United States v. Burke, 504 U.S. 229, 4 (1992)

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232

UNITED STATES v. BURKE

Opinion of the Court

Respondents filed claims for refund of the taxes withheld from the settlement payments. The Internal Revenue Service (IRS) disallowed those claims. Respondents then brought a refund action in the United States District Court for the Eastern District of Tennessee, claiming that the settlement payments should be excluded from their respective gross incomes under 104(a)(2) of the Internal Revenue Code as "damages received (whether by suit or agreement and whether as lump sums or as periodic payments) on account of personal injuries or sickness." The District Court ruled that, because respondents sought and obtained only back wages due them as a result of TVA's discriminatory under-payments rather than compensatory or other damages, the settlement proceeds could not be excluded from gross income as "damages received . . . on account of personal injuries." 90-1 USTC ¶ 50,203 (1990).

The United States Court of Appeals for the Sixth Circuit, by a divided vote, reversed. 929 F. 2d 1119 (1991). The Court of Appeals concluded that exclusion under 104(a)(2) turns on whether the injury and the claim are "personal and tort-like in nature." Id., at 1121. "If the answer is in the affirmative," the court held, "then that is the beginning and end of the inquiry." Id., at 1123 (internal quotation marks omitted). The court concluded that TVA's unlawful sex discrimination constituted a personal, tort-like injury to respondents, and rejected the Government's attempt to distinguish Title VII, which authorizes no compensatory or punitive damages,2 from other statutes thought to redress personal injuries. See id., at 1121-1123. Thus, the court held, the award of backpay pursuant to Title VII was excludable from gross income under 104(a)(2).

ment"). Hence, we confine our analysis in this case to the federal income tax question.

2 The Civil Rights Act of 1991 recently amended Title VII to authorize the recovery of compensatory and punitive damages in certain circumstances. See nn. 8 and 12, infra.

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