 

NOTE: Where it is feasible, a syllabus (headnote) will be released, as is
being done in connection with this case, at the time the opinion is issued.
The syllabus constitutes no part of the opinion of the Court but has been
prepared by the Reporter of Decisions for the convenience of the reader.
See United States v. Detroit Lumber Co., 200 U. S. 321, 337.

SUPREME COURT OF THE UNITED STATES

          Syllabus

UNITED STATES v. BURKE et al.
certiorari to the united states court of appeals for
           the sixth circuit
No. 91-0042.   Argued January 21, 1992"Decided May 26, 1992

As part of the settlement of a sex discrimination claim under Title VII
of the Civil Rights Act of 1964, the Tennessee Valley Authority (TVA)
paid backpay to affected employees, including respondents, from
which it withheld federal income taxes.  The Internal Revenue
Service (IRS) disallowed respondents' claims for refund of the with-
held taxes.  In a subsequent refund action, the District Court ruled
that, since respondents had obtained only backpay due them as a
result of TVA's discriminatory underpayments rather than compensa-
tory or other damages, the settlement proceeds could not be excluded
from their gross incomes as ``damages received . . . on account of
personal injuries'' under 26 U.S.C. 104(a)(2).  The Court of
Appeals reversed, holding that TVA's discrimination constituted a
personal, tort-like injury to respondents, and rejecting the Govern-
ment's attempt to distinguish Title VII, which authorizes no compen-
satory or punitive damages, from other statutes thought to redress
personal injuries.
Held:Backpay awards in settlement of Title VII claims are not exclud-
able from gross income under 104(a)(2).  Pp.413.
(a)IRS regulations formally link identification of a ``personal
injury'' for purposes of 104(a)(2) to traditional tort principles, refer-
ring to ``prosecution of a legal suit or action based upon tort or tort
type rights.''  26 CFR 1.1041(c).  In order to fall within the
104(a)(2) exclusion, respondents must show that Title VII, the legal
basis for their recovery of backpay, redresses a tort-like personal
injury.  Pp.45.
(b)A hallmark of traditional tort liability is the availability of a
broad range of damages to compensate the plaintiff for harm sus-
tained.  Title VII, however, permits the award of only backpay and
other injunctive relief.  Congress sought through Title VII to restore
victims to the wage and employment positions they would have
occupied absent discrimination, but declined, in contrast to other
federal antidiscrimination statutes, to recompense victims for any of
the other traditional harms associated with personal injury, such as
pain and suffering, emotional distress, harm to reputation, or other
consequential damages.  Thus, Title VII cannot be said to redress a
tort-like personal injury within the meaning of 104(a)(2) and the
applicable regulations.  Pp.513.
929 F.2d 1119, reversed.

Blackmun, J., delivered the opinion of the Court, in which Rehn-
quist, C. J., and White, Stevens, and Kennedy, JJ., joined.  Scalia,
J., and Souter, J., filed opinions concurring in the judgment.  O'Con-
nor, J., filed a dissenting opinion, in which Thomas, J., joined.



  NOTICE: This opinion is subject to formal revision before publication in the
preliminary print of the United States Reports.  Readers are requested to
notify the Reporter of Decisions, Supreme Court of the United States, Wash-
ington, D.C. 20543, of any typographical or other formal errors, in order that
corrections may be made before the preliminary print goes to press.

             SUPREME COURT OF THE UNITED STATES
                        No. 91-0042
 
         UNITED STATES, PETITIONER v. THERESE A.
                   BURKE, CYNTHIA R. CENTER, and
                          LINDA G. GIBBS
        on writ of certiorari to the united states court of
                   appeals for the sixth circuit
                          [May 26, 1992]

       Justice Blackmun delivered the opinion of the Court.
       In this case we decide whether a payment received in
settlement of a backpay claim under Title VII of the Civil
Rights Act of 1964, 78 Stat. 253, as amended, 42 Stat.
2000e et seq., is excludable from the recipient's gross
income under 104(a)(2) of the federal Internal Revenue
Code, 26 U. S. C. 104(a)(2), as ``damages received . . . on
account of personal injuries.''
                                 I
       The relevant facts are not in dispute.  In 1984, Judy A.
Hutcheson, an employee of the Tennessee Valley Authority
(TVA), filed a Title VII action in the United States District
Court for the Eastern District of Tennessee alleging that
TVA had discriminated unlawfully in the payment of
salaries on the basis of sex.  The Office and Professional
Employees International Union, which represented the
affected employees, intervened.  Among the represented
employees were respondents Therese A. Burke, Cynthia R.
Center, and Linda G. Gibbs.
       The complaint alleged that TVA had increased the
salaries of employees in certain male-dominated pay
schedules, but had not increased the salaries of employees
in certain female-dominated schedules.  In addition, the
complaint alleged that TVA had lowered salaries in some
female-dominated schedules.  App. in No. 905607 (CA6)
(hereinafter App.), pp. 2832 (Second Amended Complaint).
The plaintiffs sought injunctive relief as well as backpay for
all affected female employees.  Id., at 3334.  The defen-
dants filed a counterclaim against the Union alleging,
among other things, fraud, misrepresentation, and breach
of contract.  Id., at 35.
       After the District Court denied cross-motions for summa-
ry judgment, the parties reached a settlement.  TVA agreed
to pay $4,200 to Hutcheson and a total of $5,000,000 for the
other affected employees, to be distributed under a formula
based on length of service and rates of pay.  Id., at 7071,
7677.  Although TVA did not withhold taxes on the $4,200
for Hutcheson, it did withhold, pursuant to the agreement,
federal income taxes on the amounts allocated to the other
affected employees, including the three respondents here.
       Respondents filed claims for refund for the taxes withheld
from the settlement payments.  The Internal Revenue
Service (IRS) disallowed those claims.  Respondents then
brought a refund action in the United States District Court
for the Eastern District of Tennessee, claiming that the
settlement payments should be excluded from their respec-
tive gross incomes under 104(a)(2) of the Internal Revenue
Code as ``damages received (whether by suit or agreement
and whether as lump sums or as periodic payments) on
account of personal injuries or sickness.''  The District
Court ruled that, because respondents sought and obtained
only backwages due them as a result of TVA's discriminato-
ry underpayments rather than compensatory or other
damages, the settlement proceeds could not be excluded
from gross income as ``damages received . . . on account of
personal injuries.''  901 USTC 50,203 (1990).
       The United States Court of Appeals for the Sixth Circuit,
by a divided vote, reversed.  929 F. 2d 1119 (1991).  The
Court of Appeals concluded that exclusion under 104(a)(2)
turns on whether the injury and the claim are ``personal
and tort-like in nature.'' Id., at 1121. ``If the answer is
affirmative,'' the court held, ``then that is the beginning and
end of the inquiry'' (internal quotation omitted).  Id., at
1123.  The court concluded that TVA's unlawful sex
discrimination constituted a personal, tort-like injury to
respondents, and rejected the Government's attempt to
distinguish Title VII, which authorizes no compensatory or
punitive damages, from other statutes thought to redress
personal injuries.  See id., at 11211123.  Thus, the court
held, the award of backpay pursuant to Title VII was
excludable from gross income under 104(a)(2).
       The dissent in the Court of Appeals, 929 F. 2d, at 1124,
took the view that the settlement of respondents' claims for
earned but unpaid wage differentials"wages that would
have been paid and would have been subjected to tax
absent TVA's unlawful discrimination"did not constitute
compensation for ``loss due to a tort,'' as required under
104(a)(2).  See id., at 1126.
       We granted certiorari to resolve a conflict among the
Courts of Appeals concerning the exclusion of Title VII
backpay awards from gross income under 104(a)(2).  ___
U. S. ___ (1991).
                                II
                                 A
       The definition of gross income under the Internal Reve-
nue Code sweeps broadly.  Section 61(a), 26 U. S. C. 61(a),
provides that ``gross income means all income from whatev-
er source derived,'' subject only to the exclusions specifically
enumerated elsewhere in the Code.  As this Court has
recognized, Congress intended through 61(a) and its
statutory precursors to exert ``the full measure of its taxing
power,'' Helvering v. Clifford, 309 U. S. 331, 334 (1940), and
to bring within the definition of income any ``accessio[n] to
wealth.''  Commissioner v. Glenshaw Glass Co., 348 U. S.
426, 431 (1955).  There is no dispute that the settlement
awards in this case would constitute gross income within
the reach of 61(a).  See Brief for Respondents 910.
       The question, however, is whether the awards qualify for
special exclusion from gross income under 104(a), which
provides in relevant part that ``gross income does not
include-
``(2) the amount of any damages received (whether by
suit or agreement and whether as lump sums or
periodic payments) on account of personal injuries or
sickness . . . .''
       Neither the text nor the legislative history of 104(a)(2)
offers any explanation of the term ``personal injuries.''
Since 1960, however, IRS regulations formally have linked
identification of a personal injury for purposes of 104(a)(2)
to traditional tort principles: ``The term `damages received
(whether by suit or agreement)' means an amount received
. . . through prosecution of a legal suit or action based upon
tort or tort type rights, or through a settlement agreement
entered into in lieu of such prosecution.''  25 Fed. Reg.
11490 (1960); 26 CFR 1.1041(c) (1991).  See Threlkeld v.
Commissioner, 87 T.C. 1294, 1305 (1986) (``The essential
element of an exclusion under section 104(a)(2) is that the
income involved must derive from some sort of tort claim
against the payor. . . . As a result, common law tort law
concepts are helpful in deciding whether a taxpayer is being
compensated for a `personal injury''') (internal quotation
omitted), aff'd, 848 F. 2d 81 (CA6 1988).
       A  tort has been defined broadly as a  civil wrong, other
than breach of contract, for which the court will provide a
remedy in the form of an action for damages.  See W.
Keeton, D. Dobbs, R. Keeton & D. Owen, Prosser and
Keeton on the Law of Torts 2 (1984).  Remedial principles
thus figure prominently in the definition and conceptualiza-
tion of torts.  See R. Heuston, Salmond on the Law of Torts
9 (12th ed. 1957) (noting that  an action for damages is  an
essential characteristic of every true tort, and that, even
where other relief, such as an injunction, may be available,
 in all such cases it is solely by virtue of the right to
damages that the wrong complained of is to be classed as a
tort).  Indeed, one of the hallmarks of traditional tort
liability is the availability of a broad range of damages to
compensate the plaintiff ``fairly for injuries caused by the
violation of his legal rights.''  Carey v. Piphus, 435 U. S.
247, 257 (1978).  Although these damages often are de-
scribed in compensatory terms, see Memphis Community
School Dist. v. Stachura, 477 U. S. 299, 306 (1986), in many
cases they are larger than the amount necessary to reim-
burse actual monetary loss sustained or even anticipated by
the plaintiff, and thus redress intangible elements of injury
that are ``deemed important, even though not pecuniary in
[their] immediate consequence[s].''  D. Dobbs, Remedies 136
(1973).  Cf. Molzof v. United States, ___ U. S. ___, ___
(1992) (slip op. 45) (compensatory awards that exceed
actual loss are not prohibited as ``punitive'' damages under
the Federal Tort Claims Act).
       For example, the victim of a physical injury may be
permitted, under the relevant state law, to recover damages
not only for lost wages, medical expenses, and diminished
future earning capacity on account of the injury, but also
for emotional distress and pain and suffering.  See Dobbs,
at 540551; Threlkeld v. Commissioner, 87 T.C., at 1300.
Similarly, the victim of a ``dignitary'' or nonphysical tort
such as defamation may recover not only for any actual
pecuniary loss (e.g., loss of business or customers), but for
``impairment of reputation and standing in the community,
personal humiliation, and mental anguish and suffering.''
Gertz v. Robert Welch, Inc., 418 U. S. 323, 350 (1974).  See
also Dobbs, at 510520.  Furthermore, punitive or exempla-
ry damages are generally available in those instances where
the defendant's misconduct was intentional or reckless.  See
id., at 204208; Molzof v. United States, supra.
       We thus agree with the Court of Appeals' analysis insofar
as it focused, for purposes of 104(a)(2), on the nature of
the claim underlying respondents' damages award.  See 929
F. 2d, at 1121; Threlkeld v. Commissioner, 87 T.C., at 1305.
Respondents, for their part, agree that this is the appropri-
ate inquiry, as does the dissent.  See Brief for Respondents
912; post, at 2.  In order to come within the 104(a)(2)
income exclusion, respondents therefore must show that
Title VII, the legal basis for their recovery of backpay,
redresses a tort-like personal injury in accord with the
foregoing principles.  We turn next to this inquiry.
                                 B
       Title VII of the Civil Rights Act of 1964 makes it an
unlawful employment practice for an employer ``to discrimi-
nate against any individual with respect to his compensa-
tion, terms, conditions, or privileges of employment, because
of such individual's race, color, religion, sex, or national
origin.''  42 U. S. C. 2000e-2(a)(1).  If administrative
remedies are unsuccessful, an aggrieved employee may file
suit in a district court, 2000e-5(f)(1), although the Courts
of Appeals have held that Title VII plaintiffs, unlike
ordinary tort plaintiffs, are not entitled to a jury trial.  See,
e.g., Johnson v. Georgia Highway Express, Inc., 417 F.2d
1122, 1125 (CA5 1969).  See also Curtis v. Loether, 415 U.S.
189, 192193 (1974) (describing availability of jury trials for
common law forms of action); id., at 196197, n. 13 (citing
Title VII cases).  If the court finds that the employer has
engaged in an unlawful employment practice, it may enjoin
the practice and ``order such affirmative action as may be
appropriate, which may include, but is not limited to,
reinstatement or hiring of employees, with or without back
pay . . . or any other equitable relief as the court deems
appropriate.''  2000e-5(g).
       It is beyond question that discrimination in employment
on the basis of sex, race, or any of the other classifications
protected by Title VII is, as respondents argue and this
Court consistently has held, an invidious practice that
causes grave harm to its victims.  See Brief for Respondents
3539; Griggs v. Duke Power Co., 401 U. S. 424 (1971).  The
fact that employment discrimination causes harm to
individuals does not automatically imply, however, that
there exists a tort-like ``personal injury'' for purposes of
federal income tax law.
       Indeed, in contrast to the tort remedies for physical and
nonphysical injuries discussed above, Title VII does not
allow awards for compensatory or punitive damages;
instead, it limits available remedies to backpay, injunctions,
and other equitable relief.  See 2000e-5(g); Patterson v.
McLean Credit Union, 491 U. S. 164, 182, n. 4 (1989)
(noting that a plaintiff in a Title VII action is ``limited to a
recovery of backpay''); Great American Fed. Sav. & Loan
Assn. v. Novotny, 442 U. S. 366, 374375 (1979); Sparrow
v. Commissioner, ___ U. S. App. D.C. ___, ___ -___, 949 F.
2d 434, 437438 (1991) (collecting cases).  An employee
wrongfully discharged on the basis of sex thus may recover
only an amount equal to the wages the employee would
have earned from the date of discharge to the date of
reinstatement, along with lost fringe benefits such as
vacation pay and pension benefits; similarly, an employee
wrongfully denied a promotion on the basis of sex, or, as in
this case, wrongfully discriminated against in salary on the
basis of sex, may recover only the differential between the
appropriate pay and actual pay for services performed, as
well as lost benefits.
       The Court previously has observed that Title VII focuses
on ``legal injuries of an economic character,'' see Albemarle
Paper Co. v. Moody, 422 U. S. 405, 418 (1975), consisting
specifically of the unlawful deprivation of full wages earned
or due for services performed, or the unlawful deprivation
of the opportunity to earn wages through wrongful termina-
tion.  The remedy, correspondingly, consists of restoring
victims, through backpay awards and injunctive relief, to
the wage and employment positions they would have
occupied absent the unlawful discrimination.  See id., at
421 (citing 118 Cong. Rec. 7168 (1972)).  Nothing in this
remedial scheme purports to recompense a Title VII
plaintiff for any of the other traditional harms associated
with personal injury, such as pain and suffering, emotional
distress, harm to reputation, or other consequential
damages (e.g., a ruined credit rating).  See Walker v. Ford
Motor Co., 684 F. 2d 1355, 13641365, n. 16 (CA11 1982).
       No doubt discrimination could constitute a ``personal
injury'' for purposes of 104(a)(2) if the relevant cause of
action evidenced a tort-like conception of injury and
remedy.  Cf. Curtis v. Loether, 415 U. S. 189, 195196, n. 10
(1974) (noting that ``under the logic of the common law
development of a law of insult and indignity, racial discrim-
ination might be treated as a dignitary tort'' (internal
quotation omitted)).  Indeed, the circumscribed remedies
available under Title VII stand in marked contrast not only
to those available under traditional tort law, but under
other federal antidiscrimination statutes, as well.  For
example, 42 U. S. C. 1981 permits victims of race-based
employment discrimination to obtain a jury trial at which
``both equitable and legal relief, including compensatory
and, under certain circumstances, punitive damages may be
awarded.''  Johnson v. Railway Express Agency, Inc., 421
U. S. 454, 460 (1975).  The Court similarly has observed
that Title VIII of the Civil Rights Act of 1968, whose fair
housing provisions allow for jury trials and for awards of
compensatory and punitive damages, ``sounds basically in
tort'' and ``contrasts sharply'' with the relief available under
Title VII.  Curtis v. Loether, 415 U. S., at 195, 197; 42
U. S. C. 3613(c).
       Notwithstanding a common-law tradition of broad tort
damages and the existence of other federal antidis-
crimination statutes offering similarly broad remedies,
Congress declined to recompense Title VII plaintiffs for
anything beyond the wages properly due them"wages that,
if paid in the ordinary course, would have been fully
taxable.  See L. Frolik, Federal Tax Aspects of Injury,
Damage, and Loss 70 (1987).  Thus, we cannot say that a
statute such as Title VII, whose sole remedial focus is
the award of backwages, redresses a tort-like personal
injury within the meaning of 104(a)(2) and the applicable
regulations.
      Accordingly, we hold that the backpay awards received by
respondents in settlement of their Title VII claims are not
excludable from gross income as ``damages received . . . on
account of personal injuries'' under 104(a)(2).  The
judgment of the Court of Appeals is reversed.

                                          It is so ordered.




               SUPREME COURT OF THE UNITED STATES
                        No. 91-0042
 
         UNITED STATES, PETITIONER v. THERESE A.
                   BURKE, CYNTHIA R. CENTER, and
                          LINDA G. GIBBS
        on writ of certiorari to the united states court of
                   appeals for the sixth circuit
                          [May 26, 1992]

       Justice Scalia, concurring in the judgment.
       Section 104(a)(2) of the Internal Revenue Code excludes
from gross income  the amount of any damages received . . .
on account of personal injuries or sickness.  26 U. S. C.
104(a)(2) (emphasis added).  The Court accepts at the
outset of its analysis the Internal Revenue Service regula-
tion (dating from 1960) that identifies  personal injuries
under this exclusion with the violation of, generically,  tort
or tort type rights, 25 Fed. Reg. 11490 (1960); 26 CFR
1.1041(c) (1991)"thus extending the coverage of the
provision to  `dignitary' or nonphysical tort[s] such as
defamation, ante, at 67 (footnote omitted).  Thereafter,
the opinion simply considers the criterion for determining
whether  tort or tort type rights are at stake, the issue on
which it disagrees with the dissent.
       In my view there is no basis for accepting, without
qualification, the IRS's  tort rights formulation, since it is
not within the range of reasonable interpretation of the
statutory text.  See Chevron U. S. A. Inc. v. Natural Re-
sources Defense Council, Inc., 467 U. S. 837, 842845 (1984).
In isolation, I suppose, the term  personal injuries can be
read to encompass injury to any noncontractual interest  for
which the court will provide a remedy in the form of an
action for damages.  Ante, at 5 (quoting W. Keeton, D.
Dobbs, R. Keeton, & D. Owen, Prosser and Keeton on the
Law of Torts 2 (1984)).  That is assuredly not, however, the
only permissible meaning of the term.  Indeed, its more
common connotation embraces only physical injuries to the
person (as when the consequences of an auto accident are
divided into  personal injuries and  property damage), or
perhaps, in addition, injuries to a person's mental health.
            Under the American decisional law, the phrase
`personal injury' denotes primarily an injury to the
body of a person.  At least some of the courts, however,
have not narrowly limited the term, and have conclud-
ed that a personal injury or an injury to person, within
the meaning of the law, does not necessarily involve
physical contact with the person injured or mere bodily
or physical injuries, but may embrace all actionable
injuries to the individual himself.  1 S. Speiser, C.
Krause, & A. Gans, Law of Torts 6 (1983).
See also Black's Law Dictionary 786 (6th ed. 1990).
       In deciding whether the words go beyond their more
narrow and more normal meaning here, the critical factor,
in my view, is the fact that  personal injuries appears not
in isolation but as part of the phrase  personal injuries or
sickness.  As the Court has said repeatedly,  [t]he maxim
noscitur a sociis, that a word is known by the company it
keeps, while not an inescapable rule, is often wisely applied
where a word is capable of many meanings in order to avoid
the giving of unintended breadth to the Acts of Congress.
Jarecki v. G. D. Searle & Co., 367 U. S. 303, 307 (1961).
The term  sickness connotes a  [d]iseased condition;
illness; [or] ill health, Webster's New International
Dictionary 23292330 (2d ed. 1950), and I think that its
companion must similarly be read to connote injuries to
physical (or mental) health.  It is almost as odd to believe
that the first part of the phrase  personal injuries or
sickness encompasses defamation, as it would be to believe
that the first part of the phrase  five feet, two inches refers
to pedal extremities.
       The common-sense interpretation I suggest is supported
as well by several other factors: First, the term  personal
injuries or sickness is used three other times in 104(a),
and in each instance its sense is necessarily limited to
injuries to physical or mental health.  See 104(a)(1) (gross
income does not include  amounts received under work-
men's compensation acts as compensation for personal
injuries or sickness (emphasis added)); 104(a)(3) (gross
income does not include  amounts received through accident
or health insurance for personal injuries or sickness
(emphasis added)); 104(a)(4) (gross income does not
include  amounts received as a pension, annuity, or similar
allowance for personal injuries or sickness resulting from
active service in the armed forces . . . or as a disability
annuity payable under . . . the Foreign Service Act (empha-
sis added)).  When, sandwiched in among these provisions,
one sees an exclusion for  the amount of any damages
received . . . on account of personal injuries or sickness,
one has little doubt what is intended, and it is not recovery
for defamation (or other invasions of  personal interests
that do not, of necessity, harm the victim's physical or
mental health).  Second, the provision at issue here is a tax
exemption, a category of text for which we have adopted a
rule of narrow construction, see, e.g., United States v.
Centennial Savings Bank FSB, 499 U. S. ___, ___ (1991)
(slip op., at 10).
       The question, then, is whether the settlement payments
at issue in this case were  received . . . on account of
personal injuries"viz.,  on account of injuries to the
recipients' physical or mental health"so as to qualify for
exclusion under 104(a)(2).  I think not.  Though it is quite
possible for a victim of race- or sex-based employment
discrimination to suffer psychological harm, her entitlement
to backpay under Title VII does not depend on such a show-
ing.  Whether or not she has experienced the sort of distur-
bances to her mental health that the phrase  personal
injuries describes, a Title VII claimant is entitled to be
 restor[ed] . . . to the wage and employment positio[n] [she]
would have occupied absent the unlawful discrimination.
Ante, at 10; see Albemarle Paper Co. v. Moody, 422 U. S.
405, 420421 (1975) ( [G]iven a finding of unlawful discrim-
ination, backpay should be denied only for reasons which,
if applied generally, would not frustrate the central statuto-
ry purposes of eradicating discrimination throughout the
economy . . .).  The only harm that Title VII dignifies with
the status of redressable legal injury is the antecedent
economic deprivation that produced the Title VII violation
in the first place.  See Albermarle Paper Co., supra, at 418
( Title VII deals with legal injuries of an economic character
. . .).  I thus conclude that respondents did not receive their
settlement payments (in respect of backpay)  on account of
personal injuries within the meaning of 104(a)(2), and
would reverse the judgment of the Court of Appeals.
       It is true that the Secretary's current regulation, at least
as it has been applied by the IRS, see n. 1, supra, contra-
dicts the interpretation of the statute I have set forth
above.  But while agencies are bound by those regulations
that are issued within the scope of their lawful discretion
(at least until the regulations are modified or rescinded
through appropriate means, see, e.g., Motor Vehicle Mfrs.
Assn. of United States, Inc. v. State Farm Mutual Automo-
bile Ins. Co., 463 U. S. 29, 4142 (1983)), they cannot be
bound by regulations that are contrary to law.  Otherwise,
the Secretary of the Treasury would effectively be empow-
ered to repeal taxes that the Congress enacts.  Cf. Office of
Personnel Management v. Richmond, 496 U. S. 414,
427428 (1990).  The existence of an ever-so-rare ``taxpayer-
friendly'' Treasury regulation (however inconsistent with
the statutory text) may be relevant to whether penalties for
blameworthy failure to pay can be assessed, see Cheek v.
United States, 498 U. S. ___, ___ (1991) (slip op., at 911),
but it cannot control the determination of whether the tax
was due and owing according to Congress's command.
       Finally (and relatedly), I must acknowledge that the basis
for reversing the Court of Appeals on which I rely has not
been argued by the United States, here or below.  The rule
that points not argued will not be considered is more than
just a prudential rule of convenience; its observance, at
least in the vast majority of cases, distinguishes our
adversary system of justice from the inquisitorial one.  See
United States v. Pryce, 291 U. S. App. D.C. 84, 96, 938 F. 2d
1343, 1355 (1991) (Silberman, J., dissenting in part).  Even
so, there must be enough play in the joints that the
Supreme Court need not render judgment on the basis of a
rule of law whose nonexistence is apparent on the face of
things, simply because the parties agree upon it"particu-
larly when the judgment will reinforce error already
prevalent in the system.  See, e.g., Arcadia v. Ohio Power
Co., 498 U. S. ___ (1990).  I think that is the case here.
       For the foregoing reasons, I concur in the judgment.





                SUPREME COURT OF THE UNITED STATES
                        No. 91-0042
 
         UNITED STATES, PETITIONER v. THERESE A.
                   BURKE, CYNTHIA R. CENTER, and
                          LINDA G. GIBBS
        on writ of certiorari to the united states court of
                   appeals for the sixth circuit
                          [May 26, 1992]

       Justice Souter, concurring in the judgment.
       Respondents may not exclude their recovery from taxable
income unless their action was one  based upon tort or tort
type rights.  26 CFR 1.1041(c) (1991).  On the reason-
able assumption that the regulation reflects the broad
dichotomy between contract and tort posited by the dissent,
post, at 23, there are good reasons to put a Title VII claim
on the tort side of the line.  There are definite parallels
between, say, a defamation action, which vindicates the
plaintiff's interest in good name, and a Title VII suit, which
arguably vindicates an interest in dignity as a human being
entitled to be judged on individual merit.  Our cases have,
indeed, recognized parallels (though for different purposes)
between tort claims and claims under antidiscrimination
statutes other than Title VII.  See Goodman v. Lukens Steel
Co., 482 U. S. 656, 661 (1987) (similarity between claim
under 42 U. S. C. 1981 and personal-injury claim for
purposes of determining applicable statute of limitations);
Wilson v. Garcia, 471 U. S. 261, 277278 (1985) (same for
42 U. S. C. 1983).
       The reasons do not go solely to that one side, however.
While I do not join the majority in holding that the tort-like
character of a claim should turn solely on whether the
plaintiff can recover for  intangible elements of injury,
ante, at 6, I agree that Title VII's limitation of recovery to
lost wages ( back pay) counts against holding respondents'
statutory action to be  tort-type.  Tort actions, it cannot be
gainsaid, commonly (though not invariably) permit recov-
ery for intangible injury.  Ante, at 58.  Back pay, on the
other hand, is quintessentially a contractual measure of
damages.
       A further similarity between Title VII and contract law,
at least in the context of an existing employment relation-
ship, is the great resemblance of rights guaranteed by Title
VII to those commonly arising under the terms and condi-
tions of an employment contract:  Title VII's ban on
discrimination is easily envisioned as a contractual term
implied by law.  See Hishon v. King & Spalding, 467 U. S.
69, 7475, n. 6 (1984) ( Even if the employment contract did
not afford a basis for an implied condition that the [decision
to promote] would be fairly made on the merits, Title VII
itself would impose such a requirement); Patterson v.
McLean Credit Union, 491 U. S. 164, 177 (1989) ( [T]he
performance of established contract obligations and the
conditions of continuing employment [are] matters . . .
governed by state contract law and Title VII).  Indeed, it
has been suggested that  the rights guaranteed by Title VII
are implied terms of every employment contract . . . .  C.
Shanor & S. Marcosson, Battleground for a Divided Court:
Employment Discrimination in the Supreme Court, 1988-
89, 6 Lab. Law. 145, 174, n. 118 (1990) (emphasis added).
       In sum, good reasons tug each way.  It is needless to
decide which tug harder, however, for the outcome in this
case follows from the default rule of statutory interpretation
that exclusions from income must be narrowly construed.
See United States v. Centennial Savings Bank FSB, 499
U. S. ____, ____ (1991) (slip op., at 10); Commissioner v.
Jacobson, 336 U. S. 28, 49 (1949).  That is, an accession to
wealth is not to be held excluded from income unless some
provision of the Internal Revenue Code clearly so entails.
There being here no clear application of 26 U. S. C.
104(a)(2) as interpreted by the Treasury Regulation, I
concur in the judgment.




    SUPREME COURT OF THE UNITED STATES
             No. 91-0042
 
UNITED STATES, PETITIONER v. THERESE A.
        BURKE, CYNTHIA R. CENTER, and
               LINDA G. GIBBS
on writ of certiorari to the united states court of
        appeals for the sixth circuit
               [May 26, 1992]

  Justice O'Connor, with whom Justice Thomas joins,
dissenting.
  The Court holds that respondents, unlike most plaintiffs
who secure compensation after suffering personal injury,
must pay tax on their recoveries for alleged discrimination
because suits under Title VII of the Civil Rights Act of
1964, 78 Stat. 253, as amended, 42 Stat. 2000e et seq., do
not involve  tort type rights.  This is so, the Court says,
because  Congress declined to recompense Title VII plain-
tiffs for anything beyond the wages properly due them.
Ante, at 12.  I cannot agree.  In my view, the remedies
available to Title VII plaintiffs do not fix the character of
the right they seek to enforce.  The purposes and operation
of Title VII are closely analogous to those of tort law, and
that similarity should determine excludability of recoveries
for personal injury under 26 U. S. C. 104(a)(2).
                      I
  Section 104(a)(2) allows taxpayers to exclude from gross
income  damages received . . . on account of personal
injuries or sickness.  The Court properly defers to an
Internal Revenue Service (IRS) regulation that reasonably
interprets the words  damages received to mean  an
amount received . . . through prosecution of a legal suit or
action based upon tort or tort type rights, or through a
settlement agreement entered into in lieu of such prosecu-
tion.  26 CFR 1.1041(c) (1991).  See ante, at 5; United
States v. Correll, 389 U. S. 299 (1967).  Therefore, respon-
dents may exclude from gross income any amount they
received as a result of asserting a  tort type right to
recover for personal injury.
  The Court appears to accept that discrimination in the
workplace causes personal injury cognizable for purposes of
104(a)(2), see ante, at 910, and there can be little doubt
about this point.  See Goodman v. Lukens Steel Co., 482
U. S. 656, 661 (1987) ( [R]acial discrimination . . . is a
fundamental injury to the individual rights of a person);
Price Waterhouse v. Hopkins, 490 U. S. 228, 265 (1989)
(O'Connor, J., concurring in judgment) ( [W]hatever the
final outcome of a decisional process, the inclusion of race
or sex as a consideration within it harms both society and
the individual).  I disagree only with the Court's further
holding that respondents' action did not assert tort-like
rights because Congress limited the remedies available to
Title VII plaintiffs.  Focusing on remedies, it seems to me,
misapprehends the nature of the inquiry required by
104(a)(2) and the IRS regulation.  The question whether
Title VII suits are based on the same sort of rights as a tort
claim must be answered with reference to the nature of the
statute and the type of claim brought under it.
  Title VII makes employment discrimination actionable
without regard to contractual arrangements between
employer and employee.  Functionally, the law operates in
the traditional manner of torts: courts award compensation
for invasions of a right to be free from certain injury in the
workplace.  Like damages in tort suits, moreover, monetary
relief for violations of Title VII serves a public purpose
beyond offsetting specific losses.   It is the reasonably
certain prospect of a backpay award that `provide[s] the
spur or catalyst which causes employers and unions to self-
examine and to self-evaluate their employment practices
and to endeavor to eliminate, so far as possible, the last
vestiges of [discrimination].'  Albermarle Paper Co. v.
Moody, 422 U. S. 405, 417418 (1975) (quoting United
States v. N. L. Industries, Inc., 479 F. 2d 354, 379 (CA8
1973)).
  Such a scheme fundamentally differs from contract
liability, which  is imposed by the law for the protection of
a single, limited interest, that of having the promises of
others performed.  W. Prosser, Law of Torts 5 (4th ed.
1971).  Title VII liability also is distinguishable from quasi-
contractual liability, which  is created for the prevention of
unjust enrichment of one man at the expense of another,
and the restitution of benefits which in good conscience
belong to the plaintiff.  Ibid.  It is irrelevant for purposes
of Title VII that an employer profits from discriminatory
practices; the purpose of liability is not to reassign economic
benefits to their rightful owner, but to compensate employ-
ees for injury they suffer and to  eradicat[e] discrimination
throughout the economy.  Albermarle Paper, supra, at 421.
  This Court has found statutory causes of action for
discrimination analogous to tort suits on prior occasions,
but has not suggested that this comparison turns on the
specific monetary relief available.  In Wilson v. Garcia, 471
U. S. 261 (1985), we considered which state statute of
limitations is most appropriately applied to a claim brought
under 42 U. S. C. 1983.  The Court answered this question
by looking not to the remedies afforded a 1983 plaintiff,
but to  the essence of the claim and  the elements of the
cause of action.  Id., at 268.  Of greatest significance was
the fact that Congress designed the Civil Rights Act of 1871
to provide a civil remedy for violations of constitutional
rights in the post-war South.  Because Congress was
concerned with harms that  plainly sounded in tort, it only
remained for the Court to select the best comparison from
among  a broad range of potential tort analogies, from
injuries to property to infringements of individual liberty.
Id., at 277.  In concluding that the closest state-law
equivalent to a 1983 suit is a tort claim for personal
injury, the Court once more emphasized the rights made
enforceable under federal law:
 The unifying theme of the Civil Rights Act of 1871 is
reflected in the language of the Fourteenth Amendment
that unequivocally recognizes the equal status of every
`person' subject to the jurisdiction of any of the several
States.  The Constitution's command is that all `per-
sons' shall be accorded the full privileges of citizenship
. . . .  A violation of that command is an injury to the
individual rights of the person.  Ibid. (footnote
omitted.
When asked in Goodman v. Lukens Steel Co., supra, to
determine the appropriate state analogue to a suit under 42
U. S. C. 1981, the Court again considered the rights
protected by federal law rather than the recovery that could
be had by a plaintiff.  As in Wilson, the tort-like nature of
a 1981 claim was clear.  See 482 U. S., at 661.  According-
ly, the Court quickly turned to rejecting the view that
1981 suits are more similar to tort actions for interference
with contractual rights than to claims based on personal
injury.  The Court noted that while 1981 deals partially
with contracts, it is  part of a federal law barring racial
discrimination, which . . . is a fundamental injury to the
individual rights of a person.  Ibid.  Moreover, the econom-
ic consequences of 1981  flo[w] from guaranteeing the
personal right to engage in economically significant activity
free from racially discriminatory interference.  Id., at
661662.  The most analogous state statute of limitations
in a 1981 action is, therefore, the one governing personal
injury suits.  Id., at 662.
  Wilson and Goodman held federal civil rights suits
analogous to personal injury tort actions not at all because
of the damages available to civil rights plaintiffs, but
because federal law protected individuals against tort-like
personal injuries.  Discrimination in the workplace being no
less injurious than discrimination elsewhere, the rights
asserted by persons who sue under Title VII are just as
tort-like as the rights asserted by plaintiffs in actions
brought under 1981 and 1983.
                     II
  The Court offers three additional reasons why
respondents' recoveries should be taxed.  First, it notes that
amounts awarded under Title VII would have been received
as taxable wages if there had been no discrimination,
leaving the impression that failing to tax these recoveries
would give victims of employment discrimination a windfall.
See ante, at 12 and n. 13.  Affording victims of employment
discrimination this benefit, however, simply puts them on
an equal footing with others who suffer personal injury.
For example,  [i]f a taxpayer receives a damage award for
a physical injury, which almost by definition is personal,
the entire award is excluded from income even if all or a
part of the recovery is determined with reference to the
income lost because of the injury.  Threlkeld v. Commis-
sioner, 87 T. C. 1294, 1300 (1986), aff'd, 848 F. 2d 81 (CA6
1988).  I see no inequity in treating Title VII litigants like
other plaintiffs who suffer personal injury.
  Second, the Court intimates that the unavailability of
jury trials to Title VII plaintiffs bears on determining the
nature of the claim they bring.  See ante, at 11, 12, n. 12.
Here, the Court apparently assumes the answer to a
question we have expressly declined to address on recent
occasions.  See Lytle v. Household Mfg., Inc., 494 U. S. 545,
549, n. 1 (1990) ( This Court has not ruled on the question
whether a plaintiff seeking relief under Title VII has a right
to a jury trial. . . .  [W]e express no opinion on that issue
here); Teamsters v. Terry, 494 U. S. 558, 572 (1990).  More
importantly, the Court does not explain what relevance the
availability of jury trials holds for the question of
excludability under 104(a)(2).  The suggestion is that Title
VII recoveries are not excludable under this section because
employment discrimination suits are equitable rather than
legal in nature.  Cf. Sparrow v. Commissioner, ___ U. S.
App. D.C. ___, 949 F. 2d 434 (1991).  That argument,
however, ignores the very IRS regulation the Court pur-
ports to apply.  Instead of construing the statutory term
 damages as a reference to the remedy traditionally
available in actions at law, the IRS defines  damages to
mean  an amount recovered through prosecution or
settlement of a  legal suit or action based upon tort or tort
type rights.  26 CFR 1.1041(c) (1991) (emphasis added).
This inclusive definition renders the historical incidents of
 actions at law and  suits in equity irrelevant to the
proper interpretation of 104(a)(2).
  Finally, the Court asserts that Congress fundamentally
changed the nature of a Title VII suit when it enacted the
Civil Rights Act of 1991, Pub. L. 102166, 105 Stat. 1071.
By authorizing compensatory and punitive damages in
addition to backpay and injunctive relief, the Court sug-
gests, Congress extended the statute's scope beyond purely
economic losses to personal injury.  See ante, at 12, n. 12.
This theory is odd on its face, for even before the 1991
amendments Title VII reached much more than discrimina-
tion in the economic aspects of employment.  The protection
afforded under Title VII has always been expansive,
extending not just to economic inequality, but also to
 `working environments so heavily polluted with discrimi-
nation as to destroy completely the emotional and psycho-
logical stability of minority group workers' and  `demean-
ing and disconcerting' conditions of employment.  Meritor
Savings Bank v. Vinson, 477 U. S. 57, 66, 67 (1986)
(quoting Rogers v. EEOC, 454 F. 2d 234, 238 (CA5 1971),
cert. denied, 406 U. S. 957 (1972); Henson v. Dundee, 682
F. 2d 897, 902 (CA11 1982)).
    Given the historic reach of Title VII, Congress' decision
to authorize comparably broad remedies most naturally
suggests that legislators thought existing penalties insuffi-
cient to effectuate the law's settled purposes.  There is no
need to guess whether Congress had a new conception of
injury in mind, however.  The legislature set out the reason
for new remedies in the statute itself, explaining that
 additional remedies under Federal law are needed to deter
unlawful harassment and intentional discrimination in the
workplace.  Pub. L. 102166, 2, 105 Stat. 1071.  This
authoritative evidence that Congress added new penalties
principally to effectuate an established goal of Title VII, not
contrary speculation, should guide our decision.
  By resting on the remedies available under Title VII and
distinguishing the recently amended version of that law,
the Court does make today's decision a narrow one.
Nevertheless, I remain of the view that Title VII offers a
tort-like cause of action to those who suffer the injury of
employment discrimination.  See Price Waterhouse v.
Hopkins, 490 U. S., at 264265 (O'Connor, J., concurring
in judgment).  For this reason, I respectfully dissent.



