United States v. Fior D'Italia, Inc., 536 U.S. 238, 13 (2002)

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250

UNITED STATES v. FIOR D'ITALIA, INC.

Opinion of the Court

E

Finally, Fior D'Italia suggests that the IRS is putting its "aggregate estimate" method to improper use. It traces a lengthy history of disagreement among restaurant workers, restaurant owners, and the IRS as to how best to enforce the restaurants' legal obligation to pay FICA taxes on unreported tip income. It notes that the IRS has agreed to create a special program, called the "Tip Reporting Alternative Commitment," whereby a restaurant promises to establish accurate tip reporting procedures in return for an IRS promise to base FICA tax liability on reported tips alone. It adds that any coercion used to force a restaurant to enter such a program (often unpopular with employees) would conflict with the views of Members of Congress and IRS officials, who have said that a restaurant should not be held responsible for its employees' failure to report all their tips as income. See, e. g., Letter of Members of Congress to Secretary of Treasury Lloyd Bentsen, 32 Tax Analysts' Daily Tax Highlights & Documents 3913 (Mar. 4, 1994); App. 106, 107. It adds that Congress has enacted this view into two special laws: the first of which gives restaurants a nonrefundable tax credit on FICA taxes paid, i. e., permits restaurants to offset any FICA it pays on employee tips on a dollar for dollar basis against its own income tax liability, 26 U. S. C. § 45B; and the second of which prohibits the IRS from "threaten[ing] to audit" a restaurant in order to "coerce" it into entering the special tip-reporting program. Internal Revenue Service Restructuring and Reform Act of 1998, 112 Stat. 755.

Fior D'Italia says that the IRS' recent use of an "aggre-gate estimate" approach runs contrary to the understanding that underlies this second statute, for it "effectively forces the employer into . . . verifying, investigating, monitoring, and policing compliance by its employees—responsibilities which Congress and the Courts have considered, evaluated, and steadfastly refused to transfer from IRS to the em-

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