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Severance payments can be taxed, U.S. Supreme Court rules

The U.S. Supreme Court ruled in favor of the Obama administration in a dispute over taxes on severance compensation, issuing a decision that may block more than $1 billion in refund claims.

By Greg Stohr | Updated on March 25, 2014

March 25 (Bloomberg) — The U.S. Supreme Court ruled in favor of the Obama administration in a dispute over taxes on severance compensation, issuing a decision that may block more than $1 billion in refund claims.

The justices today unanimously rejected a $1 million refund bid by Quality Stores Inc., once the country’s largest agricultural specialty retailer. The high court said severance payments the company made to 3,100 people were subject to tax under the Federal Insurance Contributions Act.

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