Syllabus

UNITED STATES v. BURKE ET AL.

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT

No. 91-42. Argued January 21, 1992-Decided May 26, 1992

As part of the settlement of a sex discrimination claim under Title VII of the Civil Rights Act of 1964, the Tennessee Valley Authority (TVA) paid backpay to affected employees, including respondents, from which it withheld federal income taxes. The Internal Revenue Service (IRS) disallowed respondents' claims for refund of the withheld taxes. In a subsequent refund action, the District Court ruled that, since respondents had obtained only backpay due them as a result of TVA's discriminatory underpayments rather than compensatory or other damages, the settlement proceeds could not be excluded from their gross incomes as "damages received... on account of personal injuries" under 26 U. S. C. § 104(a)(2). The Court of Appeals reversed, holding that TVA's discrimination constituted a personal, tort-like injury to respondents, and rejecting the Government's attempt to distinguish Title VII, which authorizes no compensatory or punitive damages, from other statutes thought to redress personal injuries.

Held: Backpay awards in settlement of Title VII claims are not excludable from gross income under § 104(a)(2). Pp. 233–242.

(a) IRS regulations formally link identification of a "personal injury" for purposes of § 104(a)(2) to traditional tort principles, referring to "prosecution of a legal suit or action based upon tort or tort type rights." 26 CFR §1.104-1(c). In order to fall within the § 104(a)(2) exclusion, respondents must show that Title VII, the legal basis for their recovery of backpay, redresses a tort-like personal injury. Pp. 233-234. (b) A hallmark of traditional tort liability is the availability of a broad range of damages to compensate the plaintiff for harm sustained. Title VII, however, permits the award of only backpay and other injunctive relief. Congress sought through Title VII to restore victims to the wage and employment positions they would have occupied absent discrimination, but declined, in contrast to other federal antidiscrimination statutes, to recompense victims for any of the other traditional harms associated with personal injury, such as pain and suffering, emotional distress, harm to reputation, or other consequential damages. Thus, Title VII cannot be said to redress a tort-like personal injury within the meaning of § 104(a)(2) and the applicable regulations. Pp. 234-242. 929 F. 2d 1119, reversed.

Opinion of the Court

BLACKMUN, J., delivered the opinion of the Court, in which REHNQUIST, C. J., and WHITE, STEVENS, and KENNEDY, JJ., joined. SCALIA, J., post, p. 242, and SOUTER, J., post, p. 246, filed opinions concurring in the judgment. O'CONNOR, J., filed a dissenting opinion, in which THOMAS, J., joined, post, p. 248.

Jeffrey P. Minear argued the cause for the United States. On the briefs were Solicitor General Starr, Assistant Attorney General Peterson, Deputy Solicitor General Wallace, Kent L. Jones, Ann Belanger Durney, and Bruce R. Ellisen. Joseph E. Finley argued the cause for respondents. With him on the brief was Lucinda M. Finley.*

JUSTICE BLACKMUN delivered the opinion of the Court.

In this case we decide whether a payment received in settlement of a backpay claim under Title VII of the Civil Rights Act of 1964, 78 Stat. 253, as amended, 42 U. S. C. § 2000e et seq., is excludable from the recipient's gross income under § 104(a)(2) of the federal Internal Revenue Code, 26 U. S. C. § 104(a)(2), as “damages received . . . on account of personal injuries."

I

The relevant facts are not in dispute. In 1984, Judy A. Hutcheson, an employee of the Tennessee Valley Authority (TVA), filed a Title VII action in the United States District

*Briefs of amici curiae urging affirmance were filed for the American Association of Retired Persons by Steven S. Zaleznick, Cathy VentrellMonsees, Raymond C. Fay, and Thomas F. Joyce; for the American Civil Liberties Union et al. by C. Cabell Chinnis, Jr., Alison C. Wetherfield, Martha F. Davis, Steven R. Shapiro, Isabelle Katz Pinzler, Julius L. Chambers, and Charles Stephen Ralston; for the Equal Employment Advisory Council by Robert E. Williams and Douglas S. McDowell; for Equal Rights Advocates, Inc., by Stephen V. Bomse, Nancy L. Davis, and Maria Blanco; for Women Employed et al. by Michael B. Erp, Mary K. O'Melveny, and Stephen G. Seliger; for the National Employment Lawyers Association by Robert B. Fitzpatrick; and for the National Women's Law Center by Walter J. Rockler.

Raymond C. Fay, Alan M. Serwer, and Thomas F. Joyce filed a brief for the United Airlines Pilot Group as amicus curiae.

Opinion of the Court

Court for the Eastern District of Tennessee alleging that TVA had discriminated unlawfully in the payment of salaries on the basis of sex. The Office and Professional Employees International Union, which represented the affected employees, intervened. Among the represented employees were respondents Therese A. Burke, Cynthia R. Center, and Linda G. Gibbs.

The complaint alleged that TVA had increased the salaries of employees in certain male-dominated pay schedules, but had not increased the salaries of employees in certain female-dominated schedules. In addition, the complaint alleged that TVA had lowered salaries in some femaledominated schedules. App. in No. 90-5607 (CA6) (hereinafter App.), pp. 28-32 (Second Amended Complaint). The plaintiffs sought injunctive relief as well as backpay for all affected female employees. Id., at 33-34. The defendants filed a counterclaim against the union alleging, among other things, fraud, misrepresentation, and breach of contract. Id., at 35.

After the District Court denied cross-motions for summary judgment, the parties reached a settlement. TVA agreed to pay $4,200 to Hutcheson and a total of $5 million for the other affected employees, to be distributed under a formula based on length of service and rates of pay. Id., at 70-71, 76-77. Although TVA did not withhold taxes on the $4,200 for Hutcheson, it did withhold, pursuant to the agreement, federal income taxes on the amounts allocated to the other affected employees, including the three respondents here.1

1The pretax figures for the three respondents ranged from $573 to $928; the federal income tax withheld ranged from $114 to $186. 90-1 USTC ¶ 50,203, p. 83,747 (1990). Although respondents also sought a refund of taxes withheld from their incomes pursuant to the Federal Insurance Contributions Act (FICA), 26 U. S. C. §3101 et seq., neither the parties nor the courts below addressed the distinct analytical question whether backpay received under Title VII constitutes "wages" subject to taxation for FICA purposes. See 26 U. S. C. §3101(a) (imposing percentage tax on "wages"), §3121(a) (defining "wages" as "all remuneration for employ

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 underpayments 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.

Opinion of the Court

The dissent in the Court of Appeals, 929 F. 2d, at 1124, took the view that the settlement of respondents' claims for earned but unpaid wage differentials-wages that would have been paid and would have been subjected to tax absent TVA's unlawful discrimination-did not constitute compensation for "loss due to a tort," as required under § 104(a)(2). See id., at 1126.

We granted certiorari to resolve a conflict among the Courts of Appeals concerning the exclusion of Title VII backpay awards from gross income under § 104(a)(2).3 502 U. S. 806 (1991).

II
A

The definition of gross income under the Internal Revenue Code sweeps broadly. Section 61(a), 26 U. S. C. §61(a), provides that "gross income means all income from whatever source derived," subject only to the exclusions specifically enumerated elsewhere in the Code. As this Court has recognized, Congress intended through § 61(a) and its statutory precursors to exert "the full measure of its taxing power," Helvering v. Clifford, 309 U. S. 331, 334 (1940), and to bring within the definition of income any "accessio[n] to wealth." Commissioner v. Glenshaw Glass Co., 348 U. S. 426, 431 (1955). There is no dispute that the settlement awards in this case would constitute gross income within the reach of §61(a). See Brief for Respondents 9-10.

The question, however, is whether the awards qualify for special exclusion from gross income under § 104(a), which

3 Compare the Sixth Circuit's opinion in this case with Sparrow v. Commissioner, 292 U. S. App. D. C. 259, 949 F. 2d 434 (1991) (Title VII backpay awards not excludable), and Thompson v. Commissioner, 866 F. 2d 709 (CA4 1989) (same). See also Johnston v. Harris County Flood Control Dist., 869 F. 2d 1565, 1579-1580 (CA5 1989) (noting, for purposes of district court consideration of tax liability in computing damages, that Title VII backpay awards may not be excluded under § 104(a)(2)), cert. denied, 493 U. S. 1019 (1990).