CSX Corporation v. United States, 18 F.4th 672

Background

CSX required employees to relocate for business reasons and paid various relocation benefits (cash and in-kind) such as temporary housing, storage, home-sale/purchase assistance, stipends, and lease-cancellation fees.
CSX initially treated those payments as taxable compensation under the Railroad Retirement Tax Act (RRTA), 26 U.S.C. § 3231(e), and paid approximately $1.76 million in taxes in 2009, then sought refunds claiming exemption under § 3231(e)(1)(iii).
In an earlier appeal (CSX I), this Court held corporate stock transactions were not “money remuneration” and ruled that relocation benefits that meet § 3231(e)(1)(iii)’s statutory requirements are excludable, remanding to determine compliance and refund calculations.
On remand the district court found most cash relocation benefits were bona fide and necessary expenses incurred in CSX’s business but concluded CSX failed to satisfy regulatory substantiation requirements by applying the Accountable Plan rules and denied the refund on that basis.
The government conceded the Accountable Plan does not literally apply to non-Title VI nondeductible moving expenses and urged remand to apply analogous regulatory substantiation; CSX argued the statute’s identification requirement alone sufficed.
The Eleventh Circuit affirmed that relocation benefits fall within § 3231(e)(1)(iii), reversed the district court’s application of the Accountable Plan (no applicable regulatory substantiation), and remanded to calculate refunds and manage employee notification.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether relocation benefits are exempt under 26 U.S.C. § 3231(e)(1)(iii) as “bona fide and necessary expenses incurred in the business of the employer”	CSX: Employer-required moves create bona fide, necessary business expenses; statute’s plain text covers such relocation costs	U.S.: Statutory text should be read consistent with prior Treasury regulations and § 162(a)/§ 3231(e)(5), which (per gov’t) exclude these moving costs	Held: Exemption covers employer-required relocation benefits; text is unambiguous and comparable to travel expenses; government’s historical/regulatory arguments rejected
Whether CSX must meet additional regulatory substantiation (Accountable Plan) to claim the exemption	CSX: Statute requires only identification (separate payment or specific allocation); no extra regulatory substantiation applies	U.S.: Although Accountable Plan doesn’t literally apply, analogous substantiation rules should be required to verify claims; remand to apply most demanding rules	Held: No applicable regulatory substantiation exists for these nondeductible moving expenses; district court erred applying the Accountable Plan; CSX entitled to refund subject to statutory identification only

Key Cases Cited

Wis. Cent. Ltd. v. United States, 138 S. Ct. 2067 (Sup. Ct. 2018) (money-remuneration limited to medium of exchange; in-kind benefits excluded)
CSX Corp. v. United States, 909 F.3d 366 (11th Cir. 2018) (CSX I) (relocation benefits that meet § 3231(e)(1)(iii) are excludable; remand to assess compliance)
BNSF Ry. Co. v. United States, 775 F.3d 743 (5th Cir. 2015) (interpreting § 3231(e)(1)(iii) to cover only travel-related expenses)
Sibla v. Comm’r, 611 F.2d 1260 (9th Cir. 1980) (company-directed moves convert personal moving expenses into business expenses)
Comm’r v. Tellier, 383 U.S. 687 (Sup. Ct. 1966) (definition of "necessary" as appropriate and helpful)
Chevron U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (Sup. Ct. 1984) (framework for judicial deference to agency interpretations)
Mayo Found. for Med. Educ. & Rsch. v. United States, 562 U.S. 44 (Sup. Ct. 2011) (Treasury’s general rulemaking authority under § 7805(a))
Cent. Ill. Pub. Serv. Co. v. United States, 435 U.S. 21 (Sup. Ct. 1978) (distinguishing withholding rules from income taxation)