Ruling on an important tax question that has split the federal circuits, the 3rd U.S. Circuit Court of Appeals has ruled that the University of Pittsburgh’s early retirement payments to its formerly tenured professors are taxable wages under the Federal Insurance Contribution Act (FICA).

“Because tenure is a form of compensation for past services to the university, payments offered as a substitute for tenure are compensation and therefore taxable as wages,” 3rd Circuit Judge Julio M. Fuentes wrote in the 24-page opinion in University of Pittsburgh v. United States.