Sorenson v. Secretary of Treasury, 475 U.S. 851 (1986)

Sorenson v. Secretary of the Treasury

No. 84-1686

Argued January 15, 1986
Decided April 22, 1986
475 U.S. 851

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR

THE NINTH CIRCUIT

Syllabus

The Internal Revenue Code (IRC) allows an individual responsible for the support of a child living with him a credit against income taxes due equal to a certain percentage of so much of earned income as does not exceed a specified amount. If the credit exceeds tax liability, the excess is considered "an overpayment" of tax under IRC § 6401(b). Section 6402(a) provides for a refund of "any overpayment" to the person who made it. Section 6402(c) requires the amount of "any overpayment" to be reduced by the amount of any past-due child support payments assigned to a State. Section 464 of the Social Security Act (SSA) directs the Secretary of the Treasury to "intercept" tax refunds payable to persons who have failed to meet child support obligations that have been assigned to a State. When petitioner’s husband fell behind in support payments for a child of a previous marriage who was in the custody of his former wife, the latter, upon applying for welfare benefits from the State of Washington, assigned to the State, as required by the Aid to Families with Dependent Children program, her right to collect the unpaid child support payments. Petitioner and her husband, who had their own dependent child living with them, filed a joint federal income tax return for 1981 in which all income was attributable to petitioner’s wages and unemployment compensation benefits and in which they anticipated a refund based in part on an earned-income credit. The Internal Revenue Service, however, notified them that a certain amount of the anticipated refund was being retained, under the authority of the tax-intercept law, and would be paid over to the State of Washington. Petitioner then filed a class action in Federal District Court, seeking a declaration that § 464 of the SSA did not reach a refund attributable to an excess earned-income credit. The District Court granted summary judgment for the Government, and the Court of Appeals affirmed.

Held: An excess earned-income credit can properly be intercepted under the applicable statutes. Pp. 859-865.

(a) The IRC’s treatment of earned-income credits supports the Government’s position. The refundability of that credit is inseparable from its classification as an overpayment of tax. It is an "overpayment" not only for purposes of § 6402(a), but also for purposes of § 6402(c). Eligibility for an earned-income credit does not depend upon an individual’s actually having paid any tax. The IRC’s classification of the credit as an "overpayment" to be refunded is similarly independent of the individual’s actually having made any payment. To the extent an excess credit is "payable" to an individual, it is payable as if it were a refund of tax paid. Pp. 859-863.

(b) There is no support for petitioner’s claim that Congress did not intend the tax-intercept program to reach excess earned-income credits. Although Congress never mentioned the earned-income credit in enacting the Omnibus Budget Reconciliation Act of 1981, which added § 6902(c) to the IRC, it must have been aware, when it provided in § 6402(c) that "any overpayment" to be refunded shall be reduced by the amount of any past-due child support, that this would include refunds attributable to excess earned-income credits. And, although the goals of the earned-income credit -- to reduce the disincentive to work caused by Social Security taxes on earned income, to stimulate the economy by funneling funds to persons likely to spend the money immediately, and to provide for relief for low-income families hurt by rising food and energy prices -- are important, it cannot be said that Congress concluded that they outweigh the goals served by the subsequently enacted tax-intercept program -- securing child support from absent parents and reducing the number of families on welfare. Pp. 863-865.

752 F.2d 1433, affirmed.

BLACKMUN, J., delivered the opinion of the Court, in which BURGER, C.J., and BRENNAN, WHITE, MARSHALL, POWELL, REHNQUIST, and O’CONNOR, JJ., joined. STEVENS, J., filed a dissenting opinion, post, p. 866.