DOJ Seeks Rehearing, Insisting Aggregate Method of Assessing Employer FICA Liability on Tips Is Proper

Fior D'Italia operates a restaurant, computing and paying its share of FICA taxes for each employee based on the employees' salary and tip reports. It also files Form 8027 each year, reporting tip information. The IRS determined a deficiency in the company's FICA taxes after computing the aggregate amount of the employees' unreported tips.

The Service determined the percentage of tips reported for meals charged on credit cards and then estimated the total tips received by all employees, subtracting the amount of tips reported to calculate the unreported amount. Fior D'Italia paid a portion of the assessment and sought a refund, arguing that the IRS cannot use the aggregate method to assess employer-only FICA liability. The company insisted that the IRS must determine FICA taxes for each employee individually before assessing the employer's share.

A U.S. district court ruled that section 3121(q) does not address the issue but that the subsection, read in conjunction with other FICA statutes, indicates that Congress wanted the employer's share of FICA taxes to be based on individual assessments against employees. (For a summary of that opinion, see Tax Notes, Nov. 9, 1998, p. 728; for the full text, see Doc 98-32181 (20 pages) or 98 TNT 211-1 .) The Ninth Circuit affirmed the district court, holding that the IRS may not determine and assess the amount of underreported tips for FICA tax purposes by estimating the amount of tips because Congress didn't authorize the IRS to use estimation as an assessment method for the collection of FICA taxes. The court dismissed the IRS's reliance on section 3121(q), noting that while the section permits the IRS to determine by other means the tips received when not accurately reported, it doesn't specify that estimation of the tips is permissible. Thus, the court affirmed the district court. In a dissent, Circuit Judge M. Margaret McKeown noted that the IRS merely determined a logical, reasonable method of determining the underreported tips, and further that this decision puts the Ninth Circuit at odds with three other circuits. (For a summary, see Tax Notes, March 19, 2001, p. 1641; for the full text, see Doc 2001-6963 (25 original pages) [PDF] or 2001 TNT 48-57.)

The Justice Department argues that the Ninth Circuit erred and that the IRS may assess employer FICA taxes based on an estimate of the aggregate unreported tip income of the employer's restaurant employees. The DOJ insists that this decision has exceptional importance and warrants en banc review because the panel decision conflicts with decisions of the Seventh, Federal, and Eleventh Circuits in 330 West Hubbard Restaurant Corp. v. United States, 203 F.3d 990 (7th Cir. 2000) (Doc 2000-4718 (14 original pages) or 2000 TNT 33-8 ; Bubble Room Inc. v. United States, 159 F.3d 553 (Fed. Cir. 1998)(Doc 98-31087 (46 original pages) or 98 TNT 202-9 , and Morrison Restaurants Inc. v. United States, 118 F.3d 1526 (11th Cir. 1997)(Doc 97-24071 (6 original pages) or 97 TNT 161-4 .

[1] I express a belief, based on a reasoned and studied professional judgment, that this appeal involves the following question of exceptional importance relating to the administration of the tax laws: Whether the IRS may assess employer FICA taxes based on an estimate of the aggregate unreported tip income of the employer's restaurant employees without determining the amount of unreported tips of each individual employee.

[2] The panel decision on this question conflicts with the decisions of the Seventh, Federal, and Eleventh Circuits. See 330 West Hubbard Restaurant Corp. v. United States, 203 F.3d 990 (7th Cir. 2000); Bubble Room, Inc. v. United States, 159 F.3d 553 (Fed Cir. 1998); Morrison Restaurants, Inc. v. United States, 118 F.3d 1526 (11th Cir. 1997).

JEFFREY R. MEYER

[3] Whether the IRS may assess employer FICA taxes based on an estimate of the aggregate unreported tip income of the employer's restaurant employees without determining the amount of unreported tips of each individual employee.

STATEMENT OF FACTS

[4] Fior D'Italia, Inc. ("taxpayer") operates a restaurant that has employees who are tipped directly (i.e., from the customer) and employees who receive tips indirectly (i.e., tips shared from employees who receive direct tips). (Op. 2884.) Tips received by an employee who receives more than $20 in tips in any month, but not in excess of the Social Security wage base, are treated as "wages" for FICA tax purposes; an employer is required to pay employer FICA taxes on the amount of those tips. I.R.C. sections 3111, 3121(a) and (q) (26 U.S.C.). These limits on the amount of tips that are "wages" have been referred to as creating a "wages band." (Op. 2883.)

[5] Employees are required to make monthly reports to their employer of all tips constituting wages. I.R.C. section 6053(a); Treas. Reg. section 31.6053-1(a)-(c). Large restaurants, such as taxpayer's, are required to make annual reports (Form 8027) to the IRS of tips reported to them by directly and indirectly tipped employees. I.R.C. section 6053(c).

[6] Taxpayer filed Forms 8027 for 1991 and 1992, reflecting that its employees had reported receiving tips of $247,181 for 1991 and $220,845 for 1992. The Forms 8027 showed total charged tips alone, however, of $364,786 for 1991, and $338,161 for 1992 . (Op. 2883 n.2.) Taxpayer calculated its employer FICA tax liability based only on the amounts its tipped employees had reported receiving.

[7] The IRS then undertook a compliance check of taxpayer's restaurant. Using the figures reported by taxpayer, the IRS divided the charged tips by the charged sales, yielding 14.49% and 14.29% tip rates for 1991 and 1992. ¹ (Op. 2883-84.) Multiplying these tip rates by taxpayer's gross receipts, less taxpayer's reported total tips, indicated unreported tips of $156,545 for 1991 and $147,529 for 1992. (Op. 2884 n.3.) Based on the 7.65% tax rate, employer FICA taxes on the unreported tips were $11,976 for 1991 and $11,286 for 1992. The IRS sent taxpayer notice and demand pursuant to I.R.C. section 3121(q) for the 1991 and 1992 FICA taxes. The IRS did not determine the unreported tips for each individual employee. (Op. 2884.)

[8] Taxpayer paid a portion of the tax and filed this refund suit. The parties filed cross-motions for summary judgment. Taxpayer did not dispute the accuracy of the IRS's determination of the amount of unreported tips. (ER 88; see Op. 2909.) Instead, taxpayer challenged the IRS's authority to assess taxes under the aggregate method. The district court ruled that the IRS is not permitted to make an assessment of employer FICA taxes on unreported tips unless the IRS determines the amount of unreported tips of each individual employee. (ER 92-106.)

[9] The Government appealed and this Court affirmed in a 2-1 decision. The majority ruled that the assessment was invalid because "[i]t rests on an estimate in circumstances where Congress has not authorized the IRS to use estimation as an assessment method." (Op. 2889.) The court observed that I.R.C. section 446 "has been interpreted as giving the IRS authority to make an assessment based on an estimate" (Op. 2887), but concluded that "the IRS cannot rely on section 446 as authority for the assessment here because the section does not apply to the collection of FICA taxes" (Op. 2889).

[10] The majority also concluded that the IRS's estimate has "some serious flaws" (Op. 2888): (1) "the IRS's method for estimating cash tips likely overstates the amount of such tips received" (ibid.) because it is based on tips paid by customers using credit cards, whereas "experience shows that charged tips generally exceed cash tips" (Op. 2885); (2) "the IRS method fails to take into account the three per-cent fee imposed by the credit card companies which may be passed on to employees by the restaurant" (Op. 2888); and (3) "the estimate [does not] make allowance for the statutory wages bands which limit the restaurant's FICA tax liability" (Op. 2888; see Op. 2885-86).

[11] In the majority's view, an estimate of the employer's FICA tax liability is impermissible, and the IRS must "audit[] the employees' records or otherwise determin[e] the amount each employee earned in tips" because there is "no way to determine the employer's FICA tax liability without making an employee-by-employee determination of the taxable tips each has earned." (Op. 2892.)

[12] Judge McKeown dissented (Op. 2896-2909), observing that the majority's decision was in conflict with the decisions of three other circuits (Op. 2897-2901, 2909) that have held that the IRS is authorized to make an assessment of employer FICA taxes with respect to aggregate unreported tip income of the employer's restaurant employees without determining the amount of unreported tips for each employee. 330 West Hubbard Restaurant Corp. v. United States, 203 F.3d 990 (7th Cir. 2000); Bubble Room, Inc. v. United States, 159 F.3d 553 (Fed. Cir. 1998); Morrison Restaurants, Inc. v. United States, 118 F.3d 1526 (11th Cir. 1997).

ARGUMENT AND AUTHORITIES

[13] Because, as the majority acknowledged, its decision in this case conflicts with Bubble Room, Inc. v. United States, 159 F.3d 553 (Fed Cir. 1998), and, as the dissent stated, the decision also conflicts 330 West Hubbard Restaurant Corp. v. United States, 203 F.3d 990, 997 (7th Cir. 2000), and Morrison Restaurants, Inc. v. United States, 118 F.3d 1526, 1530 (11th Cir. 1997), and because the issue is a matter of significant administrative importance to the IRS's tax collection efforts, this Court should grant rehearing en banc.

[14] 1. FICA taxes on the wages of employees are imposed under the provisions of I.R.C. sections 3101-3127. As to employees, I.R.C. section 3101 imposes a tax on the income of every individual equal to a specified percentage of wages received by him with respect to employment. This employee share of FICA taxes is withheld and paid over by the employer. I.R.C. section 3102(a). In addition, I.R.C. section 3111 separately imposes FICA taxes on every employer, computed as a percentage of wages paid by the employer with respect to employment.

[15] Section 3121(a) defines "wages" to mean "all remuneration for employment." Cash tips (including charged tips) received by an employee are included within the definition of "wages," unless the amount is less than $20 in any calendar month. I.R.C. section 3121(a)(12)(B); Treas. Reg. section 31.3121(a)(12)-1. Section 3121(q) provides that tips are "deemed to have been paid by the employer" for purposes of section 3111. Section 3121(q) thus requires employers to pay employer FICA taxes imposed by I.R.C. section 3111 on the total tips received by employees, up to the Social Security wage base. See I.R.C. section 3121(a)(1) (limiting "wages" to amount of Social Security wage base).

[16] Tipped employees are required to report their tips in monthly statements to the employer. I.R.C. section 6053(a). The employer's duty to collect the employee share of FICA taxes applies only with respect to the tips that are included in the employee's monthly statements. I.R.C. section 3102(c)(1); see Treas. Reg. section 31.3102-3(a)(2). In I.R.C. section 3121(q), however, Congress specifically contemplated the assessment of employer FICA taxes even when employees do not accurately report their tips. That provision authorizes the IRS to issue a notice and demand for employer FICA tax where no employee statement was furnished or where the statement was inaccurate or incomplete.

[17] Taxpayer here paid employer FICA taxes on the tips of employees only to the extent that those tips were reported by the employees on their statements under Section 6053(a). Section 3111 of the Code, read in conjunction with Section 3121(q), imposes FICA taxes on taxpayer with respect to all tips received by its employees, reported or not, up to the Social Security wage base. I.R.C. section 6201 authorizes the Secretary to "make the inquiries, determinations, and assessments of all taxes . . . imposed by this title." Thus, Section 6201 authorized the IRS to determine and assess the amount of FICA taxes imposed by Section 3111 with respect to taxpayer's employees. That is what the IRS did here.

[18] 2a. In holding that the IRS's assessment of employer FICA taxes here was unauthorized, the majority imposed a precondition for such an assessment with respect to unreported tips, namely, that the IRS must determine the amount of additional tips received by each employee. The majority did not point to any language in the Code containing this precondition. The employer tax imposed by Section 3111 is a separate and distinct obligation from the employee tax in Section 3101. Nothing conditions the determination of one on the other. Section 3111 imposes the tax at issue here on an employer in an amount equal to a specified percentage of "the wages . . . paid by him with respect to employment." Section 3121(q) defines wages to include tips, but does not contain any qualifications limiting the tips that will be treated as wages to those for which a corresponding employee determination is made. Nothing in the relevant statutes requires the IRS to make the further determinations required by the majority. Section 3111 imposes a tax, and taxpayer here does not dispute the IRS's determination of the amount of the tax. That should end the matter.

[19] The majority held that the problem with the tax assessment here was that it was based on an estimate and that the IRS has no authority to make an employer FICA tax assessment based on an estimate. (Op. 2889.) The majority's conclusion is flawed for several reasons.

[20] The majority observed that I.R.C. section 446 "has been interpreted as giving the IRS authority to make an assessment based on an estimate." (Op. 2887, citing McQuatters v. Commissioner, 32 T.C.M. (CCH) 1122 (1973).) Section 446(b) provides, "If no method of accounting has been regularly used by the taxpayer, or if the method used does not clearly reflect income, the computation of taxable income shall be made under such method as, in the opinion of the Secretary, does clearly reflect income." The Tax Court in McQuatters invoked Section 446(b) in approving the IRS's use of estimates to determine the amount of an employee's unreported tip income for income tax purposes. See also Mendelson v. Commissioner, 305 F.2d 519 (7th Cir. 1966). But courts in other income tax cases have approved of the IRS's use of estimates in determining the amount of unreported income, without referring to Section 446(b) (e.g., Delaney v. Commissioner, 743 F.2d 670 (9th Cir. 1984); Edwards v. Commissioner, 680 F.2d 1268 (9th Cir. 1982); Gerardo v. Commissioner, 552 F.2d 549 (3d Cir. 1977); Mitchell v. Commissioner, 426 F.2d 101 (7th Cir. 1969)), thus indicating that Section 446(b) is not the only authority for IRS estimates. In addition, in Carson v. United States, 560 F.2d 693, 698-700 (5th Cir. 1977), the court approved of a wagering excise tax assessment based on a reasonable estimate of total wagers accepted by a bookmaker during the relevant period. See also United States v. Janis, 428 U.S. 433, 437, 441 (1976) (wagering excise tax assessment based on estimate). Thus, the majority's conclusion that the IRS's authority to make estimates is limited to determinations of income tax liability (and then only under Section 446(b)) is wrong.

[21] The majority stated that Section 446 shows that "Congress obviously knew how to give the IRS the authority to use estimation in lieu of actual calculations, and just as clearly thought it necessary to say so explicitly when it wished to confer that power." (Op. 2890.) But Section 446(b) does not "explicitly" say anything about using estimates, and thus hardly shows that Congress thought it necessary explicitly to confer the authority to use estimates. See Palmer v. United States, 116 F.3d 1309, 1312 (9th Cir. 1997)("Congress specified no particular methods or evidentiary burdens on the Commissioner when choosing a method for reconstructing a taxpayer's income under Section 446. The Commissioner, therefore, has wide discretion in choosing an income-reconstruction method."); cf. Morrison Restaurants, 118 F3d at 1529 ("[g]iven the structure of the Internal Revenue Code, we are unconvinced that Congress's silence can be construed to mean that an employer cannot be assessed its share of FICA taxes based on employees' unreported tips in the aggregate without determining the underreporting by the individual employees").

[22] The source of the IRS's authority to use estimates here was identified by the dissent. Section 6201 authorizes the Secretary to "make the inquiries, determinations, and assessments of all taxes . . . imposed by this title." The dissent correctly observed that, under Section 6201, "[i]t is up to the IRS to choose the method [to determine the amount of taxes], so long as reasonable." (Op. 2903.) See Bubble Room, 159 F.3d at 565 ("I.R.C. section 6201 implicitly authorizes the IRS to use an indirect formula" because "the IRS would have to use an indirect formula to estimate the amount of FICA tax owed by an employer when there is no other way to 'determine and assess' the wages deemed to have been paid by the employer"). The majority did not even mention Section 6201.

[23] The appropriateness of an estimate of the employer's FICA tax liability here is demonstrated by the language of Section 3121(q), which allows the IRS to make notice and demand for employer FICA taxes where the statements given by employees to the employer are "inaccurate or incomplete." In such circumstances, it is highly unlikely that employees have accurate records showing the amount of tips that they did not report. Where no records exist showing the amount of tips received, the IRS has no alternative but to rely on an indirect method to estimate those tips. Thus, "the IRS may base assessments on indirect formulas in circumstances where it is clear that the taxpayer has understated the amount of wages received and it is impossible or impractical to determine the exact amount of wages actually received." Bubble Room, 159 F.3d at 566.

[24] Indeed, the majority's conclusion that an estimate of the employer's FICA tax liability is impermissible, and that what is required is an "employee-by-employee determination of the taxable tips each has earned" (Op. 2892), proves too much. If the IRS audited each employee to determine the amount of tips each employee earned, those individual determinations would themselves be based on estimates; precision is impossible. The majority stated that the employer's liability should be determined by adding up all of the individual determinations of taxable tips. But the sum of those individual estimates would itself be an estimate. Thus, even the method that the majority said is permitted is based on an estimate.

[25] The majority suggested that the IRS should obtain authorization from Congress to make aggregate assessments of employer FICA tax on tips. (Op. 2894-96.) The majority failed to consider Congress' most recent action in this area. In 1998, in response to restaurant industry complaints about the IRS's practice of determining an employer's liability for FICA taxes based on aggregate tip income, and about the decision of the Eleventh Circuit in Morrison Restaurants approving of that practice, Congress enacted a law that provides that IRS employees "may not threaten to audit any taxpayer in an attempt to coerce the taxpayer into entering a Tip Reporting Alternative Commitment [TRAC] Agreement." Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. No. 105-206, section 3414, 112 Stat. 685. A restaurant that signs a TRAC agreement with the IRS agrees to educate its employees about tax reporting, establish procedures to ensure accurate tip reporting, and fulfill various federal tax requirements. In return, the IRS agrees to base the restaurant's FICA tax liability solely on reported tips and any unreported tips discovered during an IRS audit of an employee. See H.R. Conf. Rep. No. 105-599 at 274-275 (1998). The dissent correctly observed that the premise upon which TRAC is designed to operate -- the employer's promise to educate its employees and comply with the law in exchange for the IRS's promise not to issue a Section 3121(q) notice and demand unless it first finds tip underreporting by an individual employee -- indicates that Congress recognized the IRS's power to make aggregate assessments against employers before or without making determinations with respect to individual employees. (Op. 2905.) If, as the majority concluded, the IRS lacks authority to determine employer FICA taxes on unreported tips without first determining the amount of the individual employees' tips, it would make no sense for a restaurant to enter into a TRAC agreement in return for the IRS's agreement to do that which it lacks authority to do. Or, as the dissent stated, in enacting the 1998 law, "CONGRESS ACKNOWLEDGED THE IRS'S POWER TO MAKE AGGREGATE CALCULATIONS of employer tax obligations, before or without making determinations with respect to individual employees." (Op. 2905 (emphasis in original).)

[26] b. The majority also concluded that the IRS's estimate has "some serious flaws." (Op. 2888.) The dissent aptly observed that the majority "confuses the IRS's authority to use the aggregate method with the accuracy of that method." (Op. 2909.) "[W]hether there are flaws in the indirect formula used to estimate the FICA tax is a separate matter from whether the IRS has the authority to assess an employer-only FICA tax based on an aggregate estimate of unreported tip income." Bubble Room, 159 F.3d at 568. Accord 330 West Hubbard, 203 F.3d at 996; see United States v. Schroeder, 900 F.2d 1144, 1149- 50 (7th Cir. 1990) (proof that amount of assessment is incorrect does not invalidate entire assessment).

[27] The reference to "flaws" in the estimate is particularly inappropriate here, where taxpayer has not challenged the accuracy of the IRS's calculation of its tax liability (ER 88), and there is no evidence to show that any of the alleged flaws suggested by the majority are actually present here. The majority stated that "the IRS's method for estimating cash tips likely overstates the amount of such tips received" (Op. 2888) because "experience shows that charged tips generally exceed cash tips" (Op. 2885). But there is no evidence in the record in this case that the charge tip rate at taxpayer's restaurant exceeded the cash tip rate.

[28] The majority also stated that "as to credit card tips, the IRS method fails to take into account the three per-cent fee imposed by the credit card companies which may be passed on to employees by the restaurant." (Op. 2888.) But there is no evidence in the record, nor any assertion by taxpayer, that this procedure was in effect in taxpayer's restaurant. Cf. Bubble Room, 159 F.3d at 567-68.

[29] Finally, the court stated that "the estimate [does not] make allowance for the statutory wages bands which limit the restaurant's FICA tax liability." (Op. 2888.) But there was no evidence that any of taxpayer's employees earned less than $20 in tips in any month, nor was there any evidence that any of its employees received tips plus salary in excess of the Social Security wage base. In the absence of evidence that some of the unreported tips here fell outside the wages band, the suggestion that the failure to account for the wages band is a "flaw" is sheer speculation. In any event, the theoretical possibility that the assessment might be too high does not mean that the entire assessment is invalid and that taxpayer owes no additional tax. Bubble Room, 159 F.3d at 567 (failure to take the "wages band" into account does not "make the assessment unlawful" but, rather, "merely suggests that the amount of FICA tax assessed against [the employer] may have been incorrect by some margin and that it may be entitled to a refund of some portion of the FICA tax assessed against it"); 330 West Hubbard, 203 F.3d at 996.

[30] Similarly, the majority's concern that an aggregate estimate of unreported tip income "puts an impossible burden on [taxpayer], making the already heavy presumption that attaches to an IRS assessment virtually conclusive" (Op. 2888; see Op. 2894) is belied by the proceedings in Bubble Room. There, the employer pointed to several purported defects in IRS's methodology in determining the amount of the assessment. The court concluded that there were genuine issues of material fact that made summary judgment on the amount of the employer's liability inappropriate. 159 F.3d at 567. Thus, as correctly observed by the dissent here, "the aggregate method is predicated on a reasonable estimate and that may be challenged by the taxpayer." (Op. 2909.) Taxpayer here, however, chose not to raise any argument about the correct amount of its liability in the proceedings below. As the dissent noted, "the issue of accuracy is not before us, because [taxpayer] did not challenge the accuracy of the calculation- it challenged only the IRS's authority to assess the taxes under the aggregate method." (Op. 2909.) Accordingly, summary judgment for the Government is proper here. See 330 West Hubbard, 203 F.3d at 997.

[31] 3. Rule 35(a) of the Federal Rules of Appellate Procedure provides, "An en banc hearing or rehearing is not favored and ordinarily will not be ordered unless: (1) en banc consideration is necessary to secure or maintain uniformity of the court's decisions; or (2) the proceeding involves a question of exceptional importance." A petition for rehearing en banc may assert that the proceeding "presents a question of exceptional importance if it involves an issue on which the panel decision conflicts with the authoritative decisions of other United States Courts of Appeals that have addressed the issue." Fed. R. App. P. 35(b)(1)(B); see Ninth Circuit Rule 35-1.

[32] The majority here recognized that its decision is in conflict with Bubble Room. (Op. at 2890, 2893.) Moreover, the dissent correctly observed that the majority's attempt to distinguish Morrison Restaurants and 330 West Hubbard (Op. 2892 n.9 ) is "transparently unsuccessful" (Op. 2900). The majority stated that Morrison Restaurants and 330 West Hubbard "considered only whether the IRS must assess the employees prior to assessing the employer and not whether the IRS may rely upon aggregate estimates -- the issue which is the fulcrum of our ruling." (Op. 2892 n.9.) But the very passages of those two decisions that the majority quotes (ibid.) show that the IRS's authority to use aggregate estimates was at the heart of those cases. 330 West Hubbard, 203 F.3d at 994 (taxpayer argued that the IRS is not authorized "to assess employer FICA taxes based on an AGGREGATE ESTIMATE of the tip income received by its employees without first determining the amount of under reporting by individual employees") (emphasis added); Morrison Restaurants, 118 F.3d at 1529 (taxpayer contended that "the IRS lacks statutory authority to assess the employer's share of FICA taxes WITHOUT DETERMINING THE INDIVIDUAL EMPLOYEES' UNREPORTED TIPS") (emphasis added).

[33] The issue presented here, therefore, has exceptional importance and warrants en banc review because the panel decision conflicts with the decisions in 330 West Hubbard, Bubble Room, and Morrison Restaurants. "Uniformity among Circuits is especially important in tax cases to ensure equal and certain administration of the tax system." Hill v. Commissioner, 204 F.3d 1214, 1216 (9th Cir. 2000). In addition, the issue presented in these cases has great administrative importance to the IRS because employer FICA tax assessments based on aggregate estimates are an important part of its program to bring about greater compliance in the reporting of tip income. The majority recognized that "the problem of collecting taxes on employees tips" involves "a substantial amount of revenue." (Op. at 2896.) The dissent observed that the issue is one of "national importance" (Op. 2897), and further observed that the majority's approach "invites employers and employees alike to evade their statutory tax obligations" (Op. 2907, citing Bubble Room, 159 F.3d at 597; Morrison Restaurants, 118 F.3d at 1530). Finally, the National Restaurant Association stated in its amicus brief (at 6) that this issue has potentially significant "impact on the industry nationwide," including some 170,000 restaurant units (at 1) operated by its members. In sum, the adverse impact on FICA tax collection makes the issue presented one of exceptional importance.

CONCLUSION

[34] For the reasons set forth above, this appeal should be reheard en banc and, the judgment of the district court should be reversed.

Respectfully Submitted,

[35] It is hereby certified that service of the foregoing petition for rehearing en banc has been made upon counsel for the appellee and counsel for amicus by mailing two copies to each of them on the 20th day of April, 2001, properly addressed as follows:

Thomas W. Power, Esquire