RAILROAD RETIREMENT TAX ACT

Issues

Are damages for lost wages in a personal injury suit brought under the Federal Employers Liability Act taxable as “compensation” under the Railroad Retirement Tax Act?

Court below

United States Court of Appeals for the Eighth Circuit

In this case, the Supreme Court will decide whether time lost awards are taxable as “compensation” under the Railroad Retirement Tax Act. BNSF Railway Company argues that such awards are taxable because they fall within the employer-employee relationship, especially when the Railroad Retirement Tax Act is read in conjunction with the Railroad Retirement Act. Michael Loos counters that the plain text of the Railroad Retirement Tax Act does not include time lost awards in its definition of “compensation” and that regardless, Internal Revenue Code (“I.R.C.”) § 104(a)(2) excludes personal injury awards from taxation. The outcome of this case will determine the contours of the definition of “compensation” in the Railroad Retirement Tax Act as well as the extent to which the Railroad Retirement Tax Act and the Railroad Retirement Act should be interpreted as a unified statutory scheme.

Questions as Framed for the Court by the Parties

Whether a railroad’s payment to an employee for time lost from work is subject to employment taxes under the Railroad Retirement Tax Act.

Respondent Michael Loos (“Loos”) is a former employee of Petitioner, BNSF Railway Company (“BNSF”). Loos v. BNSF Railway Company at 3. During his employment with BNSF, Loos incurred a number of attendance policy violations, some of which Loos attributed to “flare-ups” of a workplace injury. Id. at 4–6. Due to repeated attendance policy violations, BNSF terminated Loos’s employment on November 29, 2012. Id.

Written by

cbruni

bplastaras

Edited by

mrivera

Additional Resources

Michael Arndt and Christopher Collier, Looking Forward to Oral Argument in BNSF v. Loos, Law 360 (August 9, 2018).
Autumn Callan, Supreme Court Adds Maritime and Employment Cases to Next Term’s Docket, Jurist (May 14, 2018).
Amy Howe, Two New Grants, One CVSG Today, SCOTUSblog (May 14, 2018).
John Elwood, Relist Watch, SCOTUSblog (May 9, 2018).

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Wisconsin Central Ltd. v. United States

Issues

Are stock options granted by railroads to their employees taxable compensation under the Railroad Retirement Tax Act, 26 U.S.C. § 3231(e)(1)?

Court below

United States Court of Appeals for the Seventh Circuit

The Supreme Court will determine whether stock that a railroad transfers to its employees is taxable under the Railroad Retirement Tax Act (“RRTA”), 26 U.S.C. § 3231(e)(1). Petitioners Wisconsin Central Ltd. et al. (“Wisconsin Central”) argue that Congress enacted the RRTA to create a retirement program separate and distinct from the program created under the Federal Insurance Contributions Act (“FICA”). Wisconsin Central further asserts that when interpreting the RRTA as Congress intended at the time of enactment, stock transfers from railroad employers to employees were not considered as “compensation.” Finally, Wisconsin Central contends that the Court should not give weight to the exceptions added after the RRTA’s enactment in determining the original definition of “money remuneration” and that those exceptions are not rendered “surplusage” when using the medium-of-exchange definition for money. Respondent United States (“Government”) responds that Congress intended the RRTA’s tax structure to align with FICA’s—which taxes non-qualified stock options—by defining “compensation” as “any form of money remuneration,” which includes stock. The Government maintains that Congress added exceptions to the RRTA to help clarify the statute’s meaning; and, here the language indicates that “money” includes non-cash payments such as non-qualified stock options. Although Wisconsin Central and its supporters contend that stock-based compensation is a valuable form of compensation that rewards employee work, the Government worries that excluding stock from the definition of “money” will promote circumvention of the RRTA tax through strategic structuring of employee compensation plans.

Questions as Framed for the Court by the Parties

Whether stock that a railroad transfers to its employees is taxable under the Railroad Retirement Tax Act, 26 U.S.C. § 3231(e)(1).

Wisconsin Central Limited, Grand Trunk Western Railroad Company, and Illinois Central Railroad Company (“Wisconsin Central”) are rail carriers and subsidiaries of the Canadian National Railway Company (“Canadian National”) that operate primarily in the Midwest and Mississippi Valley. Wisconsin Cent. Ltd. v. United States, 194 F. Supp. 3d 728, 731 (N.D. Ill.