce such revised classi-
fication of foundation status in the Inter-
nal Revenue Bulletin.
New Backup Withholding Rate
for Amounts Paid After August
6, 2001
Announcement 2001–80
Purpose
This announcement is to advise payers
about a reduction in the backup withhold-
ing rate authorized by section 3406(a)(1)
of the Internal Revenue Code. Section
101(c)(10) of the Economic Growth and
Tax Relief Reconciliation Act of 2001
(Public Law 107-16) reduced the rate for
backup withholding on reportable pay-
ments.
New Backup Withholding Rate
Effective for amounts paid after August
6, 2001, payers should backup withhold
at a reduced rate of 30.5%.
For amounts paid after December 31,
2001, the backup withholding rate will be
further reduced to 30%.
New Rate Not Reflected in 2000
Products
The backup withholding rate shown in
the December 2000 revision of the fol-
lowing products is incorrect for amounts
paid after August 6, 2001.
Tax Forms.
• Instructions for the Requester of Forms
W-8BEN, W-8ECI, W-8EXP, and
W-8IMY
• Instructions for Form W-8BEN
• Instructions for Form W-8ECI
• Instructions for Form W-8EXP
• Instructions for Form W-8IMY
• Form W-9, Request for Taxpayer Iden-
tification Number and Certification
• Instructions for the Requester of Form
W-9
The Instructions for the Requester of
Forms W-8BEN, W-8ECI, W-8EXP, and
W-8IMY, and the separate instructions for
Forms W-8BEN, W-8ECI, W-8EXP, and
W-8IMY will be revised in August 2001
to reflect the new rates.

2001–31 I.R.B.99July 30, 2001
Form W-9 and the Instructions for the
Requester of Form W-9 will be revised in
December 2001 to reflect the new backup
withholding rate for amounts paid after
December 31, 2001.
Technical publications.
• Publication 17, Your Federal Income Tax
• Publication 225, Farmer’s Tax Guide
• Publication 505, Tax Withholding and
Estimated Tax
• Publication 515, Withholding of Tax on
Nonresident Aliens and Foreign Cor-
porations
• Publication 542, Corporations
• Publication 550, Investment Income
and Expenses
• Publication 583, Starting a Business
and Keeping Records
• Publication 1212, List of Original Issue
Discount Instruments
The 2001 version of these publications will
show the new backup withholding rate for
amounts paid after December 31, 2001.
New Rate Not Reflected in 2001
Products
The backup withholding rate shown in
the 2001 version of the following prod-
ucts is incorrect for amounts paid after
August 6, 2001.
• Form W-2G, Certain Gambling Winnings
• Instructions for Form 1042-S
• Form 1099-DIV, Dividends and Distri-
butions
• Form 1099-G, Certain Government
and Qualified State Tuition Program
Payments
• Form 1099-INT, Interest Income
• Form 1099-OID, Original Issue Dis-
count
• Form 1099-MISC, Miscellaneous In-
come
• Form 1099-PATR, Taxable Distribu-
tions Received From Cooperatives
• Instructions for Forms 1099, 1098,
5498, and W-2G
The 2002 version of these forms and
instructions will show the new backup
withholding rate for amounts paid after
December 31, 2001.

July 30, 2001i2001–31 I.R.B.
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”)
that have an effect on previous rulings
use the following defined terms to de-
scribe the effect:
Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus,
if an earlier ruling held that a principle
applied to A, and the new ruling holds
that the same principle also applies to B,
the earlier ruling is amplified. (Compare
with modified, below).
Clarified is used in those instances
where the language in a prior ruling is
being made clear because the language
has caused, or may cause, some confu-
sion. It is not used where a position in a
prior ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously
published ruling and points out an essen-
tial difference between them.
Modified is used where the substance
of a previously published position is
being changed. Thus, if a prior ruling
held that a principle applied to A but not
to B, and the new ruling holds that it ap-
plies to both A and B, the prior ruling is
modified because it corrects a published
position. (Compare with amplified and
clarified, above).
Obsoleted describes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used
in a ruling that lists previously published
rulings that are obsoleted because of
changes in law or regulations. A ruling
may also be obsoleted because the sub-
stance has been included in regulations
subsequently adopted.
Revoked describes situations where the
position in the previously published rul-
ing is not correct and the correct position
is being stated in the new ruling.
Superseded describes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a pe-
riod of time in separate rulings. If the
new ruling does more than restate the
substance of a prior ruling, a combination
of terms is used. For example, modified
and superseded describes a situation
where the substance of a previously pub-
lished ruling is being changed in part and
is continued without change in part and it
is desired to restate the valid portion of
the previously published ruling in a new
ruling that is self contained. In this case
the previously published ruling is first
modified and then, as modified, is super-
seded.
Supplemented is used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and
that list is expanded by adding further
names in subsequent rulings. After the
original ruling has been supplemented
several times, a new ruling may be pub-
lished that includes the list in the original
ruling and the additions, and supersedes
all prior rulings in the series.
Suspended is used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of
cases in litigation, or the outcome of a
Service study.
Abbreviations
The following abbreviations in current use and for-
merly used will appear in material published in the
Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security
Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign Corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statements of Procedural Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.
Definition of Terms

2001–31 I.R.B.iiJuly 30, 2001
Numerical Finding List
1
Bulletins 2001–27 through 2001–30
Announcements:
2001–69, 2001–27 I.R.B. 23
2001–70, 2001–27 I.R.B. 23
2001–71, 2001–27 I.R.B. 26
2001–72, 2001–28 I.R.B. 39
2001–73, 2001–28 I.R.B. 40
2001–74, 2001–28 I.R.B. 40
2001–75, 2001–28 I.R.B. 42
2001–76, 2001–29 I.R.B. 67
2001–77, 2001–30 I.R.B. 83
2001–78, 2001–30 I.R.B. 87
Notices:
2001–39, 2001–27 I.R.B. 3
2001–41, 2001–27 I.R.B. 2
2001–42, 2001–30 I.R.B. 70
2001–43, 2001–30 I.R.B. 72
2001–44, 2001–30 I.R.B. 77
Proposed Regulations:
REG–106917–99, 2001–27 I.R.B. 4
REG–100548–01, 2001–29 I.R.B. 67
Railroad Retirement Quarterly Rates:
2001–27, I.R.B. 1
Revenue Procedures:
2001–39, 2001–28 I.R.B. 38
Revenue Rulings:
2001–30, 2001–29 I.R.B. 46
2001–34, 2001–28 I.R.B. 31
2001–35, 2001–29 I.R.B. 59
Treasury Decisions:
8947, 2001–28, I.R.B. 36
8948, 2001–28, I.R.B. 27
8949, 2001–28, I.R.B. 33
8950, 2001–28, I.R.B. 34
8951, 2001–29, I.R.B. 63
8952, 2001–29, I.R.B. 60
8953, 2001–29, I.R.B. 44
8954, 2001–29, I.R.B. 47
1
A cumulative list of all revenue rulings, revenue
procedures, Treasury decisions, etc., published in
Internal Revenue Bulletins 2001–1 through 2001–26
is in Internal Revenue Bulletin 2001–27, dated July
2, 2001.

July 30, 2001iii2001–31 I.R.B.
Finding List of Current Actions on
Previously Published Items
1
Bulletins 2001–27 through 2001–30
Announcements:
2000–48
Modified by
Notice 2001–43, 2001–30 I.R.B. 72
Notices:
2001–4
Modified by
Notice 2001–43, 2001–30 I.R.B. 72
Proposed Regulations:
LR–97–79
Withdrawn by
REG–100548–01, 2001–29 I.R.B. 67
LR–107–84
Withdrawn by
REG–100548–01, 2001–29 I.R.B. 67
REG–107186–00
Corrected by
Ann. 2001–71, 2001–27 I.R.B. 26
Revenue Procedures:
97–13
Modified by
Rev. Proc. 2001–39, 2001–28 I.R.B. 38
2000–20
Modified by
Notice 2001–42, 2001–30 I.R.B. 70
2000–39
Corrected by
Ann. 2001–73, 2001–28 I.R.B. 40
2001–6
Modified by
Notice 2001–42, 2001–30 I.R.B. 70
Revenue Rulings:
57–589
Obsoleted by
REG–106917–99, 2001–27 I.R.B. 4
65–316
Obsoleted by
REG–106917–99, 2001–27 I.R.B. 4
68–125
Obsoleted by
REG–106917–99, 2001–27 I.R.B. 4
69–563
Obsoleted by
REG–106917–99, 2001–27 I.R.B. 4
74–326
Obsoleted by
REG–106917–99, 2001–27 I.R.B. 4
78–179
Obsoleted by
REG–106917–99, 2001–27 I.R.B. 4
1
A cumulative list of current actions on previously
published items in Internal Revenue Bulletins
2001–1 through 2001–26 is in Internal Revenue
Bulletin 2001–27, dated July 2, 2001.

INTERNAL REVENUE BULLETIN
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