UNITED STATES v. CLEVELAND INDIANS BASEBALL CO.

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Syllabus
UNITED STATES v. CLEVELAND INDIANS
BASEBALL CO.
certiorari to the united states court of appeals for
the sixth circuit
No. 00–203. Argued February 27, 2001—Decided April 17, 2001
Under a grievance settlement agreement, respondent Cleveland Indians
Baseball Company (Company) owed 8 players backpay for wages due
in 1986 and 14 players backpay for wages due in 1987. The Company
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 ref-
erence 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 treat-
ing 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 payments, the Company initiated this
action in District Court. The Company relied on Sixth Circuit prece-
dent holding that a settlement 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. 208–220.
(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. §§ 3111(a), 3111(b), 3301.
The Social Security tax provision, § 3111(a), prescribes tax rates applica-
ble to “wages paid during” each year from 1984 onward. The Medicare
tax provision, § 3111(b)(6), sets the tax rate “with respect to wages
paid after December 31, 1985.” And the FUTA tax provision, § 3301,
sets the rate as a percentage “in the case of calendar years 1988 through

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2007 . . . of the total wages . . . paid by [the employer] during the cal-
endar year.” Section 3121(a) establishes the annual ceiling on wages
subject to Social Security tax by defining “wages” to exclude any re-
muneration “paid to [an] individual by [an] employer during [a] calendar
year” that exceeds “remuneration . . . equal to the contribution and
benefit base . . . paid to [such] individual . . . 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. 208–209.
(b) The Government calls attention to these provisions’ constant ref-
erences to wages paid during a calendar year as 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 calendar 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 Govern-
ment’s plain language argument. The Nierotko Court concluded that,
for purposes of determining a wrongfully discharged worker’s eligibility
for Social Security benefits under § 209(g), as that provision was formu-
lated 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 allocation-back rule and lan-
guage in § 209(g) tying benefits eligibility to the number of calendar
quarters “in which” a minimum amount of “wages” “has been paid.”
Nierotko’s allocation holding for benefits eligibility purposes, which
the Government does not here urge the Court to overrule, thus turned
on an implicit construction of § 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,” id., at 370. Given this construc-
tion, it cannot be said that the FICA and FUTA provisions prescribing
tax rates based on wages paid during a calendar year have a plain
meaning that precludes allocation of backpay to the year it should have
been paid. Pp. 209–212.
(c) However, the Court rejects the Company’s contention that, be-
cause Nierotko read the 1939 “wages paid” language for benefits eligi-
bility purposes to accommodate an allocation-back rule for backpay, the
identical 1939 “wages paid” language for tax purposes must be read the
same way. Nierotko dealt specifically and only with Social Security
benefits eligibility, not with taxation. The Court’s allocation holding in
Nierotko in all likelihood reflected concern that the benefits scheme
created in 1939 would be disserved by allowing an employer’s wrong-

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202 UNITED STATES v. CLEVELAND INDIANS
BASEBALL CO.
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doing to reduce the quarters of coverage an employee would otherwise
be entitled to claim toward eligibility. No similar concern underlies
the tax provisions. The legislative history demonstrates that the 1939
Amendments adopting the “wages paid” rule for taxation were de-
signed 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. Pp. 212–214.
(d) The Court is not persuaded Congress incorporated Nierotko’s
treatment of backpay into the tax provisions when it amended the Social
Security Act shortly after Nierotko was 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 § 209(a), which defines the Social Security wage base for pur-
poses of benefits calculation, by adopting the “wages paid” language
already present in § 209(g), the provision construed in Nierotko. Con-
gress also used identical “wages paid” language in redefining the FICA
and FUTA wage bases for tax purposes. Although the legislative his-
tory makes clear that Congress sought to achieve conformity between
the tax and benefits provisions, the conformity Congress sought had
nothing to do with Nierotko’s treatment of backpay. Rather, Congress’
purpose in amending the FICA and FUTA wage bases for tax and bene-
fits purposes 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. Because the concern that animates
Nierotko’s treatment of backpay in the benefits context has no rele-
vance to the tax side, it makes no sense to attribute to Congress a de-
sire for conformity not only with respect to the general rule for mea-
suring “wages,” but also with respect to Nierotko’s backpay exception.
Pp. 214–216.
(e) There is some force to the Company’s contention that the Govern-
ment’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 presents no structural un-
fairness in taxation comparable to the structural inequity in Nierotko’s
context. In Nierotko, an inflexible 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 provisions. Here, by contrast, the Govern-
ment’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 com-
plexity and minimizing administrative confusion within the FICA and

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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. 216–218.
(f) Confronted with this tension, the Court defers to the Internal
Revenue Service’s interpretation. The Court does not sit as a commit-
tee 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 Com-
missioner’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 provisions. 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. § 3111(a) (FICA) and § 3301 (FUTA),
these regulations have continued unchanged in their basic substance
since 1940. Although the regulations, like the statute, do not specifi-
cally address backpay, the Service has consistently interpreted them
to require taxation 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 Rev-
enue Rulings themselves are entitled to deference. In this case, the
Rulings simply reflect the agency’s longstanding interpretation of its
own regulations. Because that interpretation is reasonable, it attracts
substantial judicial deference. Thomas Jefferson Univ. v. Shalala, 512
U. S. 504, 512. Pp. 218–220.
215 F. 3d 1325, reversed.
Ginsburg, J., delivered the opinion of the Court, in which Rehn-
quist, C. J., and Stevens, O’Connor, Kennedy, Souter, Thomas, and
Breyer, JJ., joined. Scalia, J., filed an opinion concurring in the judg-
ment, post, p. 220.
James A. Feldman argued the cause for the United States.
With him on the briefs were Acting Solicitor General Un-
derwood, former Solicitor General Waxman, Acting Assist-
ant Attorney General Junghans, Deputy Solicitor General
Wallace, Kent L. Jones, Kenneth L. Greene, and Robert W.
Metzler.

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204 UNITED STATES v. CLEVELAND INDIANS
BASEBALL CO.
Opinion of the Court
Carter G. Phillips argued the cause for respondent. With
him on the brief were Richard D. Bernstein, Stephen B. Kin-
naird, and Anne Berleman Kearney.*
Justice Ginsburg delivered the opinion of the Court.
The Federal Insurance Contributions Act (FICA) and the
Federal Unemployment Tax Act (FUTA) impose excise taxes
on employee wages to fund Social Security, Medicare, and
unemployment compensation programs. This case concerns
the application of FICA and FUTA taxes to payments of
back wages. The Internal Revenue Service has consistently
maintained that, for tax purposes, backpay awards should be
attributed to the year the award is actually paid. Respond-
ent Cleveland Indians Baseball Company (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 gov-
erning 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 play-
ers’ free agency rights, several Major League Baseball clubs
agreed to pay $280 million to players with valid claims for
salary damages. 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.
*Lawrence T. Perera filed a brief for the Major League Baseball Players
Association as amicus curiae urging affirmance.

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This case concerns the proper FICA and FUTA tax treat-
ment of the 1994 payments. 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 unemployment benefits.
For purposes of this litigation, 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 supporting amicus, the Major League Baseball Players
Association, contend.
In any given year, the amount of FICA and FUTA tax
owed depends on two determinants. The first is the tax
rate. 26 U. S. C. §§ 3101, 3111 (FICA), § 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. § 3121(a)(1) (FICA), § 3306(b)(1) (FUTA).
Both determinants have increased over time. In 1986, the
Social Security tax on employees and employers was 5.7 per-
cent 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
1 26 U. S. C. §§ 3101(a), 3111(a), 3121(a)(1); 51 Fed. Reg. 40256, 40257
(1986).
2 §§ 3101(a), 3111(a), 3121(a)(1); 50 Fed. Reg. 45558, 45559 (1985).
3 §§ 3101(a), 3111(a), 3121(a)(1); 58 Fed. Reg. 58004, 58005 (1993).
4 §§ 3101(b), 3111(b).
5 26 U. S. C. § 3121(a)(1) (1982 ed.); 51 Fed. Reg. 40256, 40257 (1986); 50
Fed. Reg. 45558, 45559 (1985).

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Opinion of the Court
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 payments 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 employ-
ment taxes chargeable in 1986 and 1987, allocating the 1994
payments back to those years would generate no additional
FICA or FUTA tax liability. By contrast, treating the back
wages as taxable 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
6 26 U. S. C. § 3121(a)(1).
7 26 U. S. C. §§ 3301, 3306(b)(1) (1982 ed. and Supp. III).
8 26 U. S. C. §§ 3301, 3306(b)(1).
9 If a player received wages in 1994 from another employer in addi-
tion 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. § 6413(c)(1). To illustrate, suppose a player
received $50,000 in back wages from the Cleveland Indians and an addi-
tional $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 contrast, the Indians and the Mets would each be
liable for Social Security taxes on $50,000 in wages paid to that player.
26 U. S. C. § 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.

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would be calculated according to tax rates and wage bases
higher than their levels in 1986 and 1987.
Uncertain about the proper rule of taxation, the Com-
pany 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 actually 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 Treas-
ury Regulations that ‘wages’ are to be taxed for FICA pur-
poses in the year in which they are received”). The Court
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.

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Opinion of 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.
§§ 3111(a), 3111(b), 3301. The Social Security tax provision,
§ 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 percent.”). The Medicare tax pro-
vision, § 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. § 3301 (1994 ed., Supp. IV),
says the rate shall be “6.2 percent 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 ceil-
ing 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 contribution and
benefit base . . . paid to [such] individual by [such] employer
during the calendar year with respect to which such con-
tribution and benefit base is effective.” Section 3306(b)(1)
similarly limits annual wages subject to FUTA tax by ex-
cluding from “wages” any remuneration “paid to [an] individ-
ual by [an] employer during [a] calendar year” that exceeds
“remuneration . . . equal to $7,000 . . . paid to [such] individual
by [such] employer during [the] calendar year.”

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Opinion of the Court
Both sides in this controversy have offered plausible inter-
pretations of Congress’ design. We set out next the parties’
positions and explain why we ultimately defer to the In-
ternal Revenue Service’s reasonable, consistent, and long-
standing 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 provisions 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 year as
the touchstone for determining the applicable tax rate and
wage base. 26 U. S. C. § 3111(a) (setting Social Security tax
rates for “wages paid during” particular calendar years);
§ 3121(a) (defining Social Security wage base in terms of
“remuneration . . . paid . . . during the calendar year”); § 3301
(setting FUTA tax rate as a percentage of “wages . . .
paid . . . during the calendar year”); § 3306(b)(1) (defining
FUTA wage base in terms of “remuneration . . . paid . . .
during any calendar year”). The meaning of this language,
the Government contends, is plain: Wages are taxed accord-
ing to the calendar year they are in fact paid, regardless
of when they should have been paid.
In support of this reading, the Government observes that
Congress chose the words in the current statute specifically
to replace language in the original 1935 Social Security Act
providing that FICA and FUTA tax rates applied to wages
paid or received “with respect to employment during the
calendar year.” Social Security Act (1935 Act), §§ 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

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Opinion of the Court
performance of the services for 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 Security Act Amendments of 1939 (1939 Amend-
ments), §§ 604, 608, 53 Stat. 1383, 1387 (emphasis added).
This 1939 language remains essentially unchanged in the cur-
rent FICA and FUTA tax provisions, 26 U. S. C. §§ 3111(a)
and 3301.
Acknowledging that the 1939 Amendments 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), undermines the Govern-
ment’s plain language argument. According due weight to
our precedent, we agree.
In Nierotko, the National Labor Relations Board had
ordered the reinstatement of a wrongfully discharged em-
ployee 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 em-
ployee was not on the job should nevertheless count as
“wages” in determining the employee’s eligibility for Social
Security benefits. Id., at 359. Notwithstanding the con-
trary view of the Social Security Board and the Bureau
of Internal Revenue, the Court held that backpay cover-
ing the wrongful discharge period met the definition of
“wages” in the 1935 Act. Id., at 360–370.
In the final two paragraphs of the Nierotko opinion, the
Court took up the question of how the backpay award should
be allocated for purposes of determining the worker’s eligi-
bility for benefits. As originally enacted, the Social Secu-
rity Act extended benefits to persons over 65 who had

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earned at least $2,000 in wages in each of any five years after
1936. 1935 Act, §§ 201(a), 210(c), 49 Stat. 622, 625. In 1939,
however, Congress introduced a new scheme, which remains
in place today, tying eligibility for benefits to the number
of calendar-year “quarters of coverage” accumulated by an
individual. 1939 Amendments, §§ 209(g), (h), 53 Stat. 1376–
1377 (codified at 42 U. S. C. §§ 413(a)(2), 414). Section 209(g)
defined a “quarter of coverage” as either “a calendar 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.
Nierotko swiftly dispatched the question whether “ ‘back
pay’ must be allocated 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 argument that
such allocation was impermissible because the 1939 Amend-
ments to the benefits scheme refer to “ ‘wages’ to be ‘paid’ in
certain ‘quarters,’ ” id., at 370, and n. 25 (citing id., at 362,
n. 7 (citing § 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 Nierotko was a second-
ary issue addressed summarily by the Court, we think the
Company is correct that Nierotko undercuts the plain mean-
ing argument urged by the Government here. Nierotko
found no conflict between an allocation-back rule for backpay
and the language in § 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 § 209(g)’s terms—“wages” “paid”
“in” “a calendar quarter”—to include “regular wages” that

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212 UNITED STATES v. CLEVELAND INDIANS
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Opinion of the Court
should have been paid but “were not paid as usual,” 327 U. S.,
at 370. Given this construction of § 209(g), now codified in
42 U. S. C. § 413(a)(2), we cannot say that the FICA and
FUTA provisions prescribing tax rates based on wages paid
during a calendar year, codified in 26 U. S. C. §§ 3111(a),
3301, have a plain meaning that precludes allocation of back-
pay to the year it should have been paid. Cf. Hilton v.
South Carolina Public Railways Comm’n, 502 U. S. 197, 205
(1991) (“stare decisis is most compelling” where “a pure
question of statutory construction” is involved).
B
From here, we part ways with the Company. Although
we agree that Nierotko blocks the Government’s argument
that the “wages paid” formulation in 26 U. S. C. §§ 3111(a)
and 3301 has a dispositively plain meaning, we reject the
Company’s next contention. Because Nierotko read the
1939 “wages paid” language for benefits eligibility purposes
to accommodate an allocation-back rule for backpay, the
Company urges, the identical 1939 “wages paid” language for
tax purposes must be read the same way. We do not agree
that the latter follows from the former like the night, the day.
Nierotko dealt specifically and only with Social Security
benefits eligibility, not with taxation. The Court’s allocation
holding in Nierotko in 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 concern 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 contributor a property
right to benefits against the government, and wages rather

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Opinion of the Court
than [tax] contributions are the statutory basis for calcu-
lating an individual’s benefits.” Brief for Respondent 14.
Nierotko thus does not compel symmetrical construction
of the “wages paid” language in the discrete taxation and
benefits eligibility contexts. Although we generally pre-
sume that “identical words used in different 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 tend-
ency 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 con-
stantly be guarded against.”). The benefits scheme delin-
eated in Title 42 would “no doubt” be set awry without an
allocation-back rule for back wages, notwithstanding “ac-
counting difficulties.” Nierotko, 327 U. S., at 370. But that
surely cannot be said for the taxation scheme described in
Title 26, where Congress’ evident concern was not worker
eligibility for benefits, but fiscal administrability.12
12 In determining that “accounting difficulties” were “not . . . insupera-
ble” to its allocation holding, Nierotko noted that “ ‘backpay’ is now
treated distributively” under § 119 of the Revenue Act of 1943. 327 U. S.,
at 370, and n. 26. Section 119 provided that backpay exceeding 15 percent
of gross income may be allocated to earlier periods for income tax pur-
poses if such allocation would reduce the taxpayer’s liability. § 119(a), 58
Stat. 39. But Congress eliminated the 1943 backpay allocation rule in
1964, see Pub. L. 88–272, § 232(a), 78 Stat. 107, leaving behind the princi-
ple, “too firmly embedded in the income tax law to permit of any ques-
tion,” 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
§ 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.

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214 UNITED STATES v. CLEVELAND INDIANS
BASEBALL CO.
Opinion of the Court
The 1939 Amendments adopting the “wages paid” rule for
taxation reflected Congress’ worry that, as tax rates in-
crease from year to year, “difficulties and confusion” 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 em-
ployee’s annual compensation may be “based on a percentage
of profits, or on future royalties, the amount of which cannot
be determined until long after the close of the year.”
S. Rep. No. 734, 76th Cong., 1st Sess., at 75. Requiring em-
ployers to “estimate unascertained amounts and pay taxes
and contributions on that basis” would “cause a burden on
employers and administrative authorities alike.” Id., at 75–
76. Congress correctly anticipated 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 materia, the Company insists that Con-
gress incorporated Nierotko’s treatment of backpay into the
tax provisions when it amended the Social Security Act
shortly after Nierotko was 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, § 811(a), 49 Stat. 639 (FICA); 1939
Amendments, § 606, 53 Stat. 1383 (FUTA). Paralleling the
1939 Amendments to the tax rate provisions, Congress in
1946 established the current “wages paid” rule for identify-
ing the wages that compose the FICA and FUTA wage bases
in a given year. Social Security Act Amendments of 1946
(1946 Amendments), §§ 412, 414, 60 Stat. 989–991 (codified
at 26 U. S. C. §§ 3121(a), 3306(b)(1)). The 1946 law amended

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§ 209(a), which defines the Social Security wage base for pur-
poses of benefits calculation, by adopting the “wages paid”
language already present in § 209(g), the provision construed
in Nierotko. § 414, 60 Stat. 990–991. Congress also used
identical “wages paid” language in redefining the FICA and
FUTA wage bases for tax purposes. § 412, 60 Stat. 989.
Relying on the presumption that § 209(a), as amended, incor-
porated Nierotko’s construction of § 209(g), see Cannon v.
University of Chicago, 441 U. S. 677, 696–699 (1979), and ob-
serving that Congress redefined the wage bases for taxation
to “confor[m] with the changes in section 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, § 209(a), is properly construed as incorporating
Nierotko’s reading of § 209(g), we think the “confor[mity]”
Congress sought to achieve between the tax and bene-
fits provisions, S. Rep. No. 1862, supra, at 36; H. R. Rep.
No. 2447, supra, at 35, had nothing to do with Nierotko’s
treatment 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 oc-
curred.” 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 provisions 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

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216 UNITED STATES v. CLEVELAND INDIANS
BASEBALL CO.
Opinion of the Court
Nierotko at all, considered it an exception to the general
rule for measuring “wages” in a given year.13 Because the
concern that animates Nierotko’s treatment of backpay in
the benefits context has no relevance to the tax side, supra,
at 212–213, it makes no sense to attribute to Congress a de-
sire for conformity not only with respect to the general rule
for measuring “wages,” but also with respect to Nierotko’s
backpay exception.
C
Were the Company to rely solely on arguments for sym-
metry in statutory construction, we would be inclined to
conclude, given Nierotko’s lack of concern with taxation,
that the tax provisions themselves, informed by legislative
purpose, 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 in-
13 Indeed, the contemporaneous understanding of the Commissioner of
Internal Revenue was that the 1946 Amendments supplanted Nierotko’s
allocation rule for backpay. See Letter from Joseph D. Nunan, Jr., Com-
missioner of Internal Revenue, to Social Security Administration, Bureau
of Old-Age and Survivors Insurance (Mar. 6, 1947) (“The Nierotko decision
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 enacted sub-
sequent to the date of the Nierotko decision, must be interpreted in the
light of the language contained in such Amendments and the Congres-
sional intent.”) (available in Lodging for Respondent, Exh. F). Neverthe-
less, for benefits eligibility and calculation purposes, the Social Security
Administration (SSA) by regulation continues to apply the Nierotko rule
to “[b]ack pay under a statute,” 20 CFR § 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 declining to apply
Nierotko to “[b]ack pay not under a statute,” § 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.”).

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Opinion of the Court
equities in taxation and incentives for strategic behavior
that Congress did not intend. This contention is not with-
out 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 ex-
ample, 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. § 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 employer. Ac-
cording to the Company, such results amount to tax wind-
falls and invite employers wrongfully to withhold pay or
benefits in order to reap the advantages of a strategically
timed payment. See Brief for Respondent 33–40 (additional
examples of windfalls and avoidance schemes). These out-
comes may be avoided, the Company argues, by construing
the tax provisions to require taxation of back wages accord-
ing to the year the wages should have been paid.
It is, of course, true that statutory construction “is a ho-
listic endeavor” and that the meaning of a provision is “clari-
fied by the remainder of the statutory scheme . . . [when]
only one of the permissible meanings produces a substantive

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218 UNITED STATES v. CLEVELAND INDIANS
BASEBALL CO.
Opinion of the Court
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 little doubt that the Government’s rule generates a de-
gree of arbitrariness in the operation of the tax statutes.
But in Nierotko’s context, an inflexible rule allocating back-
pay 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 eligi-
bility provisions.14 In this case, by contrast, there is no
comparable structural unfairness in taxation. The Govern-
ment’s rule sometimes disadvantages the taxpayer, as in
this case. Other times it works to the disadvantage of the
fisc, as the Company’s examples show. The anomalous re-
sults 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 supra, at 214. Given the
practical administrability concerns that underpin the tax
provisions, we cannot say that the Government’s rule is in-
compatible with the statutory scheme. The most we can say
is that Congress intended the tax provisions to be both effi-
ciently administrable and fair, and that this case reveals the
tension 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 perfect the administration of the tax laws.”
United States v. Correll, 389 U. S. 299, 306–307 (1967). In-
14 The SSA has interpreted its regulation governing “[b]ack pay under
a statute,” 20 CFR § 404.1242(b) (2000), to allow the employee to choose
whether to allocate the backpay 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).

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stead, we defer to the Commissioner’s regulations as long
as they “implement the congressional mandate in some
reasonable manner.” Id., at 307. “We do this because Con-
gress has delegated to the [Commissioner], not to the courts,
the task of prescribing all needful rules and regulations for
the enforcement 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.
§ 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 regu-
lations interpreting the FICA and FUTA tax provisions.
In their current form, the regulations specify that the em-
ployer tax “attaches at the time that the wages are paid by
the employer,” 26 CFR § 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,” § 31.3111–2(c) (emphasis added); see §§ 31.3301–2, –3(b)
(same for FUTA). Echoing the language in 26 U. S. C.
§ 3111(a) (FICA tax) and § 3301 (FUTA tax), these regula-
tions 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, §§ 402.301–.303, 402.401–
.403 (1940). Cf. National Muffler, 440 U. S., at 477 (“A regu-
lation may have particular force if it is a substantially con-
temporaneous construction of the statute by those presumed
to have been aware of congressional intent.”).
Although the regulations, like the statute, do not specifi-
cally address backpay, the Internal Revenue Service has
consistently interpreted them to require taxation of back
wages according to the year the wages are actually paid,

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220 UNITED STATES v. CLEVELAND INDIANS
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Scalia, J., concurring in judgment
regardless 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
deference. In this case, the Rulings simply reflect the
agency’s longstanding interpretation of its own regulations.
Because that interpretation is reasonable, it attracts sub-
stantial judicial deference. Thomas Jefferson Univ. v. Sha-
lala, 512 U. S. 504, 512 (1994). We do not resist according
such deference in reviewing an agency’s steady interpreta-
tion of its own 61-year-old regulation implementing a 62-
year-old statute. “Treasury regulations and interpretations
long continued without substantial change, applying to un-
amended 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 rele-
vant taxation provisions, we hold that, for FICA and FUTA
tax purposes, 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.
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—

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Scalia, J., concurring in judgment
leaving aside statements in testimony and Committee Re-
ports that I have no reason to believe Congress was aware
of—is that tax assessments do not present the equitable con-
siderations implicated by the potential arbitrary decrease of
benefits in Nierotko. See ante, at 212–213. But the Court
acknowledges that departing from Nierotko will produce
arbitrary variations in tax liability. See ante, at 216–218.
As between an immediate 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 be-
fore giving different meanings to identical statutory texts.
In fact, however, I do not think that the text of the FICA
and FUTA provisions, 26 U. S. C. §§ 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 wages
should 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 ac-
tions. (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 benefits provisions.
The Internal Revenue Service has since provided another

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Scalia, J., concurring in judgment
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 suggest) a uniform result.
I therefore concur in the Court’s judgment deferring to the
Government’s regulations.