BNSF R. Co. v. Loos
139 S. Ct. 893
| SCOTUS | 2019Background
- Michael Loos, a BNSF employee, won a jury verdict under the Federal Employers’ Liability Act (FELA) for $126,212.78, of which $30,000 was for lost wages.
- BNSF sought to withhold $3,765 from the lost-wages portion to cover Loos’s share of Railroad Retirement Tax Act (RRTA) taxes; lower courts denied the offset.
- The central statutory definition is RRTA §3231(e)(1): “compensation” means money remuneration for services rendered as an employee.
- IRS longstanding regulation (since 1938, reiterated 1994) treats “compensation” as including pay for time lost and specifically “pay for time lost.”
- The Court granted certiorari to resolve conflicting lower-court rulings on whether FELA lost-wage awards are RRTA-taxable compensation.
Issues
| Issue | Plaintiff's Argument (Loos) | Defendant's Argument (BNSF) | Held |
|---|---|---|---|
| Whether FELA damages for lost wages are RRTA‑taxable “compensation” | Lost‑wage damages compensate for injury, not for services rendered; they are not part of the employee’s remuneration package | Such awards are paid because of the employer–employee relationship and thus are remuneration for periods of absence — taxable as compensation | Yes. RRTA “compensation” includes pay for periods of absence (including FELA lost wages) when payment stems from the employer–employee relationship |
| Whether personal‑injury exclusion in IRC §104(a)(2) exempts FELA damages from RRTA | §104(a)(2) excludes personal injury damages from gross income and should inform RRTA’s “income” tax treatment | RRTA taxes are measured by statutory “compensation,” not by IRC gross income; Congress did not adopt §104(a)(2) for RRTA | No. §104(a)(2) does not exempt FELA lost‑wage awards from RRTA taxation |
Key Cases Cited
- Social Security Bd. v. Nierotko, 327 U.S. 358 (1946) (backpay awarded for employer’s wrong counted as wages for benefit/tax purposes)
- United States v. Quality Stores, Inc., 572 U.S. 141 (2014) (severance payments qualify as wages/remuneration taxable under payroll‑type statutes)
- United States v. Cleveland Indians Baseball Co., 532 U.S. 200 (2001) (reaffirmed that backpay allocable to periods not on the job counts as wages for taxation; addressed allocation timing)