Wisconsin Central Ltd. v. United States
138 S. Ct. 2067
| SCOTUS | 2018Background
- In 1937 Congress enacted the Railroad Retirement Tax Act (RRTA) to federalize railroad pension funding and tax employee "compensation" defined as "any form of money remuneration."
- At enactment railroads commonly paid in-kind benefits (meals, lodging, rail passes) that RRTA did not tax; Congress limited coverage to monetary remuneration.
- Petitioners (railroads and employees) received nonqualified employee stock options; employees often used a "cashless exercise" that converted option value immediately into deposited cash.
- The IRS and Railroad Retirement Board historically treated some noncash benefits as compensation in limited circumstances; Treasury has long treated stock options as taxable under the RRTA (paralleling FICA treatment).
- The Seventh Circuit held stock options taxable under the RRTA; the Supreme Court granted certiorari to decide whether stock options are "money remuneration."
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether employee stock options are "money remuneration" under RRTA §3231(e)(1) | Stock options are convertible into cash (often immediately via cashless exercise) and thus are a form of money remuneration | "Money" in 1937 ordinary meaning is a medium of exchange (currency); stock is not money and therefore not taxable under RRTA | Stock options are not "money remuneration" under the RRTA and thus are not taxable compensation under the statute |
| Whether textual/structural context supports taxing stock as money | Broad dictionary meanings and consistent policy weigh for including stock; RRTA amendments (exempting qualified options) and administrative practice support taxation | RRTA text, contemporaneous dictionaries, 1939 IRC distinctions, and FICA's different language show Congress meant to limit RRTA to monetary mediums of exchange | The text and context unambiguously show "money" excludes stock; differences with FICA and 1939 Code reinforce that exclusion |
| Whether contemporaneous agency interpretations and later Treasury regs should control (Chevron/Skidmore) | Agency interpretations (Treasury, Railroad Board) treated stock/options as compensation; longstanding IRS practice favors deference | The statutory text is unambiguous that "money" excludes stock, so Chevron deference is not warranted | No Chevron deference: statute unambiguous in context; agency regs do not overcome textual conclusion |
| Whether statutory exemptions (e.g., for qualified stock options) imply stock otherwise included | Exemption indicates Congress expected stock options to be within coverage absent carve-outs | Exemption can be narrow—applies to payments that include monetary components—so its existence doesn't prove stock is "money" | Exemption does not demonstrate RRTA covers stock; other Code provisions and statutory drafting show stock and money were distinct |
Key Cases Cited
- United States v. Detroit Timber & Lumber Co., 200 U.S. 321 (syllabus practice for Reporter of Decisions)
- Hisquierdo v. Hisquierdo, 439 U.S. 572 (discussing RRTA pension system context)
- Perrin v. United States, 444 U.S. 37 (statutory words given ordinary meaning at time of enactment)
- Railway Express Agency, Inc. v. Virginia, 347 U.S. 359 ("money" as medium of exchange)
- Helvering v. Credit Alliance Corp., 316 U.S. 107 (distinguishing money and stock)
- Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (agency deference framework)
- INS v. Cardoza-Fonseca, 480 U.S. 421 (use of traditional tools of statutory construction)
- Skidmore v. Swift & Co., 323 U.S. 134 (weight of agency interpretations)
- Kirtsaeng v. John Wiley & Sons, Inc., 568 U.S. 519 (Congress may use different words in different statutes)
- Commodity Futures Trading Comm’n v. Schor, 478 U.S. 833 (congressional acquiescence to agency interpretation as evidence of intent)