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Судебные дела / Зарубежная практика  / John F. REGAN, International Brother╜hood of Corrections Officers, on be╜half of themselves and all others simi╜larly situated, Plaintiffs, and The Commonwealth of Massachusetts, Plaintiff-Intervenor, v. THE UNITED STATES of America, Defendant, United States District Court, D. Massachusetts., 421 F.Supp.2d 319, No. CIV.A.02-10696 WGY., March 14, 2006

John F. REGAN, International Brother╜hood of Corrections Officers, on be╜half of themselves and all others simi╜larly situated, Plaintiffs, and The Commonwealth of Massachusetts, Plaintiff-Intervenor, v. THE UNITED STATES of America, Defendant, United States District Court, D. Massachusetts., 421 F.Supp.2d 319, No. CIV.A.02-10696 WGY., March 14, 2006

24.06.2008  

John F. REGAN, International Brother╜hood of Corrections Officers, on be╜half of themselves and all others simi╜larly situated, Plaintiffs, and The Commonwealth of Massachusetts, Plaintiff-Intervenor, v. THE UNITED STATES of America, Defendant

United States District Court, D. Massachusetts.

421 F.Supp.2d 319

No. CIV.A.02-10696 WGY.

March 14, 2006.

Alejandro L. Bertoldo, Department of Justice, Washington, DC, for United States of America, Defendant.

Lawrence D. Humphrey, National Asso╜ciation of Government Employees, Quincy, MA, for John F. Regan, Plaintiff.

Barry E. Reiferson, U.S. Department of Justice, Washington, DC, for United States of America, Defendant.

Peter Sacks, Attorney General's Office, Boston, MA, for Commonwealth of Massa╜chusetts, Intervenor Plaintiff.

Barbara Healy Smith, United States At╜torney's Office, Boston, MA, for United States of America, Defendant.

MEMORANDUM

YOUNG, District Judge.

I. INTRODUCTION

The Commonwealth of Massachu╜setts ("the Commonwealth") has largely abolished county government and trans╜ferred county employees to state employ. The United States and the Commonwealth have different perspectives on the impact that this consolidation has on the availabili╜ty of the continuing-employment exception to the Medicare tax. The issue, as framed below, is one of first impression:

Does the Commonwealth's abolition of county governments and subsequent transfer of county employees to state employment render the employees new╜ly hired and the state a new employer for the purposes of the continuing-em╜ployment exception?

This Court rules that the Commonwealth's actions do not render the employees newly hired and the state a new employer for the purposes of the continuing-employment ex╜ception. The statute involved is unclear and ambiguous on resolving the issue. A close examination of the legislative history supports that a consolidation should not interrupt the continuity of employment. Thus, the more reasonable conclusion is that this consolidation does not interrupt the continuity of employment for the con╜tinuing-employment exception.

John Regan, the International Brother╜hood of Correctional Officers, others simi╜larly situated, and the Commonwealth (col╜lectively, "the Plaintiffs") 1 claim that they qualify for a continuing-employment ex╜ception to the Medicare tax. Am. Compl. [Doc. No. 18] ╤╤ 8-14; Intervenor Compl. [Doc. No. 25] ╤ 2. The Plaintiffs allege that the Internal Revenue Service ("IRS") re╜fused or failed to refund improperly as╜sessed and collected taxes. Am. Compl. ╤╤ 8-14; Intervener Compl. ╤ 2. The Unit╜ed States claims that, as matter of law, these individuals and entities do not quali╜fy for the continuing-employment excep╜tion. See Objection to Commonwealth of Massachusetts's Mot. for Partial Summ. J., and Cross-Mot. for Partial Summ. J. [Doc. No. 58] ("Cross-Mot. Summ. J."). The parties have agreed first to determine the issue of whether the continuing-employ╜ment exception should continue to apply to the previously excepted employees and the Commonwealth. See Cross-Mot. Summ. J. at 1 n. 1. Thus, factual issues pertaining to specific tax refund claims are not under consideration on these cross-motions for summary judgment. See id.

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1. ═ Forty-seven individually named Plaintiffs bring this action as a test-case "agree[ing] to be bound by this Court's decision on th[e] legal issue, as presented by John F. Regan." Joint Stipulation Allowing Joinder Of Addi╜tional Plaintiffs In Lieu Of A Class Action [Doc. No. 16] ╤ 2.

The Commonwealth brings this action both on its own behalf and representing approxi╜mately 500 employees. Intervenor Compl. ╤ 2; See Intervener Compl., Ex. A.

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A. Background

The following recitation of facts is com╜piled from Plaintiff Regan's Memorandum in Support of Summary Judgment [Doc. No. 39], the Commonwealth's Statement of Undisputed Material Facts [Doc. No. 45], the Commonwealth's Memorandum in Support of Partial Summary Judgment [Doc. No. 46], and the Defendant's Objec╜tion to Commonwealth of Massachusetts's Motion for Partial Summary Judgment and Cross-Motion for Partial Summary Judgment [Doc. No. 58].

For the purpose of deciding the Plain╜tiffs' Motions for Partial Summary Judg╜ment, were a factual dispute to exist, the Court must take the United States's ver╜sion of the facts as true, where supported by record evidence, and draw all reason╜able inference in its favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 254, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Actually, however, there are no material issues of fact in dispute. 2

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2. ═ The Commonwealth and the United States agree that there are no material facts in dis╜pute. Reply Mem. In Supp. of Comm.'s Mot. for Partial Summ. J. and Opp'n to United States Cross-Mot. [Doc. No. 61] at 2 n. 1 ("Comm.'s Reply Mem."). The United States, however, provided two separate statements of material facts in dispute should the Court deem the referenced issues either material or genuine issues of fact.

The first statement raises two potential is╜sues. Def.'s Stat. Mat. Facts Dispute No. 1 [Doc. No. 58, Attach. 1]. The first issue, i.e. who employs Regan, is matter of law. See Def.'s Stat. Mat. Facts Dispute No. 1 ╤ 1; Mass. Gen. Laws ch. 34B, ╖╖ 12-14; 1996 Mass. Legis. Serv. ╖ 567(j), (n). The second, dealing with the label assigned to the aboli╜tion of the counties and transfer of employees, is immaterial. See Def.'s Stat. Mat. Facts Dispute No. 1 ╤ 2. As the Commonwealth cor╜rectly points out "[t]he particular label at╜tached to the transaction-merger, consolida╜tion, abolition/transfer, absorption-is of no consequence." Comm.'s Reply Mem. at 6 n. 4.

The second statement presents six potential issues in dispute. Def.'s Stat. Mat. Facts Dis╜pute No. 2 [Doc. No. 59., Attach. 3]. The first, referring to the employer status of the sher╜iffs, is matter of law. See Def.'s Stat. Mat. Facts Dispute No. 2 ╤ 1; ╖╖ 12-14; ╖ 567(j), (n). The second, dealing with the beneficiary of the sheriff's office functions, is immaterial. See id. ╤ 1. The third, whether the sheriffs' offices are independent state agencies, is matter of law. See id. ╤ 3. The fourth, pertaining to the employment status of the transferred county employees, is matter of law. See Def.'s Stat. Mat. Facts Dispute No. 2. ╤ 4; ╖╖ 12-14; ╖ 567(j), (n). The fifth, dealing with the employer status of the sher╜iffs, is matter of law. See Def.'s Stat. Mat. Facts Dispute No. 2 ╤ 5; ╖╖ 12-14; ╖ 567(j), (n). To the extent that there are any factual issues relating to the reporting, supervision, direction, or control of the sheriffs, these is╜sues are immaterial. See Def.'s Stat. Mat. Facts Dispute No. 2. ╤ 5.

The sixth issue is a request to strike para╜graph 12 of the Commonwealth's Statement of Undisputed Material Facts for lack of per╜sonal knowledge as provided for under Feder╜al Rule of Civil Procedure 56(e). Even if the Court strikes paragraph 12, much of the same information is repeated by other individuals that the United States does not claim lack personal knowledge, is contained in legisla╜tive history whose facts are uncontested, or was admitted by the United States. See Comm.'s Stat. Undisp. Mat. Facts ╤╤ 14-19.

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1. The abolition of seven counties

The Commonwealth of Massachusetts passed various statutes ("the Acts") be╜tween 1996 and 2000 which abolished the great bulk of county government in seven counties. Commonwealth's Statement of Undisputed Material Facts [Doc. No. 45] ╤ 3 ("Comm.'s Stat. Undisp. Mat. Facts"). These seven counties are Berkshire, Es╜sex, Franklin, Hampden, Hampshire, Mid╜dlesex, and Worcester ("abolished coun╜ties"). Id. ╤ 3.

For some time previous to passage of these Acts, the Commonwealth had given the seven counties substantial funding to support their corrections systems. Id. ╤╤ 7-9. Each abolished county's "largest single category of [e]xpenditure" was its correction system. Id . ╤ 9. The Common╜wealth passed the Acts in an attempt to ameliorate the abolished counties' respec╜tive financial difficulties and emergencies. Id. ╤ 14 (citing Answer to Intervener Compl. [Doc. No. 29] ╤ 6).

With the exception of the Act abolishing Franklin County, the Acts abolishing the counties were codified as Chapter 34B of the General Laws of Massachusetts. Id. ╤ 4. Set forth below is a list of the dates when each county was abolished ("abol╜ished date" or "transfer date"):

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3. ═ According to the most current law, Septem╜ber 1, 1998 is the date of transfer for "all functions, duties and responsibilities for the operation and management of the jail, house of correction[,] . . . and all duties and respon╜sibilities for operation and management of property occupied primarily by the sheriff . . . ." Mass. Gen. Laws. ch. 34B, ╖ 1. The rest of Hampshire county was abolished Janu╜ary 1, 1999. Id .

The Commonwealth and the United States assert that Hampshire County was abolished on July 1, 1998. United States Of America's Statement Of Undisputed Material Facts [Doc. No. 59, Attach. 4] ╤ 6 ("United States's Stat. Undisp. Mat. Facts"); Comm's Stat. Undisp. Mat. Facts ╤ 4. The Commonwealth and the United States find support for their assertion in an Act from 1998 which cites July 1, 1998 as the date of abolition. 1998 Mass. Acts 1305.

While July 1, 1998 was initially cited as the date of abolition, an Act passed in 1999, which codified the Acts abolishing the counties, cited September 1, 1998 as the date of abolition. 1999 Mass. Legis. Serv. ch. 127, ╖ 53. The Massachusetts legislature provides no reason for the change in dates. As the most recent law indicates the date of abolition is September 1, 1998, the Court uses this date.

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Mass. Gen. Laws. ch. 34B, ╖ 1; 1996 Mass. Legis. Serv. ╖ 567(a) (indicating July 1, 1997 as the date when Franklin county was abolished).

By operation of law, the sheriffs and the sheriffs' employees of the abolished coun╜ties became employees of the Common╜wealth. 4 Comm.'s Summ. J. Mem. at 6; Mass. Gen. Laws ch. 34B, ╖╖ 12-13; 1996 Mass. Legis. Serv. ╖ 567(j), (n). The sheriffs remain elected officials in each of the abolished counties. Mass. Gen. Laws ch. 34B, ╖ 12; 1996 Mass. Legis. Serv. ╖ 567(j). "After abolishment, the [e]m╜ployees, under the aegis of the Common╜wealth rather than the counties, performed the same or similar functions." Cross-Mot. Summ. J. at 2. The sheriffs and the sheriffs' employees were "transferred to the [C]ommonwealth with no impairment of employment rights . . . without inter╜ruption of service, without impairment of seniority, retirement or other rights of em╜ployees, without reduction in compensation or salary grade and without change in union representation." 5 Mass. Gen. Laws ch. 34B, ╖ 14; see also 1996 Mass. Legis. Serv. ╖ 567(j), (n). Additionally, the Com╜monwealth paid all the liabilities and as╜sumed the leases and contracts of the abol╜ished counties. Mass. Gen. Laws ch. 34B, ╖╖ 5-7; 1996 Mass. Legis. Serv. ╖ 567(c), (d); Comm.'s Stat. Undisp. Mat. Facts ╤ 13.

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4. ═ In the instant case, the employment status of the sheriffs and the sheriffs' employees is matter of law, as the status was statutorily established. See Mass. Gen. Laws ch. 34B, ╖╖ 12-14; 1996 Mass. Legis. Serv. ╖ 567(j), (n). Currently and at all times proceeding the dates of abolition, the sheriffs and the sheriffs' employees are employees of the Common╜wealth. Id . Accordingly, the Plaintiffs' vari╜ous theories for why the sheriffs, or the sher╜iffs' employees may not be Commonwealth employees are unavailing. See Regan's Summ. J. Mot. at 15, 18; Comm.'s Summ. J. Mot. at 15.

5. ═ The Act abolishing Franklin County reads substantially the same. See 1996 Mass. Legis. Serv. ╖ 567(n).

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2. Introduction to the continuing-employment exception and private letter rulings

As will be discussed in greater detail, state and local employees were not subject to the Medicare tax before 1986. Comm.'s Summ. J. Mem. at 10. Many of these employees ended up qualifying for Medi╜care coverage through a spouse or another job. See H.R. Rep. 99-241, pt. 1, at 25 (1985), reprinted in 1986 U.S.C.C.A.N. 579, 603 ("House Report"). These employ╜ees drained the Medicare system by using Medicare services while making little or no contributions. Id. To address this issue, Congress extended the Medicare tax to all state and local employees. Id. at 25-26. Congress created a continuing-employ╜ment exception to the tax in order to pre╜vent the huge, sudden financial burden which extension of the tax would otherwise impose on the states (which would then be obligated to pay into the Medicare fund). Id. The continuing-employment exception provided that the mandatory tax would apply only to newly hired employees.

Prior to the transfer date, various em╜ployees of the sheriffs' departments fell within the continuing-employment excep╜tion to the Medicare tax. Comm.'s Stat. Undisp. Mat. Facts ╤ 23. Shortly after the transfer date, the Massachusetts Comptroller began withholding wages from the previously excepted employees for the purpose of paying the Medicare tax. Id. ╤ 24.

On November 26, 1997, the Massachu╜setts Comptroller contacted the IRS and requested an expedited private letter rul╜ing concerning the propriety of this with╜holding. 6 Comm.'s Stat. Undisp. Mat. Facts ╤ 24. The Comptroller wanted to know whether previously excepted employ╜ees of the Middlesex Sheriff's Department should continue to be excepted after their transfer to employment under the Com╜monwealth. Id. In the request letter, the Comptroller explained his conclusion that the exception no longer applied. Id. On June 29, 1998, the IRS ruled that the continuing-employment exception no long╜er applied to the previously excepted em╜ployees. Id.; I.R.S. P.L.R. 200247014, 2002 WL 31632950 (Aug. 12, 2002).

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6. ═ A court may not cite or use a private letter ruling as precedent. See 26 U.S.C. ╖ 6110(k)(3).

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On January 28, 2002, the Commonwealth requested a reconsideration of the above-referenced private letter ruling. Comm.'s Stat. Undisp. Mat. Facts ╤ 24. Addition╜ally, the Commonwealth requested a ruling that previously excepted employees of all the abolished counties continue to be ex╜cepted after the transfer date. Comm's Stat. Undisp. Mat. Facts ╤ 24. The IRS ruled that the continuing-employment ex╜ception no longer applied. Id .; I.R.S. P.L.R. 200247014 (Aug. 12, 2002).

3. Refund requests

Plaintiff John Regan filed with the IRS for a refund of the Medicare taxes collect╜ed from him since 1997 on April 2, 2001. Regan's Summ. J. Mem. at 4. On May 11, 2001, the IRS denied this claim. Id. On June 11, 2001, Regan appealed, and more than six months have passed from the date of the appeal. 7

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7. ═ According to 26 U.S.C. ╖ 6532(a)(1), "[n]o suit or proceeding under section 7422(a) for the recovery of any internal revenue tax, pen╜alty or other sum, shall begin before the expiration of 6 months from the date of filing the claim required under such section unless the Secretary renders a decision thereon within that time . . . ."

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On April 15, 2003, the Commonwealth filed for a refund of portions of Medicare taxes paid as employer from January 1, 1999 through December 31, 2002. Comm.'s Stat. Undisp. Mat. Facts. at ╤╤ 28, 29, 30. At this same time, the Com╜monwealth, on behalf of specific employ╜ees, filed for a refund of portions of Medi╜care taxes paid by those employees from January 1, 1999 through December 31, 2002. Id . On March 18, 2004, the IRS denied the refund requests for years 2000 through 2002. Comm.'s Stat. Undisp. Mat. Facts ╤ 30. The Commonwealth waived further administrative review for years 2000-2002 by accepting the disallow╜ance and more than six months has passed since the requested refund for 1999. Id.

II. DISCUSSION

A. Standard of Review

Summary judgment is appropriate when there are no genuine issues of material fact and the moving party is entitled to judgment as matter of law. Fed.R.Civ.P. 56(c); Anderson, 477 U.S. at 247, 106 S.Ct. 2505. A "genuine" issue of fact is one that a reasonable jury, on the record before the court, could resolve in favor of either par╜ty. Id. at 248, 106 S.Ct. 2505. A fact is material when it "might affect the outcome of the suit under the governing law." Hayes v. Douglas Dynamics, Inc. , 8 F.3d 88, 90 (1st Cir.1993) (internal quotation marks omitted) (citing Anderson, 477 U.S. at 248, 106 S.Ct. 2505).

In making its determination, the Court must view the evidence in the light most favorable to the non-moving party and draw all reasonable inferences in its favor. Braga v. Genlyte Group, Inc., 420 F.3d 35, 38 (1st Cir.2005). The movant has the initial burden of production, which it can meet either by offering evidence to disprove an element of the plaintiff's case or by demonstrating an "absence of evi╜dence to support the nonmoving party's case." Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the movant has met its bur╜den, the non-moving party must "go be╜yond the pleadings and[,] by [its] own affi╜davits, or by the depositions, answers to interrogatories, and admissions on file, designate specific facts showing there is a genuine issue for trial." Id. at 324, 106 S.Ct. 2548 (citation and internal quotation marks omitted). "Cross-motions for sum╜mary judgment do not alter the basic Rule 56 standard, but rather simply require [courts] to determine whether either of the parties deserves judgment as a matter of law on facts that are not disputed." Adria Int'l Group, Inc. v. Ferre Dev., Inc., 241 F.3d 103, 107 (1st Cir.2001).

B. Continuing-Employment Exception To The Medicare Tax

The central issue in this case is whether the Commonwealth is a new employer and previously excepted employees are newly hired for the purposes of the continuing-employment exception. This case treads new legal ground. There are no controlling cases or cases in other jurisdictions directly on point.

If the Commonwealth is a new employer and the previously excepted employees are newly hired, the Plaintiffs will not qualify for the continuing-employment exception to the Medicare tax. If not, the Plaintiffs likely will qualify. The statute granting the continuing-employment exception is unclear on the issue facing this Court.

When interpreting a statute a court first looks to the statutory language to determine if it is plain and unambigu╜ous. United States v. Commonwealth En╜ergy Sys., 235 F.3d 11, 15 (1st Cir.2000) (citing United States v. Ron Pair Enters., Inc., 489 U.S. 235, 241, 109 S.Ct. 1026, 103 L.Ed.2d 290 (1989)). If a statute is silent or ambiguous a court's first step is to "use traditional tools of statutory construction to determine congressional intent." Har╜vey v. Veneman, 396 F.3d 28, 33 (1st Cir. 2005) (citing Chevron, U.S.A., Inc. v. Natu╜ral Resources Defense Council, 467 U.S. 837, 842-44, 104 S.Ct. 2778, 81 L.Ed.2d 694(1984)). A court should not defer to an agency interpretation when the legislative intent is clear. Harvey, 396 F.3d at 33-34. Thus, a court's analysis will end at this first step when the legislative intent is clear. If the legislative intent is not clear, a court will move to the second step and "accord deference to [an] agency ▒as long as its interpretation is rational and consis╜tent with the statute.' " Id. at 34 (citing Chevron, 467 U.S. at 842-44, 104 S.Ct. 2778).

In general, courts may face two differ╜ent levels of deference owing to a particu╜lar administrative interpretation of a stat╜ute: 1) Chevron deference, or 2) Skidmore deference. See United States v. Mead Corp., 533 U.S. 218, 235, 121 S.Ct. 2164, 150 L.Ed.2d 292 (2001).

Chevron deference binds courts to follow an administrative agency's inter╜pretation unless it is arbitrary or capri╜cious:

When Congress has "explicitly left a gap for an agency to fill, there is an express delegation of authority to the agency to elucidate a specific provision of the stat╜ute by regulation," [ Chevron, 467 U.S. at] 843-844, 104 S.Ct. 2778, and any ensuing regulation is binding in the courts unless procedurally defective, ar╜bitrary or capricious in substance, or manifestly contrary to the statute.

Mead, 533 U.S. at 227, 121 S.Ct. 2164 (citing Chevron, 467 U.S. at 844, 104 S.Ct. 2778) (emphasis added). The First Circuit recognizes Mead for the proposition that " ▒where statutory circumstances indicate no intent to delegate authority to make rules with force of law, or where such authority was not invoked,' a court must review agency interpretations under a less tolerant standard." Navarro v. Pfizer Corp., 261 F.3d 90, 98-99 (1st Cir.2001) (quoting Mead, 533 U.S. at 237-38, 121 S.Ct. 2164). The congressional intent to permit an agency to address an ambiguity in its controlling statute, or fill in the gaps of a statute need not be explicit. Mead, 533 U.S. at 229, 121 S.Ct. 2164. "[I]t can still be apparent from the agency's gener╜ally conferred authority and other statuto╜ry circumstances that Congress would ex╜pect the agency to be able to speak with the force of law when it addresses ambigu╜ity in the statute or fills a space in the enacted law, even one about which ▒Con╜gress did not actually have an intent' as to a particular result." Id. (quoting Chevron, 467 U.S. at 845, 104 S.Ct. 2778).

If an administrative interpretation does not qualify for Chevron deference, it receives Skidmore deference. See Navar╜ro, 261 F.3d at 99. Skidmore deference means that a court will consider the administrative interpretation in light of its persuasive power. Id. "Under [ Skidmore, a court is] constrained to weigh the ▒thor╜oughness evident in [the guidance's] con╜sideration, the validity of its reasoning, its consistency with earlier and latter pro╜nouncements, and all those factors which give it power to persuade, it lacking power to control.' " Id . (quoting Skidmore v. Swift , 323 U.S. 134, 140, 65 S.Ct. 161, 89 L.Ed. 124 (1944)).

1. The statutory language of the con╜tinuing-employment exception is unclear regarding the question at issue; legislative history supports the Plaintiffs' position

The statutory language governing the continuing-employment exception does not indicate how a court ought resolve the legal question at issue. Specifically, Title 26, Section 3121 of the U.S.Code does not provide a clear answer as to whether the Commonwealth is a new employer and the previously excepted employees are newly hired when a state abolishes a county and brings employment relationships under its control. Accordingly, this Court looks to the legislative history and other persuasive sources to shed light on the problem. The House Report states public policy concerns which support the Plaintiffs' position. Ad╜ditionally, the House Report indicates that Congress intended that difficult cases ought be resolved by conducting an "inde╜pendence analysis". The results of such an analysis also lend support to the Plain╜tiffs' position.

The Federal Insurance Contributions Act ("FICA") taxes employers and em╜ployees for the purpose of contributing to (a) an old-age, survivors, and disability insurance system ("OASDI") and (b) a hospital insurance system (Medicare tax). 26 U.S.C. ╖╖ 3101, 3111, 3121. The FICA tax is determined based on a percentage of the wages "paid by [the employer]," id. ╖ 3111, and "received by [the employee] with respect to employment," id. ╖ 3101; see also id. ╖ 3121. Unless a remunera╜tion is specifically excluded from falling within the term "wages", or a service is specifically excluded from falling within the term "employment", an employer's re╜muneration paid for employee's services will generally be subject to FICA tax. Id. ╖╖ 3101, 3102, 3111, 3121.

If an employee of a state or political subdivision is a member of a retirement system of the same state or political subdi╜vision and the employee is not covered by a "Section 218 agreement", the employee's services are not considered "employment" for the purpose of the OASDI portion of FICA tax. Id . ╖╖ 3121(b)(7)(E), (F); see also 42 U.S.C. ╖ 418 (codifying Section 218 of the Social Security Act). But if a state or political subdivision hired an employee after March 31, 1986 and the services the employee performs are not covered by a Section 218 agreement, then the employ╜ee's services constitute "employment" for the purpose of extending the Medicare portion of the FICA tax. See 26 U.S.C. ╖ 3121(u)(2).

Section 3121(u)(2)(C) contains the con╜tinuing-employment exception to the Medi╜care portion of the FICA tax. This excep╜tion provides that certain state and local employment services will not be consid╜ered "employment" if:

(i) such service would be excluded from the term "employment" for purposes of this chapter if subparagraph (A) did not apply; 8

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8. ═ Section 3121(u)(2)(C)(i) requires that the employee seeking the continuing-employment exception be 1) a member of a retirement system of such state or political subdivision and 2) is not a member of an agreement entered into pursuant to Section 218 of the Social Security Act, as codified under Title 42, Section 418 of the U.S.Code. See Id. ╖ 3121(u)(2)(C)(i) (cross-referencing Section 3121(u)(2)(A) (cross-referencing Section 3121 (b)(7))).

The above-referenced requirements for the statutory cross-referencing runs as follows. An individual needs to satisfy clause (i) of Section 3121(u)(2)(C) to meet the continuing-employment exception. One satisfies clause (i) if the service she performs "would be ex╜cluded from term ▒employment' . . . if subpar╜agraph (A) did not apply." Id . ╖ 3121(u)(2)(C)(i). If subparagraph (A) did not apply, one would look to subsection (b), paragraph (7) in order to determine what services fall under the term "employment" when an individual provides services for a state or political subdivision. See Id. ╖╖ 3121(u)(2)(A), 3121(b)(7). Subsection (b) provides that the term employment shall not include:

(7) service[s] performed in the employ of a [s]tate, or any political subdivision . . . [except:]

(E) service included under an agreement entered into pursuant to section 218 of the Social Security Act, or

(F) service in the employ of a[s]tate . . ., of any political subdivision . . . by an indi╜vidual who is not a member of a retire╜ment system of such [s]tate [or] political subdivision . . . .

Id. ╖╖ 3121(b)(7)(E), (F) (emphases added). Accordingly, one's services under the employ of a state or political subdivision are not con╜sidered "employment" under (b)(7) if that person is not covered by a Section 218 agree╜ment and is a member of a retirement system of such a locality. Id. As such services "would be excluded from term ▒employment' . . . if subparagraph (A) did not apply", then a person performing those services could satisfy clause (i). See Id . ╖ 3121(u)(2)(C)(i).

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(ii) such service is performed by an individual-

(I) who was performing substantial and regular service for remunera╜tion for that employer before April 1, 1986,

(II) who is a bona fide employee of that employer on March 31, 1986, and

(III) whose employment relationship with that employer was not entered into for purposes of meeting the requirements of this subparagraph; and

(iii) the employment relationship with that employer has not been terminated after March 31, 1986.

Id. ╖ 3121(u)(2)(C).

a. The language of Section 3121 does not clearly address the legal issue in question

The United States argues that the statu╜tory language is clear and that the continu╜ing-employment exception should not ap╜ply to the previously excepted employees. Cross-Mot. Summ. J. at 5. The United States frames the legal issue as whether the previously excepted employees have a continuing relationship with the same em╜ployer after the abolition of the counties. See id. at 5-6. It asserts that, based on the statutory language, a state employer is clearly a different employer than a county employer. Id . Therefore, the employees in question have not worked continuously for the same employer. Id .

In support of its argument, the United States points to a section of the statute which defines employers for the purpose of the exception:

(D) Treatment of agencies and instru╜mentalities.-

For purposes of subparagraph (C), under regulations-

(i) All agencies and instrumentalities of a State (as defined in section 218(b) of the Social Security Act) or of the District of Columbia shall be treated as a single employer.

(ii) All agencies and instrumentalities of a political subdivision of a State (as so defined) shall be treated as a single employer and shall not be treated as described in clause (i). 9

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9. ═ Section 218(b) of the Social Security Act (42 U.S.C. ╖ 418(b)(1), (2)) provides the following definitions: "(1) The term ▒[s]tate' does not include the District of Columbia, Guam, or American Samoa. (2) The term ▒political sub╜division' includes an instrumentality of (A) a State, (B) one or more political subdivisions of a State, or (C) a State and one or more of its political subdivisions."

The Commonwealth claims that the state╜ment "all agencies . . . of a political subdivision . . . shall be treated as a single employer and shall not be treated as described in clause (i)" was written into the statute because the reference within Section 3121(u)(2)(D) to sec╜tion 218 would otherwise make all political subdivisions state employers. See Comm.'s Reply Mem. at 3; compare 26 U.S.C. ╖ 3121(u)(2)(D), with 42 U.S.C. ╖ 418(b)(1), (2).

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26 U.S.C. ╖ 3121(u)(2)(D)(i), (ii). As mat╜ter of law, the Commonwealth is a state, and the abolished counties were political subdivisions. See id. ╖ 31 21(u)(2)(D)(i), (ii); 42 U.S.C. ╖ 418(b)(1), (2). The Unit╜ed States asserts that the plain language of the statute indicates that "lateral em╜ployment moves between State entities or between political subdivision[s] do not pre╜clude application of the continuing employ╜ment exception." Cross-Mot. Summ. J. at 7. But "vertical moves between State entities and political subdivision[s] do pre╜clude its application." Id.

Not surprisingly, the Plaintiffs frame the issue differently. The Plaintiffs argue that they satisfy all but one of the continu╜ing-employment exception requirements found in clauses (ii) and (iii) of Section 3121(u)(2)(C). For the Plaintiffs, the legal issue is whether "the employment relation╜ship with that employer has not been ter╜minated after March 31, 1986." Comm.'s Summ. J. Mem. at 2; Regan's Summ. J. Mem. at 6. The Plaintiffs argue the answer to this question cannot be found in the language of the statute because the statute does not address what happens when em╜ployers consolidate. Comm.'s Summ. J. Mem. at 12; Regan's Summ. J. Mem. at 7. Moreover, the Plaintiffs argue that this Court must look both to the legislative history and the rationale of a Sixth Circuit case to determine the merits of the instant case.

Both the Commonwealth and Regan rely heavily on Board of Educ. of Muhlenberg v. United States, 920 F.2d 370 (6th Cir. 1990) to support their position that the statutory language is not clear. See Comm.'s Summ. J. Mem. at 9-18; Regan's Summ. J. Mem. at 7-9. In Muhlenberg, three school districts (Muhlenberg County, Central City Independent, and Greenville Independent) consolidated into one single school district (Muhlenberg County). Id. at 371. After the consolidation, the United States deemed the teachers of the Central City Independent and Greenville Indepen╜dent School Districts newly hired employ╜ees of Muhlenberg County. Id. at 372. Presumably, none of the teachers were previously subject to the Medicare tax be╜fore the consolidation. See id. at 372-73. Subsequently, the IRS began collecting Medicare tax from the newly hired teach╜ers and the school district, but considered that the teachers from the original Muh╜lenberg County School District still quali╜fied for the continuing-employment excep╜tion to the Medicare tax. Id. at 372. The Sixth Circuit presented the issue in contro╜versy as, "whether the plaintiff teachers were newly hired by a different employer after the consolidation . . . or whether the teachers qualify for the continuing employ╜ment exception to the Medicare tax . . . ." Id. at 373. To determine if the teachers were newly hired, the court looked to the legislative history of the statute despite the language found in Section 3121(u)(2)(D):

The language of the statute is unambig╜uous in the ordinary employment con╜text involving an employee who quits or is terminated from one job and is hired for another. It is clear, however, that the statute does not expressly address an event in which two or more employ╜ers consolidate . . . . Therefore, we find it necessary to look to the legislative history, particularly to the policy behind the creation of the continuing employ╜ment exception.

Muhlenberg, 920 F.2d at 374 (emphasis added). The Sixth Circuit concluded that the statute did not clearly addresses a situation where employers consolidate. Id.

The United States argues that Muhlen╜berg is distinguishable from the instant case, as Muhlenberg involved the consoli╜dation of local political entities. Def.'s Obj. Regan's Summ. J. Mem. at 5-6. "The Sixth Circuit did not address a case like this, and certainly did not read ╖ 3121(u)(2)(D) out of the law . . . ." ═ Id. at 6. "The Commonwealth ignores the difference between the lateral moves in Muhlenberg and the vertical moves [in the instant case which] go to the heart of the applicable statutes." Cross-Mot. Summ. J. at 8. Maintaining its position that there is no ambiguity in the statutory language, the United States asserts that under Section 3121(u)(2)(D) a state employer is a different employer than a political subdivision. Def.'s Obj. Regan's Summ. J. Mem. at 6. Accordingly, the United States argues that Muhlenberg is not on point. See id. at 5-6. Additionally, it claims the plain language of Section 3121(u)(2)(D) is consistent with the legislative history. Id. at 5-6.

Of course, Muhlenberg involved the con╜solidation of political subdivisions, while the instant case involves the consolidation of political subdivisions with state govern╜ment. Yet such a difference does not invalidate the Sixth Circuit's trenchant ob╜servation that "[i]t is clear, however, that the statute does not expressly address an event in which two or more employers consolidate." Muhlenberg, 920 F.2d at 374. That court never stated that the lack of statutory clarity is limited to situations involving the consolidation of political sub╜divisions, even if the case dealt only with political subdivisions. As stated by the Sixth Circuit, the plain language of the statute is clear only to the extent that it addresses the situation where an employee "quits or is terminated from one job and is hired for another." Muhlenberg, 920 F.2d at 374.

Furthermore, the plain language of Sec╜tion 3121(u)(2)(D) does not appear consis╜tent with the United States's vertical and horizontal distinction. As the Common╜wealth points out, clause (ii) of subpara╜graph (D) states that "[a]ll agencies and instrumentalities of a political subdivision of a State (as so defined) shall be treated as a single employer ." Comm.'s Reply Mem. at 4 (citing 26 U.S.C. ╖ 3121(u)(2)(D)(ii) (emphases added)). Ac╜cordingly, it does not appear that from the literal meaning of clause (ii) "lateral em╜ployment moves . . . between political sub╜division entities do not preclude application of the continuing employment exception." Compare Cross-Mot. Summ. J. at 7, with 26 U.S.C. ╖ 3121(u)(2)(D)(ii).

Additionally, if the plain language of the statute is so clear, the House Report would not anticipate that the Secretary of the Treasury would issue regulations to help determine if an employee is newly hired. See House Report at 25. As the Common╜wealth points out, the House Report "rec╜ognizes that defining entities as separate employers for purposes of determining whether an employee has been hired by a State or local entity after 1985, may pose complex issues for the Internal Revenue Service." Id.; See Comm.'s Reply Mem. at 7.

The United States argues that Muhlen╜berg is distinguishable from the instant case because it only involved local political entities, Def.'s Obj. Regan's Summ. J. Mem. at 5-6, and argues that "[t]he legis╜lative history is consistent with the plain language of ╖ 3121(u)(2)(D)", as the House Report states "moves between state and local government would discontinue em╜ployment." Id. at 6. Perhaps for these reasons, the United States does not ad╜dress the Sixth Circuit's discussion of the policy considerations in Muhlenberg.

Even so, this Court looks to the legisla╜tive history and other persuasive sources to reach its decision.

b. Policy considerations undergird╜ing the continuing-employment exception support the Plaintiffs' position

As observed by the Sixth Circuit in Muhlenberg, the policy considerations for the continuing-employment exception are based on preventing a financial burden on state and local governments while subject╜ing state and local employers to a manda╜tory Medicare tax. 10 These policy consid╜erations support the Plaintiffs' position that the employees should not be deemed newly hired nor the Commonwealth a new employer for the purposes of the continu╜ing-employment exception.

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10. ═ Regan asserts that "[t]he Muhlenberg court appears to have used the successor liability method of analysis that has been applied in labor law." Regan's Summ. J. Mem. at 9. Regan asserts that, like the courts rationale in Muhlenberg, the doctrine of successor liability "protect[s] employees when the ownership of their employer suddenly changes." The Unit╜ed States's response appears only to suggest that "[w]hile such an exercise may be some╜what useful where a court is confronted with an ambiguous statute, it is of no use here." Def.'s Obj. Regan's Summ. J. Mem. at 9.

Regan misconstrues the Sixth Circuit's analysis of the policy behind the continuing-employment exception. In Muhlenberg, the Sixth Circuit observes that Congress was con╜cerned with states facing the financial burden of the new mandatory Medicare tax, thus Congress intended that the tax apply only to newly hired employees. See Muhlenberg, 920 F.2d at 375. The policy behind the continu╜ing-employment exception seeks to protect states from the financial burden of the man╜datory Medicare tax. See id. The Muhlen╜berg opinion does not mention "the successor liability doctrine", and that doctrine is not applicable or analogous to the instant case.

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Prior to 1986, state and local employ╜ment was only covered by Social Security if the states entered into voluntary agree╜ments. House Report at 25. In some instances, state and local employees who made no contributions to FICA taxes would still end up qualifying for benefits through a spouse or other employment. House Report at 25-26. This phenomenon created a financial problem, especially as it pertained to Medicare coverage. Id.

If an individual qualified for Medicare coverage, that individual was entitled to full coverage regardless of the level of contribution. Id. Thus, those state and local employees who qualified and utilized Medicare coverage while never making real contributions to the Medicare pro╜gram would "drain" the system. See id. Accordingly, Congress extended Medicare coverage to newly hired state and local employees and subjected the employees and employers to the Medicare tax. Id. at 26-27; see also 26 U.S.C. ╖╖ 3101(b), 3111(b).

The House was "aware of concerns among [s]tate and local governments about the financial burden that mandatory Medi╜care coverage for all of their employees might represent." House Report at 26, 1986 U.S.C.C.A.N. at p. 603. With such concerns in mind, Congress provided for the continuing-employment exception so that the mandatory coverage would only apply to newly hired state and local em╜ployees. See id.

As mentioned previously, the case of Muhlenberg dealt with the issue of wheth╜er the consolidation of three local school districts into one larger local district cre╜ated newly hired employees for the pur╜poses of the continuing-employment excep╜tion. 920 F.2d at 373. The Sixth Circuit turned to the legislative history of the continuing-employment exception for guid╜ance. Id. at 374. In examining the House Report, the Sixth Circuit observed that Congress created the continuing-employ╜ment exception to protect state and local governments from the financial burden that the mandatory Medicare tax would otherwise inflict. Id. at 375. Further╜more, the court concluded that allowing a consolidation of governmental entities to create a new employer frustrates the goals of the policy supporting the exception:

The House Report's explanation for the continuing employment exception suggests that it was not the intent of Congress to treat a merger or consolidation as creating a new employer for the pur╜poses of this statute because such a treatment would create the same sudden financial burden on state and local gov╜ernments that the exception was drafted to mitigate. Allowing a merger or con╜solidation to create a new employer for purposes of this statute would be incon╜sistent with the policy decision Congress made when it created the continuing employment exception. Congress was not attempting to deter good faith con╜solidation of local government entities for the purposes of enhancing efficiency but rather to provide a gradual system of including employees in the Medicare system.

Id. at 375 (emphasis added). The Sixth Circuit relied in large part upon this policy argument in holding that the post-consoli╜dation Muhlenberg County Board of Edu╜cation "is the same employer as the former Central City, Greenville, and Muhlenberg County School Districts for purposes of interpreting 26 U.S.C. ╖ 3121(u)(2)(C)." 11 See id. at 376.

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11. ═ In addition to the policy considerations found in the legislative history, "[t]he court in Muhlenberg found [an] analogy to the tax treatment under 26 U.S.C. ╖ 402 of the lump sum retirement distribution received by an employee when two employers merge or con╜solidate persuasive." Regan ▒s Summ. J. Mem. at 14. The Sixth Circuit agreed with the school district that "the [United States] is inconsistent in treating a consolidation as cre╜ating a new employer in this [Medicare] tax context but not in others." Muhlenberg, 920 F.2d at 375. The Sixth Circuit cites Revenue Ruling 79-336 for the proposition that "under ╖ 402 employees are not considered separat╜ed from service if a liquidation, merger, or consolidation resulted in their working for a new employer." Id . (citing Rev. Rul. 79-336, 1979-2 C.B. 187, 1979 WL 51080.); see also United States v. Haggart, 410 F.2d 449, 452 (8th Cir.1969). Accordingly, the court concluded that such an analogy was persuasive in the context of Section 3121(u)(2)(C).

Regan asserts that the treatment of employ╜er consolidations under Section 402 is appli╜cable by analogy to the instant case under Section 3121. Regan's Summ. J. Mem. at 14-15. Subsequently, he alleges the analogy provides further persuasive force in the in╜stant case that the employment was continuous despite a technical change in employers. Id. The argument seeks to extend the Sixth Circuit's rationale for the use of Section 402 to the instant case. Id. The United States responds that Section 3121 does not reference Section 402 and that the statute demands different treatment of state and local employ╜ers. Def.'s Obj. Regan's Summ. J. Mem. at 9.

If Section 402 is persuasive it is because it shows an inconsistency between the govern╜ment's treatment of consolidated employers among various sections of the Code. See Muhlenberg, 920 F.2d at 375-6. There may, however, be various rational policy reasons for the different treatment of consolidated em╜ployers within different sections of the Code. Additionally, it is not clear from Regan's as╜sertions or Muhlenberg if Section 402 is the general way the tax code treats consolidated employers in analogous situations. The best way to resolve the issue before this Court is to turn to the legislative history because it pro╜vides surer footing on slippery ground.

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The United States acknowledges that the continuing-employment exception was introduced to protect the states and local governments from the sudden burden of mandatory Medicare taxes. Cross-Mot. Summ. J. at 10-11. But it stresses that such an exception merely provided for the state and local government's gradual tran╜sition into the mandatory Medicare tax. Id. at 11. The United States points out that the Commonwealth did escape the sudden inclusion of all its employees. Id. The Commonwealth did have notice re╜garding the Medicare tax and yet it volun╜tarily abolished the counties. Id. at 11-12. Furthermore, the case only involves a rela╜tively small number of employees who were subjected to the Medicare tax ten years after Congress mandated that the Medicare tax applied to all newly hired state and local government employees. Id. The policy supports the gradual transi╜tion of government employees into the Medicare system, and subjecting the Plain╜tiffs to the Medicare tax is allegedly con╜sistent with these policy considerations.

If Congress had intended for the con╜tinuing-employment exception to remain in force for ten years or less, it could have written that into the statute. The continu╜ing-employment exception was intended to transition state and local governments into the mandatory Medicare tax system re╜gardless of the amount of time it took. Id. at 10-11. A court would inappropriately inflict the financial burden of mandatory Medicare taxation on the Commonwealth when individuals whom Congress intended to qualify for an exception are prevented from qualifying. It is true that the total amount the Commonwealth owes would be less if the taxation clock starts ticking for these employees after ten years as op╜posed to when the mandatory Medicare tax went into effect. Regardless, just be╜cause the burden is less, it is still against the policy considerations to make individu╜als Congress intended to except from the tax instead subject to the tax because an arbitrary number of years have passed.

The Sixth Circuit stated that if a consoli╜dation creates a new employer under the continuing-employment exception, such a result would be against the policy support╜ing the Medicare tax exception. Muhlen╜berg, 920 F.2d. at 375. Even if this Court accepts that the Sixth Circuit in Muhlen╜berg refers on this point only to a consoli╜dation of local employers, the rationale still can and does apply to a consolidation of local employers into state employment. In Muhlenberg, the court stated that "Con╜gress was not attempting to deter good-faith consolidation of local government en╜tities for the purposes of enhancing effi╜ciency but rather to provide a gradual system of including employees in the Medicare system." Id. Congress would not treat a consolidation of local entities as forming a new employer and employees because "such a treatment would create the same sudden financial burden on state and local governments that the exception was drafted to mitigate." Id.

The same rationale applies to the aboli╜tion of counties and the transfer of their employees to state employment for the purposes of enhancing state efficiency. The gravamen of the United States's argu╜ment is that the language of Section 3121(u)(2)(D) is clear. Cross-Mot. Summ. J. at 5-6. According to it, a court should always treat state employers differ╜ently from county employers. See id. at 7-8. Even if a court looks to the legisla╜tive history, it allegedly shows that Con╜gress intended vertical moves in employ╜ment should be treated differently than horizontal moves. See id. at 9-10.

Yet when this Court looks at the statuto╜ry language and the legislative history and concludes that the United States's inter╜pretation is unsupported, there is little left to justify the result which it requests. The result of holding that the Common╜wealth is a new employer and the formerly excepted county employees are newly hired would cause the Commonwealth a financial burden. This financial burden would be equally as "inconsistent with the policy decision Congress made when it cre╜ated the continuing employment excep╜tion" as it would in the context of the consolidation of political subdivisions. See Muhlenberg, 920 F.2d. at 375. It appears just as likely that Congress would have intended to protect states from the kind of financial burden which would be inflicted upon them if this Court deemed the Com╜monwealth a new employer, as Congress would in the context of political subdivision consolidations. See id.

For the above-mentioned reasons, the Court holds that the policy considerations of the continuing-employment exception support that the Commonwealth is not a new employer, and the previously excepted employees are not newly hired.

c. Alternatively, the House Report provides for an "independence analysis" to determine if an entity is a new employer, and such analy╜sis also supports that the Com╜monwealth is not a new employer

The House anticipated that the Secre╜tary of the Treasury would create regulations to aid in the determination of "wheth╜er an individual employee is newly hired and thus covered, or has in fact not been separate from his previous excluded em╜ployment . . . ." 12 Id. The House Report provided guidance in making such a determination:

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12. ═ The Sixth Circuit noted in Muhlenberg that "[t]he House Report recognized the difficulty of deciding who is ▒newly hired' and invited the Treasury to write regulations[, but] [t]he treasury has not done so." 920 F.2d at 374 n. 4. Fifteen years after Muhlenberg, the IRS has still not provided such regulations. Comm.'s Summ. J. Mem. at 13.

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It should be generally true that employ╜ees who move between different jobs in different integral units of a State gov╜ernment, such as different departments within the State government, would be considered continuously employed by the State, while employees who move from State government employment to a job with a local township, count or mu╜nicipality, or vice versa, would be consid╜ered to be newly hired. The Committee expects that cases in which the distinc╜tions are more difficult to make will be judged according to the independence of the second employing unit from the first, as an employer.

Id. at 26-27, U.S.C.C.A.N. at pp. 604-05 (emphasis added).

The Commonwealth asserts that it "has no real independence from the abolished counties [as an employer], and thus the continuing employment exception applies." Comm.'s Summ. J. Mem. at 18. In sup╜port of its position, the Commonwealth points out that it transferred the employ╜ees with the same rights, seniority, com╜pensation, union representation, and col╜lective bargaining agreements. Id. at 18-19 (citing Mass. Gen. Laws ch. 34B, ╖ 14(a)). As recognized even by the Unit╜ed States, "[a]fter abolishment, the [e]m╜ployees, under the aegis of the Common╜wealth rather than the counties, performed the same or similar functions." Cross-Mot. Summ. J. at 2. Furthermore, the Commonwealth paid all outstanding liabili╜ties and assumed all of the contracts of the abolished counties. Comm.'s Summ. J. Mem. at 19. In addition, the Common╜wealth asserts that as it had been paying a large portion of the financial costs for op╜erating the sheriffs' departments, the abo╜lition embraced the reality that the coun╜ties were dependent on state funding. See id . at 19-20; Comm.'s Stat. Undisp. Mat. Facts ╤╤ 7-9, 14. The Commonwealth con╜tends it made "no ▒clean break' with [coun╜ty employees] or employment obligations." Comm.'s Summ. J. Mem. at 19. "Rather, [the Commonwealth] stepped directly into [the abolished counties'] shoes." Id.

In response, the United States first ar╜gues that the Commonwealth failed to show why the instant case is sufficiently difficult to warrant the independence anal╜ysis found in the House Report. Cross-Mot. Summ. J. at 12. Second, the United States asserts that "[t]o the extent that the Commonwealth insists that this is a ▒more difficult' case requiring additional guid╜ance, that guidance is available in the form of a revenue ruling." Id. at 13. Third, the United States claims that the revenue rul╜ing to which it refers is entitled to Chevron deference. Id. Fourth, the United States asserts that even under the independence analysis, the Commonwealth is not suffi╜ciently dependent on the abolished coun╜ties to prevent it from counting as a new employer. Id. at 15.

First, this is a difficult case where the law is not clear. It is of little importance that the Commonwealth did not expressly make such an assertion. The Common╜wealth has demonstrated that, after the abolition date, the substantive nature of the employment relationship stayed sub╜stantially the same. Comm.'s Summ. J. Mem. at 18-19. Additionally, the Commonwealth clearly asserts that the similar╜ities and the lack of independence between the employing entities supports a ruling that the employment is continuous. See Comm.'s Summ. J. Mem. at 18-20. Such a ruling is appropriate despite the fact that, as matter of law, the Commonwealth is the current employer. See id. The present scenario is sufficient for this Court to rule that the case is difficult enough to warrant the independence analysis.

Second, the United States is incor╜rect in asserting that an administrative revenue ruling should guide the analysis. See Cross-Mot. Summ. J. at 13. A court ought first look to the legislative history before considering "agency interpretations or other devices of construction." Tupper v. United States, 134 F.3d 444, 446 (1st Cir.1998). Courts and agencies must fol╜low the expressed intent of Congress. Thus, if such intent is found in the legisla╜tive history the analysis ends. See Chev╜ron , 467 U.S. at 843-44, 104 S.Ct. 2778. The House Report states "[t]he Committee expects that cases in which the distinctions are more difficult to make will be judged according to the independence of the sec╜ond employing unit from the first." House Report at 26-27, U.S.C.C.A.N. at pp. 604-05. Here the House Report calls for an analysis of the independence of the em╜ploying units in situations where it is diffi╜cult to determine whether an employee has been continuously employed. Revenue rulings are not mentioned in the House Report for this purpose at all. Thus, a court should not jump first to the revenue ruling without exhausting the legislative history. Within the legislative history, Congress intends that difficult cases will be judged under an "independence analy╜sis".

Third, the United States is not correct that Revenue Ruling 86-88 ("the revenue ruling") is entitled to Chevron deference. The revenue ruling reads:

Q7. An employee who was hired before April 1, 1986, by a state employer trans╜ferred after March 31, 1986, to another state employer of that state. The trans╜fer was made without a termination of the employee's overall employment rela╜tionship with that state. Does the em╜ployee qualify for the continuing em╜ployment exception?

A7. Yes. An employee hired before April 1, 1986, by a state employer who transfers after March 31, 1986 . . . may qualify . . . , provided the transfer was made without a termination of the em╜ployee's overall employment relationship with that state. The same rule applies to an employee hired . . . by a political subdivision employer, who transfers . . . to another political subdivision employer of that political subdivision.

On the other hand, an employee hired before April 1, 1986, does not qualify for the continuing employment exception if after March 31, 1986, the employee transfers from a state employer to a political subdivision employer or from a political subdivision employer to a state employer. Likewise, an employee does not qualify for the exception if the em╜ployee transfers from a political subdivi╜sion employer in one political subdivision to a political subdivision employer in a different political subdivision, or from a state employer in one state to a state employer is a different state. Section 3121(u)(2)(D).

Rev. Rul. 86-88, 1986-2 C.B. 172, 1986 WL 328030.

The United States does not provide any reason why the revenue ruling is entitled to such strong deference other than it is long-standing. See Cross-Mot. Summ. J. at 13. In examining the pertinent statuto╜ry provisions and legislative history, it is not clear what could support a claim that the revenue ruling is entitled to Chevron deference. The House Report does "anti╜cipat[e] that the Secretary of the Treasury will issue regulations relating . . . to the technical rules under which it will be de╜termined whether an individual employee is newly hired and thus covered . . . ." House Report at 26 (emphasis added). This statement, however, does not entitle an IRS revenue ruling to such strong def╜erence. The House Report does not evi╜dence that Congress intended the IRS to make revenue rulings with the force of law. See Navarro, 261 F.3d at 98-99. One might be able to argue that Congress intended that the Secretary of the Trea╜sury promulgate regulations with the force of law, but the instant case obviously does not involve regulations.

The United States has not provided any specific case law which supports the con╜clusion that revenue rulings are entitled to Chevron deference or that other statutory circumstances show that Congress would expect that revenue rulings have the force of law. 13 Judge Saylor recently stated that a revenue ruling was "entitled to substan╜tial deference", Wheeler v. United States, No. 03-40128, 2005 WL 3277952, at *4 (D.Mass. Aug.24, 2005) (Saylor, J.), yet his analysis does not extend to, or even men╜tion Chevron deference. Id . Moreover, the Sixth Circuit does not grant revenue rul╜ings Chevron deference because, when the IRS issues revenue rulings, it does not invoke the authority to make the rulings with the force of law. Aeroquip-Vickers, Inc. v. Comm'r of Internal Revenue, 347 F.3d 173, 181 (6th Cir.2003). Revenue Procedure 89-14 states that "[r]evenue rulings published in the Bulletin do not have the force and effect of Treasury De╜partment regulations (including Treasury Decisions), but are published as prece╜dents to be used in the disposition of other cases, and may be cited for that purpose." Rev. Proc. 89-14, 1989-8 I.R.B. 20, 1989 WL 519042 (emphasis added).

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13. ═ The United Stated does claim that the rev╜enue ruling "has the same legal effect as a regulation." Cross-Mot. Summ. J. at 14.

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This Court rules that Congress did not intend for the revenue ruling at issue here to have the force of law and, as the IRS does not claim such force when making such rulings, this one does not qualify for Chevron deference. See Na╜varro, 261 F.3d at 98-99.

Assuming arguendo that the revenue ruling was entitled to Chevron deference (or Skidmore deference for that matter), the revenue ruling does not address the issue of consolidation. Thus, it cannot bind or persuasively inform the Court's analysis of the instant case.

Revenue Ruling 86-88 deals with the "transfer" of employment in a traditional sense, not in the more difficult situation where employers consolidate. Similar lan╜guage can be found in the House Report, with one difference. See House Report at 26-27. In the House Report, after noting that it will generally be true that "employ╜ees who move from State government em╜ployment to a job with a . . . county . . ., or vice versa, would be considered to be new╜ly hired," the report states that the com╜mittee expects more difficult cases to "be judged according to the independence of the second employing unit from the first, as an employer." Id. Even if this revenue ruling was entitled to Chevron deference, it would not be relevant to the analysis because it does not address the legal ques╜tion at issue in the instant case.

Additionally, a strict reading of this rev╜enue ruling's interpretation of Section 3121(u)(2)(D) would conflict directly with the holding of Muhlenberg, as the revenue ruling states: "an employee does not quali╜fy for the exception if the employee trans╜fers from a political subdivision employer in one political subdivision to a political subdivision employer in a different political subdivision." Rev. Rul. 86-88, 1986-2 C.B. 172, 1986 WL 328030. Accordingly, any transfers between political subdivisions would break the continuity of employment under such a narrow interpretation. Moreover, this revenue ruling's narrow in╜terpretation would conflict with the United States's position that "lateral employment moves between . . . political subdivisions . . . do not preclude application of the con╜tinuing employment exception." Compare id., with Cross-Mot. Summ. J. at 7. This revenue ruling does not address situations where employers consolidate.

Fourth, the United States argues that "the allegation that the Commonwealth has no independence from the county gov╜ernments it abolished is both unsupported and unsupportable." Id. at 15. The Unit╜ed States contends that the Common╜wealth never provided criteria to deter╜mine independence for the purpose of the analysis. Id. Additionally, the United States asserts that the Commonwealth provided insufficient contractual and finan╜cial factors to find the lack of indepen╜dence between employers that warrants extending the continuing-employment ex╜ception. Id .

True, the Commonwealth did not pro╜vide any criteria to determine "indepen╜dence" for the purpose of the analysis and the parties have neither suggested, nor briefed an analysis of the instant case based on any specifically stated definition of "independence" or "independent". The legislative history is also noticeably silent on this point. The House Report only states, "cases in which the distinctions are more difficult to make will be judged ac╜cording to the independence of the second employing unit from the first, as an em╜ployer." House Report at 26-27. Such a broad form of comparative analysis may lend itself most readily to a totality of the circumstances approach. In searching for criteria to define independence, this Court considers it useful to examine traditional methods of definition such as Black's Law Dictionary:

independence, n. The state or quality of being independent . . . .

independent, adj. 1. Not subject to the control or influence of another < inde╜pendent investigation>. 2. Not associat╜ed with another (often larger) entity < an independent subsidiary>. 3. Not dependent or contingent on something else < an independent person>.

Black's Law Dictionary 785 (8th ed.2004)(emphases in original).

A narrow reading of the word "indepen╜dent" supports the United States's position that the Commonwealth is fully indepen╜dent. The Commonwealth may be an independent employer because it abolished the counties, thus they no longer exist. Accordingly, the Commonwealth, as sec╜ond employing unit, is not dependent or its powers contingent in any way on the abol╜ished counties. See Cross-Mot. Summ. J. at 15-16. Also, the Commonwealth is not subject to the control of the abolished counties. In fact, the Commonwealth abolished the counties through its own leg╜islative process.

More broadly read, though, the Com╜monwealth is not independent from the counties as an employer. The Common╜wealth "stepped into the shoes" of the counties as an employer. See Comm.'s Summ. J. Mem. at 19. The Common╜wealth is more than just "associated" with the counties as an employer, it abolished and took over the position of employer. See Mass. Gen. Laws ch. 34B, ╖╖ 12-14. The Commonwealth, as employer, did not change the substantive nature of the em╜ployment relationship. See Cross-Mot. Summ. J. at 2. The Commonwealth might not currently be subject to the control or influence of the abolished counties; yet, the Commonwealth did subject itself to many of the counties' earlier decisions and obligations. The Commonwealth assumed all the counties outstanding financial liabil╜ities and contractual obligations. See Comm.'s Summ. J. Mem. at 19; Mass. Gen. Laws ch. 34B, ╖╖ 5,7.

On balance, the Commonwealth is not sufficiently independent as an employer to warrant deeming the transferred employ╜ees as newly hired or the Commonwealth as a new employer for the purpose of the continuing-employment exception.

III. CONCLUSION

Section 3121 does not clearly or unam╜biguously address the issue facing this Court. The legislative history provides policy considerations and a method of anal╜ysis which support the Plaintiffs' position. For these reasons, the Court GRANTED Plaintiff's Motions for Partial Summary Judgment [Doc. Nos. 32, 44] on January 31, 2006. See Order of 01/31/06 [Doc. No. 62].

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