The question before the court was “Is back-pay subject to federal taxes under the Federal Insurance Contributions Act and the Federal Unemployment Tax Act, based on the year the money should have been paid out?” The court held that wages are to be taxed on the year they were actually paid.

The taxes would have been significant because the Federal Insurance Contributions Act (FICA) and the Federal Unemployment Tax Act (FUTA) which are used to fund Medicare, Social Security and Unemployment.

The Cleveland Indians used Sixth Court precedent in its argument that late wages are taxed upon the year they should have paid.

The District Court bound by precedent ordered the government to return the taxes.

Justice Ginsburg, delivering the opinion of the court stated “according due respect to the service’s reasonable, longstanding construction of the governments statues and its own regulations, we hold that back wages are subject to FICA and FUTA taxes by reference to the year the wages are in fact paid.”