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SUPREME COURT OF THE UNITED STATES
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No. 94-500
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COMMISSIONER OF INTERNAL REVENUE, PETI-
TIONER v. ERICH E. SCHLEIER and HELEN B.
SCHLEIER
on writ of certiorari to the united states court
of appeals for the fifth circuit
[June 14, 1995]

  Justice O'Connor, with whom Justice Thomas joins
and with whom Justice Souter joins with respect to
Part II, dissenting.
  Age discrimination inflicts a personal injury.  Even
under the principles set forth in United States v. Burke,
504 U. S. 229 (1992), the damages received from a claim
of such discrimination under the Age Discrimination in
Employment Act of 1967 (ADEA) are received -on
account of- that personal injury and therefore excludable
from taxable income under 26 U. S. C. 104(a)(2).
Unless the Court reads 104(a)(2) to permit exclusion
only of damages received for tangible injuries (i. e.,
physical and mental injuries)-a reading rejected by
eight Members of the Court in Burke and contradicted
by an agency's reasonable interpretation of the statute
it administers-the inescapable conclusion is that ADEA
damage awards are excludable.

                     I
  It is not disputed that the damages received by
petitioners constitute gross income under 26 U. S. C.
61(a) unless excluded elsewhere; the question is
whether such damages fall within 104(a)(2), which
excludes from taxable income -the amount of any
damages received (whether by suit or agreement and
whether as lump sum or periodic payments) on account
of personal injuries or sickness . . . .-  What constitutes
-damages received on account of personal injuries- is not
obvious from the text or history of the statute, and since
1960 Internal Revenue Service (IRS) regulations have
defined the phrase with reference 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 1.104-1(c) (1994).
  At one point in time, determining whether damages
received from a lawsuit were excludable under 104(a)(2)
and the applicable regulation was a fairly straightfor-
ward task.  In Threldkeld v. Commissioner, 87 T. C.
1294, 1299 (1986), aff'd, 848 F. 2d 81 (CA6 1988), the
Tax Court, in a 15-1 decision, set forth the test as
follows:
-Section 104(a)(2) excludes from income amounts
received as damages on account of personal injuries.
Therefore, whether the damages received are paid on
account of `personal injuries' should be the beginning
and the end of the inquiry.  To determine whether
the injury complained of is personal, we must look
to the origin and character of the claim . . ., and
not to the consequences of the injury.-  87 T. C., at
1299.
Thus, under Threldkeld, damages from a lawsuit were
excludable under 104(a)(2) so long as they were
received -on account of any invasion of the rights that
an individual is granted by virtue of being a person in
the sight of the law.-  Id., at 1308.
  Under this standard, ADEA damages surely are
excludable.  -[D]iscrimination in the workplace causes
personal injury cognizable for purposes of 104(a)(2), . . .
and there can be little doubt on this point.-  Burke,
supra, at 249 (O'Connor, J., dissenting).  We have
recognized that -racial discrimination . . . is a funda-
mental injury to the individual rights of a person.-
Goodman v. Lukens Steel Co., 482 U. S. 656, 661 (1987).
Such offense to the rights and dignity of the individual
attaches regardless of whether the discrimination is
based on race, sex, age, or other suspect characteristics.
See, e. g., 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-); EEOC v.
Wyoming, 460 U. S. 226, 231 (1983) (Age discrimination
-inflict[s] on individual workers the economic and
psychological injury accompanying the loss of the
opportunity to engage in productive and satisfying
occupations-).  Thus, prior to 1992, courts generally
relied on Threldkeld to hold that damages awarded
under the ADEA were excludable from income because
they were received on account of personal injuries.  See,
e. g., Pistillo v. Commissioner, 912 F. 2d 145 (CA6
1990); Rickel v. Commissioner, 900 F. 2d 655 (CA3
1990); Redfield v. Insurance Co. of North America, 940
F. 2d 542 (CA9 1991).
  Things changed, however, with United States v. Burke,
supra.  In that case, the Court of Appeals, relying on
Threldkeld, held that race discrimination violative of
Title VII infringes upon a victim's personal rights and
thus that damages received therefrom are properly ex-
cludable under 104(a)(2).  Agreeing that discrimination
violates personal rights, this Court nevertheless reversed
because the statutory remedies do not -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).-  504 U. S., at 239.
  I dissented from the Court's decision in Burke because
-the remedies available to Title VII plaintiffs do not fix
the character of the right they seek to enforce,- id., at
249, and I remain of that view today.  Dean Prosser
presciently observed years ago that -[t]he relation
between the remedies in contract and tort presents a
very confusing field, still in process of development, in
which few courts have made any attempt to chart a
path.-  W. Prosser, Law of Torts 635 (3d ed. 1964)
(footnote omitted).  Three decades later, and despite the
Court's attempt to chart a path in Burke (or perhaps
because of it), whether a remedy sounds in tort often
depends on arbitrary characterizations.  Compare
Schmitz v. Commissioner, 34 F. 3d 790, 794 (CA9 1994)
(ADEA liquidated damages are tort like because they
-compensate victims for damages which are too ob-
scure and difficult to prove-), with Downey v. Commis-
sioner, 33 F. 3d 836, 840 (CA7 1994) (ADEA liquidated
damages, -as the name implies, compensate a party for
those difficult to prove losses that often arise from a
delay in the performance of obligations-as a type of
contract remedy-).
  The Court today sidesteps these difficulties by laying
down a new per se rule: an illegal discharge based on
age cannot -fairly be described as a `personal injury' or
`sickness.'-  Ante, at 7.  To justify this conclusion, the
Court offers a hypothetical car crash, the injuries from
which cause the taxpayer to miss work.  She would be
able, in such circumstances, to exclude the recovered lost
wages because they would constitute damages received
-`on account of personal injuries.'-  Ante, at 6.  By
contrast, in the Court's view, ADEA damages are not
excludable because they are not -`on account of' any
personal injury and because no personal injury affected
the amount of back wages recovered.-  Ante, at 7.
  This reasoning assumes the wrong answer to the
fundamental question of this case: What is a personal
injury?  Eight Justices in Burke agreed that discrimina-
tion inflicts a personal injury under 104(a)(2).  See 504
U. S., at 239-240; id., at 247 (Souter, J., concurring in
judgment); id., at 249 (O'Connor, J., dissenting).  Only
Justice Scalia disagreed, arguing instead that the
phrase -personal injuries- under 104(a)(2) -is necessar-
ily limited to injuries to physical or mental health,- id.,
at 244; in his view, employment discrimination, without
more, does not inflict a personal injury because it is only
a legal injury that causes economic deprivation, ibid.
Whatever the merits of this view, it was rejected by the
Court in Burke and wisely not advanced by the Commis-
sioner in this case, see Brief for Petitioner 10, 25, n. 15.
  Although the Court professes agreement with the view
that -personal injury- within the meaning of 104(a)(2)
comprehends both tangible and intangible harms, ante,
at 6, n. 4, the Court's analysis contradicts this funda-
mental premise.  The Court's hypothetical contrast
between wages lost due to a car crash and wages lost
due to illegal discrimination would be significant only if
one presumes that there is a relevant difference for
purposes of 104(a)(2) between the car crash and the
illegal discrimination.  But such a difference exists only
if one reads -personal injuries,- as Justice Scalia did
in Burke, to include only tangible injuries.  Those
physical and mental injuries, of course, differ from the
economic and stigmatic harms that discrimination
inflicts upon its victims, but it is a difference without
relevance under 104(a)(2)-at least in the view of eight
Justices in Burke, and the view that the Court professes
to adopt today, ante, at 6, n. 4.  The injuries from
discrimination that the ADEA redresses-like the harm
to reputation and loss of business caused by a dignitary
tort like defamation, see Burke, supra, at 234-235; id.
at 247 (Souter, J., concurring in judgment)-may not
always manifest themselves in physical symptoms, but
they are no less personal, see supra, at 2-3, and thus no
less worthy of excludability under 104(a)(2).  The Court
states: -Whether one treats respondent's attaining the
age of 60 or his being laid off on account of his age as
the proximate cause of respondent's loss of income,
neither the birthday nor the discharge can fairly be
described as a `personal injury' or `sickness.'-  Ante, at
7.  This assertion, the key to the Court's analysis, is not
reconcilable with the Court's recognition that the
intangible harms of illegal discrimination constitute
-personal injuries- under 104(a)(2).
  The Court argues that although -the intangible harms
of discrimination can constitute personal injury- within
the meaning of 104(a)(2), -to acknowledge that discrimi-
nation may cause intangible harms is not to say . . .
that any of the damages received were on account of
those harms.-  Ante, at 9, n. 6.  The logic of this argu-
ment is rather hard to follow.  If the harms caused by
discrimination constitute personal injury, then amounts
received as damages for such discrimination are received
-on account of personal injuries- and should be
excludable under 104(a)(2).

                    II
  Even overlooking this fundamental defect in the
Court's analysis, ADEA damages should be excludable
from taxable income under our precedents.  The Court
in Burke deferred to the applicable IRS regulation, 26
CFR 1.104-1(c) (1994), and stated that -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.-  504 U. S., at
239.  The Court held that a suit based on Title VII was
not based upon -tort or tort type rights,- 26 CFR
1.104-1(c) (1991), however, because Title VII does not
entitle -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.'-  504
U. S., at 240 (quoting Johnson v. Railway Express
Agency, Inc., 421 U. S. 454, 460 (1975)).
  Unlike Title VII, the ADEA expressly provides that
any person aggrieved may bring a civil action and -shall
be entitled to a trial by jury of any issue of fact in any
. . . action for recovery of amounts owing as a result of
a violation of this chapter,- 29 U. S. C. 626(c)(2)
(emphasis added).  More important, the ADEA does not
limit relief to back wages, but instead authorizes courts
to grant the panoply of -such legal or equitable relief as
will effectuate the purposes- of the Act, 29 U. S. C.
626(c)(1) (emphasis added), and it expressly provides for
liquidated damages in addition to back wages, 29
U. S. C. 626(b).  The Court emphasizes that liquidated
damages under the ADEA are punitive in nature, ante,
at 8, but it is an emphasis without relevance.  Punitive
damages are traditionally available only in tort.  See 3
Dobbs, Law of Remedies 118 (2d ed. 1993) (-The rule
against punitive damages prevails even if the breach [of
contract] is wilful or malicious, as long as the breach
does not amount to an independent tort-).  Thus,
whether the liquidated damages available under the
ADEA are characterized as compensatory, or as a form
of punitive damages, it is clear that the remedies
available under the ADEA go beyond Title VII's limited
focus on -`legal injuries of an economic character,'-
Burke, ___ U. S., at ___ (quoting Albemarle Paper Co v.
Moody, 422 U. S. 405, 418 (1975)).  Plaintiffs claiming
age discrimination, then, are not limited to the -circum-
scribed remedies available under Title VII,- Burke,
supra, at 240, but instead may sue under the ADEA,
which appears to be one of the -other federal anti-
discrimination statutes offering . . . broad remedies-
distinguished by Burke, see id., at 241.
  These distinctions qualify an ADEA suit as a -tort
type- action under Burke, and should entitle a prevailing
plaintiff to exclude damages recovered therefrom from
taxable income under 104(a)(2) and the applicable IRS
regulation, 26 CFR 1.104-1(c) (1994).  The Court seeks
to avoid this conclusion by asserting that our decision in
Burke and the IRS regulation that it interpreted do not
conclusively determine the scope of 104(a)(2).  Both,
according to the Court, ante, at 13, impose a necessary
condition that the suit be tort or tort like, but neither
states that this showing is sufficient for excludability
under 104(a)(2).  This contention is untenable.
  The Court's decision in Burke makes clear that it was
deciding conclusively what 104(a)(2) permits to be
excluded.  After quoting the language of 104(a)(2), the
Court introduced its analysis with the following: -Nei-
ther 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.-  504 U. S., at
234.  The Court then quoted language from the IRS
regulation, 29 CFR 1.104-1(c), which identified recovery
from a suit -based on tort or tort type rights- as the
hallmark of excludability under 104(a)(2).  Every
member of the Court so understood the opinion-that
the scope of 104(a)(2) is defined in terms of traditional
tort principles.  See id., at 246-247 (Souter, J., concur-
ring in judgment); id., at 249 (O'Connor, J., dissenting).
Even Justice Scalia, who disagreed with the Court that
-personal injury or sickness- included nonphysical
injuries, see id., at 243-244 (Scalia, J., concurring in
judgment), agreed that the IRS regulation is -descriptive
of the ambit of 104(a)(2) as a whole,- id., at 242, n. 1.
  For 35 years the IRS has consistently interpreted its
regulation, 29 CFR 1.104-1(c), as conclusively establish-
ing the requirements of 104(a)(2).  See Rev. Rul. 85-98,
1985-2 Cum. Bull. 51.  This was the interpretation the
Commissioner pressed upon us in Burke, see Brief for
United States in United States v. Burke, O. T. 1991, No.
91-42, pp. 22-23; formally affirmed after Burke, see Rev.
Rul. 93-88, 1993-2 Cum. Bull. 61; presented to the
courts below, see Brief for Appellant in No. 93-5555
(CA5), p. 28, n. 16; and advanced in the opening briefs
before us, see Brief for Petitioner 14, n. 5, 16-17, n. 7.
It is only in one sentence in her reply brief that the
Commissioner expressed a view at odds with 35 years of
administrative rulings, agency practice, and representa-
tions to the courts-a sentence that the Court expands
into its holding today.
  The Court states that it does not accord the Commis-
sioner's reply brief any special deference in light of the
-differing interpretations of her own regulation,- ante, at
11, n. 7.  But ignoring the Commissioner's off-hand
assertion in this case does not wipe the slate clean.
There still remain 35 years of formal interpretations
upon which taxpayers have relied and of agency posi-
tions upon which courts, including this one, have based
their decisions.  Unless the Court is willing to declare
these positions to be unreasonable, they cannot be
ignored.  See Lyng v. Payne, 476 U. S. 926, 939 (1986).
The Court asserts that -`the Service's interpretive
rulings do not have the force and effect of regulations,'-
ante, at 13, n. 7 (quoting Davis v. United States, 495
U. S. 472, 484 (1990)).  That is true; it also says
nothing about the deference courts must give to such
reasonable interpretations, and a fuller exposition of our
precedent indicates that the level of deference is sub-
stantial.  Davis states: -Although the Service's interpre-
tive rulings do not have the force and effect of regula-
tions, we give an agency's interpretations and practices
considerable weight where they involve the contempora-
neous construction of a statute and where they have
been in long use.-  Ibid. (citations omitted).
  The Court states that the Commissioner -reads the
regulation correctly in this case.-  Ante, at 11, n. 7.
Even if true, that statement says nothing about whether
her interpretation for the past 35 years is reasonable.
Both may be reasonable; such is the nature of ambigu-
ity.  In any event, I do not agree that the Commis-
sioner's reply brief correctly reads the regulation to
impose a necessary, but not sufficient, condition for
excludability under 104(a)(2).  Although the regulation
purports to interpret the term -damages received
(whether by suit or agreement),- that term is unambigu-
ous; it plainly includes all kinds of damages-inflicted
on property or person, based on contract or tort, received
by suit or agreement.  Read in context, the regulation
seeks to define the overall ambit of 104(a)(2)-specifi-
cally the concept of -personal injuries,- the ambiguity of
which gives rise to controversies over the scope of the
exclusion under 104(a)(2).  The regulation is subtitled,
-Damages received on account of personal injuries or
sickness,- and its first sentence reads: -Section 104(a)(2)
excludes from gross income the amount of any damages
received (whether by suit or agreement) on account of
personal injuries or sickness.-  29 CFR 1.104-1(c) (1994).
In light of the expansive scope of these statements and
the futility  of any attempt to define only -damages
received,- the regulation is more sensibly read as
defining the entire scope of 104(a)(2).
  Finally, the Court states that agency rules and regula-
tions -may not be used to overturn the plain language
of a statute.-  Ante, at 13, n. 7.  But the language of
the statute is anything but plain.  As the Court noted
in Burke, -[n]either the text nor the legislative history
of 104(a)(2) offers any explanation of the term `personal
injuries.'-  504 U. S., at 234.  That is why the IRS
promulgated its regulation in 1960 linking the slippery
concept of personal injury to traditional tort principles.
The Court today stops short of declaring this regulation
unreasonable; it merely asserts that the regulation's
requirement of a tort or tort like injury is in addition to,
not in place of, the statutory requirement that the
damages be received -on account of personal injuries or
sickness.-  But, as noted above, it is not clear where
besides the definition of personal injury there is room in
the statute for the agency to graft on this additional
requirement.  It is surely more reasonable to read the
regulation as defining an ambiguous statutory phrase,
rather than as imposing a superfluous precondition
without any statutory basis.
  For these reasons, I respectfully dissent.