ROWAN COS., INC. v. UNITED STATES
No. 80-780
Supreme Court of the United States
Argued April 21, 1981—Decided June 8, 1981
452 U.S. 247
K. Martin Worthy argued the cause for petitioner. With
Stuart A. Smith argued the cause for the United States. With him on the brief were Solicitor General McCree, Acting Assistant Attorney General Murray, Leonard J. Henzke, Jr., and Stanley S. Shaw, Jr.*
JUSTICE POWELL delivered the opinion of the Court.
This case concerns the federal taxes imposed upon employers by the Federal Insurance Contributions Act (FICA),
I
During the tax years in question, 1967-1969, petitioner Rowan Companies, Inc., owned and operated rigs for drilling oil and gas wells, both on land and offshore. Some of petitioner‘s offshore rigs were located as many as 60 miles from land. It cost petitioner less and was more convenient to provide meals and lodging to employees at these rigs than to transport the employees to and from the rigs for each work shift.1 Employees worked at these rigs for 10-day tours of duty, and petitioner then transported them back to land for
Petitioner did not include the value of the meals and lodging in computing its employees’ “wages” for the purpose of paying taxes under FICA or FUTA.2 Nor did petitioner include this value in computing “wages” for the purpose of withholding its employees’ federal income tax under
The District Court for the Southern District of Texas granted the Government‘s motion for summary judgment. The Court of Appeals for the Fifth Circuit affirmed, expressing the view that the different interpretations of the definition of “wages” are justified by the different purposes of FICA and FUTA, on the one hand, and income-tax withholding, on the other. 624 F. 2d 701, 707 (1980). We granted a writ of certiorari, 449 U. S. 1109 (1981), because the Court of Appeals’ decision conflicts with the decisions of other Courts of Appeals.7 We now reverse.
II
The Government acknowledges that petitioner properly excluded the value of the meals and lodging in computing the “wages” from which it withheld employees’ income tax under
Notwithstanding this acknowledgment, the Government contends that petitioner should have included the value of the meals and lodging in “wages” for purposes of FICA and FUTA. It relies on
“Ordinarily, facilities or privileges (such as entertainment, medical services, or so-called ‘courtesy’ discounts on purchases), furnished or offered by an employer to his employees generally, are not considered as remuneration for employment if such facilities or privileges are of relatively small value and are offered or furnished by the employer merely as a means of promoting the health, good will, contentment, or efficiency of his employees. The term ‘facilities or privileges,’ however, does not ordinarily include the value of meals or lodging furnished, for example, to restaurant or hotel employees, or to seamen or other employees aboard vessels, since generally these items constitute an appreciable part of the total remuneration of such employees.”
If valid, these regulations dictate that the value of the meals and lodging provided by petitioner to its employees on offshore rigs was includable in “wages” as defined in FICA and FUTA, even though excludable from “wages” under the substantially identical definition in
We consider Treasury Regulations valid if they “implement the congressional mandate in some reasonable manner.” United States v. Correll, 389 U. S. 299, 307 (1967); accord, Commissioner v. Portland Cement Co. of Utah, 450 U. S. 156,
Among other considerations relevant to the validity of Treasury Regulations, we inquire whether the regulation “is a substantially contemporaneous construction of the statute by those presumed to have been aware of congressional intent,” National Muffler Dealers Assn. v. United States, 440 U. S., at 477; and “[i]f the regulation dates from a later period, the manner in which it evolved merits inquiry.” Ibid. We also consider, if pertinent, “the consistency of the Commissioner‘s interpretation, and the degree of scrutiny Congress has devoted to the regulation during subsequent re-enactments of the statute.” Ibid. In this case, we hold that
Congress chose “wages” as the base for measuring employers’ obligations under FICA, FUTA, and income-tax withholding. In Central Illinois Public Service Co. v. United States, 435 U. S. 21 (1978), we considered Congress’ use of the concepts of “income” and “wages” for the purpose of income-tax withholding. The question was whether an employer should have included in “wages” for income-tax withholding the reimbursements it had given employees for lunch expenses on company travel that had not required overnight stays. We held that the employer was not required to include the reimbursements in “wages,” even though the reimbursements constituted “income” to the employees.10 This holding relied on the recognition that “[t]he two concepts—income and wages—obviously are not necessarily the same. Wages usually are income, but many items qualify as income and yet clearly are not wages.” Id., at 25 (footnote omitted). In short, “wages” is a narrower concept than “income,” see ibid., and the fact that the reimbursements were “income” to the employees did not necessarily mean that the employer had to include them in “wages” for income-tax withholding.
Petitioner contends that its position in this case follows from our reasoning in Central Illinois. Because “wages” is a narrower concept than “income” for the purposes of income-tax withholding, it is argued that the value of the meals and lodging in this case—which the Government acknowledges is not “income“—therefore cannot be “wages” under FICA and FUTA. Petitioner‘s argument rests on the assumption that Congress intended the term “wages” to have
B
Congress enacted the predecessor provisions of FICA and FUTA as Titles VIII and IX of the Social Security Act of 1935, ch. 531, 49 Stat. 636, 639. It chose “wages” as the base for taxation of employers, § 804, 49 Stat. 637; § 901, 49 Stat. 639, and it defined “wages.” § 811 (a), 49 Stat. 639; § 907 (b), 49 Stat. 642. Congress originated the present income-tax withholding system in § 172 of the Revenue Act of 1942, 56 Stat. 884. See Central Illinois Public Service Co. v. United States, supra, at 26-27. It again chose “wages” as the base, 56 Stat. 888, and defined “wages” in substantially the same language that it used in FICA and FUTA, id., at 887. When Congress revised the withholding system by replacing § 172 with the Current Tax Payment Act of 1943, 57 Stat. 126, it retained the definition of “wages.” Ibid. In view of this sequence of consistency, the plain language of the statutes is strong evidence that Congress intended “wages” to mean the same thing under FICA, FUTA, and income-tax withholding.
The legislative histories of the Acts establishing income-tax withholding support the conclusion to be drawn from the plain language. These histories reveal a congressional concern for “the interest of simplicity and ease of administration.” S. Rep. No. 1631, 77th Cong., 2d Sess., 165 (1942) (Revenue Act of 1942). See Central Illinois Public Service Co. v. United States, supra, at 31. They also reveal that one of the means Congress chose in order to promote simplicity was to base withholding upon the same measure—“wages“—as taxation under FICA and FUTA. Thus, whereas the withholding system proposed by the House provided for withholding upon dividends and bond interest in addition to wages, H. R. Rep. No. 2333, 77th Cong., 2d Sess.,
When Congress replaced § 172, the House devoted much attention to the specified exceptions from “wages,” H. R. Rep. No. 268, 78th Cong., 1st Sess., pt. 1, p. 14 (1943); H. R. Rep. No. 401, 78th Cong., 1st Sess., pt. 1, pp. 22-23 (1943), but it left the essential definition of “wages” unchanged. H. R. Rep. No. 268, supra, at 14. The Senate modified the bill proposed by the House, and reported: “[T]he methods of collection, payment, and administration of the withholding tax have been coordinated generally with those applicable to the Social Security tax imposed on employees under section 1400 of the code. This proposal has been made in order to facilitate the work of both the Government and the employer in administering the withholding system.” S. Rep. No. 221, 78th Cong., 1st Sess., 17 (1943); see also H. R. Conf. Rep. No. 510, 78th Cong., 1st Sess., 28 (1943).11
In sum, Congress intended in both the Revenue Act of 1942 and the Current Tax Payment Act of 1943 to coordinate the income-tax withholding system with FICA and FUTA. In both instances, Congress did so to promote simplicity and ease of administration. Contradictory interpretations of substantially identical definitions do not serve that interest. It would be extraordinary for a Congress pursuing this interest to intend, without ever saying so, for identical definitions to be interpreted differently.
Despite the plain language of Congress’ definition of “wages” and this legislative history, the Government contends that FICA and FUTA compose a distinct system of taxation to which the rules of income taxation, such as the exclusion of the value of meals and lodging from “income” under the convenience-of-the-employer rule in
We are not persuaded by this contention. The reference by Congress to “room, board, etc.” as examples of “wages” under Titles VIII and IX is ambiguous. It does not neces-
The Government further contends, however, that a line of Treasury Regulations and rulings unbroken since 1940 refutes petitioner‘s view that Congress intended a consistent interpretation of the term “wages.” It also contends that we may infer congressional endorsement of these Treasury Regulations and rulings from Congress’ re-enactment of FICA, FUTA, and the income-tax withholding provisions in the Internal Revenue Code of 1954. We now address these contentions.
C
The history of the Treasury Regulations and rulings interpreting Congress’ definition of “wages” in FICA and FUTA
The position taken in the Treasury Regulations and rulings subsequently changed, but without explanation. In 1939, Congress passed the Social Security Act Amendments of 1939, ch. 666, 53 Stat. 1360, that amended some of the specified exclusions from “wages” under FICA and FUTA but left unchanged the definition of “wages.” Compare §§ 603, 614, 53 Stat. 1382, 1392, with §§ 1426 (a), 1607 (b), Internal Revenue Code of 1939, 26 U. S. C. §§ 1426 (a), 1607 (b) (1952 ed.). In 1940, however, the Commissioner issued Treas. Regs. 106, § 402.227 (FICA), and Treas. Regs. 107, § 403.227 (FUTA). These Regulations, which were virtually
The Government contends that the 1940 Regulations and the rulings issued pursuant to them acquired “the effect of law” when Congress re-enacted FICA and FUTA without substantial change in the Internal Revenue Code of 1954. United States v. Correll, 389 U. S., at 305; Cammarano v. United States, 358 U. S. 498, 510-511 (1959). In its view, the 1936 Treasury Regulations and the rulings under them were short-lived and therefore are inconsequential. See National Muffler Dealers Assn. v. United States, 440 U. S., at 485-486.15
We are unconvinced. Despite Treas. Regs. 106 and 107 and the rulings issued under them, the rule of S. S. T. 302 issued in 1938—that the value of meals provided for the convenience of the employer is excludable from “wages“—remained in effect until after 1954. In 1957, the Service ruled
The history of the Treasury Regulations and rulings interpreting Congress’ definition of “wages” in FICA and FUTA therefore lends only the most ambiguous support to the view that Congress intended to approve different interpretations of “wages” when it re-enacted the Internal Revenue Code in 1954. The differing interpretations were not substantially contemporaneous constructions of the statutes, and nothing in the manner in which the interpretations changed is probative of congressional endorsement. Nor is there evidence of any particular consideration of these regulations by Congress during re-enactment.
We conclude that
We therefore hold that the Regulations are invalid, and that the Service erred in relying upon them to include in the computation of “wages” the value of the meals and lodging that petitioner provided for its own convenience to its employees on offshore oil rigs. The judgment of the Court of Appeals is reversed.
It is so ordered.
JUSTICE WHITE, with whom JUSTICE BRENNAN and JUSTICE MARSHALL join, dissenting.
For the reasons so well stated by Judge Rubin, I agree with the judgment of the Court of Appeals for the Fifth Circuit that the Regulations under attack here are a permissible interpretation of the controlling provisions of the Internal Revenue Code. Consequently, I dissent and would affirm the judgment.
Notes
“(a) Meals and lodging furnished to employee, his spouse, and his dependents, pursuant to employment.
“There shall be excluded from gross income of an employee the value of any meals or lodging furnished to him, his spouse, or any of his dependents by or on behalf of his employer for the convenience of the employer, but only if—
“(1) in the case of meals, the meals are furnished on the business premises of the employer, or
“(2) in the case of lodging, the employee is required to accept such lodging on the business premises of his employer as a condition of his employment.”
In the first of this series, a school inquired whether it had to include the value of meals served to teachers for the school‘s convenience in the teachers’ “wages” under FICA. The Service replied in January 1954 that the school need not, for “S. S. T. 302 is applicable to the instant case.” Private Ruling 5401062910A. In the second ruling, an employer inquired whether to include in “wages” under FICA the value of meals and lodging provided pursuant to an employment contract. The Service replied in March 1954 that the employer should include this value because of the employment contract. It stated that S. S. T. 302 was “based on the premises that the lunches were of relatively small value and were furnished merely as a means of promoting the health, good will, contentment, or efficiency of the employees.” Private Ruling 5403042970A. In the third,
The Service had changed its view of S. S. T. 302 by the time it issued the fourth in this series. In 1957, another restaurant inquired whether the value of meals provided to employees was includable in “wages” for FICA and FUTA. Relying on S. S. T. 302, the restaurant contended that the value was excludable. The Service answered that S. S. T. 302 “cannot be regarded as controlling the treatment of meals furnished to employees in the restaurant industry.” Private Ruling 5710044200A. Nonetheless, like Rev. Rul. 57-471, 1957-2 Cum. Bull. 630, this private ruling repudiated S. S. T. 302 only as to the restaurant industry, thus leaving the convenience-of-the-employer rule apparently applicable to determinations by other employers. Finally, in 1965, an employer inquired whether the revocation of S. S. T. 302 by Rev. Rul. 62-150, 1962-2 Cum. Bull. 213, applied retroactively. The Service ruled that the limitation of S. S. T. 302 in Rev. Rul. 57-471 applied retroactively only as to employers operating restaurants. Private Ruling 6507023460A.