CSX CORPORATION, ATLANTIC LAND & IMPROVEMENT COMPANY, CARROLLTON RAILROAD, CHESSIE COMPUTER SERVICES, INC., CSX INTERMODAL TERMINALS, INC., CSX RAIL PAYROLL SERVICES, INC., CSX REAL PROPERTY, INC., CSX TRANSPORTATION, INC., CSX TRANSPORTATION TERMINALS, CYBERNETICS & SERVICES, INC., FRUIT GROWERS DISPATCH, INC., FRUIT GROWERS EXPRESS COMPANY, TOTAL DISTRIBUTION SERVICES, INC., TRANSFLO TERMINAL SERVICES, INC. v. UNITED STATES OF AMERICA
No. 20-12494
United States Court of Appeals for the Eleventh Circuit
November 10, 2021
[PUBLISH]
Plaintiffs-Appellants,
versus
UNITED STATES OF AMERICA,
Defendant-Appellee.
Appeal from the United States District Court for the Middle District of Florida
D.C. Docket No. 3:15-cv-00427-BJD-JRK
Before WILLIAM PRYOR, Chief Judge, LAGOA, Circuit Judge, and WATKINS,* District Judge.
This appeal requires us to decide whether relocation benefits provided by a railroad to its employees are exempt under the Railroad Retirement Tax Act as “bona fide and necessary expenses incurred [by the employee] . . . in the business of the employer,”
adequately substantiated. The United States argues that the benefits were not incurred in the business of the employer, but if they were, it requests that we remand to determine which substantiation requirements apply. Because the benefits are bona fide and necessary expenses incurred by the employee in CSX‘s business and there is no requirement to prove or substantiate anything beyond compliance with the statute, we affirm in part, reverse in part, and remand for the district court to calculate the amount of CSX‘s refund and to oversee the required notification process.
I. BACKGROUND
CSX and its various subsidiaries operate a network of rail lines throughout the eastern United States. In so doing, CSX requires its employees to move to different locations because of operational consolidations, mergers, promotions, and other business-related reasons. CSX chooses to pay for most of the expenses the
When CSX first provided the benefits, it treated the benefits as taxable compensation under the Railroad Retirement Tax Act.
The Act imposes on the employer and employee a tax calculated as a percentage of the employee‘s “compensation.”
The Act is similar to the Federal Insurance Contributions Act, which does not govern railroad companies and their employees. See Wis. Cent. Ltd. v. United States, 138 S. Ct. 2067, 2071-72 (2018). The railroad
In 2009, CSX deducted and paid to the Internal Revenue Service approximately $1.76 million in taxes for these relocation benefits. CSX later decided that these benefits were exempt because they were “advance[s,] reimbursement[s,] or allowance[s] . . . for traveling or other bona fide and necessary expenses” that were “incurred or reasonably expected to be incurred” by its employees “in the business of” CSX.
where both wages and expense reimbursement or allowance are combined in a single payment.”
CSX sought a refund of the taxes. After the Service refused, CSX sued for refunds of these and other taxes paid on behalf of itself and its employees. In addition to the taxes on relocation benefits, CSX sought refunds for taxes paid on stock transactions, which CSX claimed were not “money remuneration.”
The parties stipulated to the material facts and filed cross-motions for summary judgment. The district court held that corporate stock and in-kind relocation benefits were “properly considered” money remuneration by the Treasury Department. And it held that relocation benefits did not fall under the exemption in
During the pendency of an appeal by CSX, the Supreme Court decided that “money remuneration” in the Act did not apply to in-kind benefits, but instead applied only to compensation that is a commonly used “medium of exchange.” Wis. Cent., 138 S. Ct. at 2074. The government conceded on appeal that CSX‘s stock transactions were not subject to the Act, but it contested the status of CSX‘s relocation benefits. CSX Corp. v. United States, 909 F.3d 366, 368 (11th Cir. 2018) (CSX I).
We agreed that corporate stock was not “money remuneration” and reversed the district court on that issue, but we did not
address whether in-kind relocation benefits were “money remuneration.” Id. at 368-69. On the issue of cash relocation benefits, “we [held] that relocation benefits and moving expenses that comport with the statutory requirements of [section] 3231(e)(1)(iii) are excluded from taxable compensation under the [Act].” Id. at 369. Because “[w]hether CSX complied with these statutory requirements [was] outside the scope of [the] decision,” we “remand[ed] for further consideration of the statutory requirements” and refund calculations. Id.
In a concurring opinion, Judge Jordan reiterated that “[r]elocation benefits . . . fit comfortably within this broad provision [section 3231(e)(1)(iii)].” Id. at 370 (Jordan, J., concurring). Judge Jordan explained that he disagreed with an interpretation of the same section in BNSF Railway Co. v. United States, 775 F.3d 743, 758-59 (5th Cir. 2015). In CSX I, the government argued that the Fifth Circuit‘s interpretation of
Judge Jordan rejected BNSF Railway‘s interpretation for three reasons. First, the text of the statute was unambiguous and required no application of the general-specific or superfluity canons: “[t]he terms ‘traveling,’ ‘bona fide,’ and ‘necessary’ may be broad, but they are not vague.” CSX I, 909 F.3d at 371 (Jordan, J., concurring). Second,
§ 11048, 131 Stat. 2088 (suspending the moving expense deduction for tax years 2018–25)).
On remand, the parties again filed cross-motions for summary judgment. The government conceded that in-kind relocation benefits were not “money remuneration.” The parties continued to dispute whether cash relocation benefits were exempt under
The district court then addressed whether CSX had substantiated these amounts to qualify for the exemption. It rejected CSX‘s argument that the only requirement was that the amount be paid in a “separate payment” or that there be a specific indication of “the separate amounts.” See
ruled that CSX failed to meet regulatory substantiation requirements in the Accountable Plan.
CSX and the government filed a joint motion to issue a final judgment under Federal Rule of Civil Procedure 54(b). The judgment could not otherwise become final until CSX had comported with regulatory requirements involving the collection of refunds on the tax paid for in-kind relocation benefits on behalf of its employees—the most relevant of which requires notifying each employee of the refund amount and requesting consent for CSX to collect it on his behalf. See
II. STANDARD OF REVIEW
This Court reviews summary judgment orders de novo, “viewing all the evidence and [drawing] all reasonable inferences in favor of the non-moving party.” McKenny v. United States, 973 F.3d 1291, 1296 (11th Cir. 2020). Summary judgment is appropriate when “there is no genuine issue as to any material fact, such that
judgment in favor of one party is appropriate as a matter of law.” Id. (citing FED. R. CIV. P. 56(a)).
III. DISCUSSION
As a preliminary matter, the parties dispute whether our decision in CSX I resolved the two issues in this appeal: whether the moving expenses were incurred in CSX‘s business and what, if any, substantiation requirements are applicable. Our mandate rule and the law-of-the-case doctrine bar relitigation of issues resolved explicitly or by necessary implication in an earlier appeal. Norelus v. Denny‘s, Inc., 628 F.3d 1270, 1288 (11th Cir. 2010). In CSX I, we remanded “for further consideration of the statutory requirements and the calculation of CSX‘s taxable compensation.” 909 F.3d at 369. So, we did not resolve the issues presented in this appeal.
We divide our discussion in two parts. First, we explain that the text of
A. Section 3231(e)(1)(iii) Includes Relocation Benefits for Employees Whose Employers Require Them to Move.
The parties dispute whether the relocation benefits paid by CSX are for “bona fide and necessary expenses” incurred by the employee “in the business of the employer.”
behest of his employer. The district court agreed; it reasoned that the expenses were necessary and incurred in good faith “in carrying out the business of the employer, i.e. moving from one area to another to perform a job function for CSX.” The government argues that the historical context in which
“[W]e start with the text.” White v. Lemma, 947 F.3d 1373, 1377 (11th Cir. 2020); see also SCALIA & GARNER, supra § 2, at 56 (“The words of a governing text are of paramount concern . . . .“). The text must be interpreted “consistent[ly] with [its] ordinary meaning at the time Congress enacted the statute.” Wis. Cent., 138 S. Ct. at 2070 (alterations adopted) (internal quotation marks omitted). The Act exempts certain payments for expenses to employees from taxable compensation:
[A]n amount paid specifically—either as an advance, as reimbursement or allowance—for traveling or other bona fide and necessary expenses incurred or reasonably expected to be incurred in the business of the employer provided any such payment is identified by the employer either by a separate payment or by specifically indicating the separate amounts where both wages and expense reimbursement or allowance are combined in a single payment.
The text of the statute is unambiguous. A “bona fide” expense is one incurred in good faith. See Comm‘r v. Estate of Sanders, 834 F.3d 1269, 1275 (11th Cir. 2016); Bona Fide, BLACK‘S LAW DICTIONARY (rev. 4th ed. 1968) (“In or with good faith; . . . without deceit or fraud.“). And in this context, “necessary” does not mean strictly needed but instead means only that “the expense [is] appropriate and helpful.” Comm‘r v. Tellier, 383 U.S. 687, 689 (1966) (internal quotation marks omitted); see also Necessary, BLACK‘S LAW DICTIONARY (rev. 4th ed. 1968) (“This word . . . may import absolute physical necessity or inevitability, or. . . that which is only convenient, useful, appropriate, suitable, proper, or conducive to the end sought.“). The payments also correspond to expenses incurred by employees in the business of their employer.
We reject the government‘s argument that the expenses at issue are personal expenses as opposed to expenses incurred in CSX‘s business. When employees are required to travel for business, expenses for hotels are indisputably incurred in their employer‘s business. Hotel expenses are not materially different from moving expenses incurred when employees are required to
relocate for business. CSX‘s employees incurred moving expenses at the direction of their employer because CSX required them to relocate to continue their employment. And because incurring those expenses was required to perform services for CSX, the expenses were “incurred . . . in the business of [their] employer.”
This argument about “the historical origin” of the tax exemption would require us to ignore the plain meaning of
in statutory interpretation, “we do not consider legislative history when the text is clear. . . . When the words of a statute are unambiguous, . . . judicial inquiry is complete.” Villarreal v. R.J. Reynolds Tobacco Co., 839 F.3d 958, 969 (11th Cir. 2016) (en banc) (internal quotation marks omitted). The government does not argue that the plain language excludes the relocation benefits. See, e.g., CSX I, 909 F.3d at 370 (Jordan, J., concurring) (“The government does not dispute that CSX‘s relocation benefits are generally bona fide or necessary.“). In fact, the government mentions the “plain language” in its brief only when it argues that the text of
In addition to using legislative history, the government relies on the consistent-usage canon, which states that a “word or phrase is presumed to bear the same meaning throughout a text.” SCALIA & GARNER, supra § 25, at 170. The government argues that the textual similarities and history require us to interpret
The consistent-usage canon applies where the same word or phrase is used in two separate provisions of the same law. Id. § 25, at 170-73. It can also extend to two different statutes when the “timing and purpose” of the two statutes are similar and their text
is “materially indistinguishable.” BNSF Ry. Co. v. Loos, 139 S. Ct. 893, 898-99 (2019); see also SCALIA & GARNER, supra § 25, at 173 (“If [the two distinct statutes were] enacted at the same time, and dealt with the same subject, the argument could even be persuasive.“). For example, in BNSF Railway Co. v. Loos, the Supreme Court applied the consistent-usage canon to corresponding provisions of the Act and the Federal Insurance Contributions Act because the programs were similar in “timing and purpose.” See 139 S. Ct. at 898-99.
By contrast,
The government finally argues that in enacting
framework.” Citing Treasury Regulations from 1944 and 1950, the government argues that the nearly identical language in those regulations and
The government‘s reliance on the old-soil canon is misplaced. It is not “obvious[]” that
(applying the canon to the word “consolidate” when the Federal Rules of Civil Procedure were “expressly modeled” on their relevant predecessor); see also In re Fed. Bureau of Prisons’ Execution Protocol Cases, 955 F.3d 106, 116-17 (D.C. Cir. 2020) (Katsas, J., concurring) (applying the canon to the word “manner” when carried over in multiple versions of the statute). Here, in contrast, the Treasury Regulations include the word “ordinary,” but
earlier decision. In CSX I, we concluded that relocation benefits “that comport with the statutory requirements of [section] 3231(e)(1)(iii) are excluded from taxable compensation under the [Act].” 909 F.3d at 369. Under the law of the case, at least some relocation benefits meet the statutory requirements. Respect for our precedent requires us not to adopt an interpretation of the statute that would effectively neuter our previous holding. See Kondratyev v. City of Pensacola, 949 F.3d 1319, 1335 n.1 (11th Cir. 2020) (Newsom, J., concurring) (“[A] healthy respect for the decisions of [our] colleagues . . . counsels a fairly rigorous application of the prior-panel-precedent rule.“).
The government recognizes the need to identify at least some relocation benefits that would fall within its proffered interpretation. In its view,
This argument fails because these payments and expenses are not “relocation benefits and moving expenses.” CSX I, 909 F.3d at 369. As the government acknowledges, the payments are for
home-office expenses. The government tries to evade this defect by arguing that what is important is what “a railroad [company] describes as ‘relocation benefits.‘” But CSX I concluded that some “relocation benefits and moving expenses [can] comport with the statutory requirements,” id., not some benefits that a “rail [company] describes” as a relocation benefit. And if only expenses such as home-office expenses would be exempt, then CSX I would have affirmed the district court because the record conclusively showed that none of CSX‘s relocation benefits were home-office expenses.
Also fatal to the government‘s position, the expenses identified by the government largely do not fall within
To be sure, the conclusion here and in CSX I—that relocation benefits and moving expenses fall within
relocations required by the business of the employer.” 775 F.3d at 758 (internal quotation marks omitted). The Fifth Circuit reversed on the ground that “two statutory interpretation canons“—the general-specific and the rule against superfluities—required a different
The rule against superfluities only applies when “a provision is susceptible of . . . another meaning” that avoids the superfluity. SCALIA & GARNER, supra, § 26, at 176. The Fifth Circuit did not explain why it disagreed with the conclusion of the district court that the plain meaning included relocation benefits and moving expenses. Nor did it explain why the text of
We also disagree with the Fifth Circuit‘s invocation of the general-specific canon, which only applies when “conflicting provisions cannot be reconciled—when the attribution of no permissible meaning can eliminate the conflict.” SCALIA & GARNER, supra, § 28, at 183. There is no conflict between
Finally, the government argues that, until recently, no one considered relocation benefits to fall within the exemption provided by
B. Because No Regulatory Substantiation Requirements Apply, CSX Is Entitled to a Refund.
The district court concluded that the Accountable Plan Regulation directly applied. It reasoned that the Secretary had the
power to “prescribe all needful rules and regulations” to enforce the provision,
The government, for its part, does not defend the ruling that the Accountable Plan applies here. As the government concedes, the Accountable Plan applies only to expenses that are deductible under Title VI of the Internal Revenue Code. See
to apply the most demanding substantiation rules in the Accountable Plan.
We decline the invitation to invent a regulatory substantiation requirement. The government‘s concession that the Accountable Plan does not apply dooms its argument. It contends that “there needs to be a mechanism by which expenses are monitored and verified unless the Government is forced to accept at face value any claim that a payment” satisfied the statutory requirements. (Internal quotation marks omitted.) In support, the government relies on a House Conference Report for a separate bill, enacted nearly seventeen years after
To the extent the government argues that satisfying some additional substantiation requirement is inherently necessary to take advantage of the exemption, that argument too fails. On the government‘s own account, the Accountable Plan did not go into effect until July 1, 1990, nearly fourteen years after the enactment of
authorization to prescribe all needful rules and regulations for the enforcement” of the provisions in the Internal Revenue Code. See Mayo Found. For Med. Educ. & Rsch. V. United States, 562 U.S. 44, 57 (2011) (internal quotation marks omitted);
Without a regulatory substantiation rule applicable to the expenses at issue, we need not decide whether any such rule would be consistent with
We stated in CSX I that moving expenses must be “substantiated in accordance with the statutory requirements.” CSX I, 909 F.3d at 369. But that statement was imprecise because the statute itself does not provide specific substantiation requirements, and that imprecise language understandably confused the parties and the district court. The identification required by the statute is not synonymous with substantiation. See Substantiate, BLACK‘S LAW DICTIONARY (11th ed. 2019) (“To establish the existence or truth of (a fact, etc.) . . . .“); Substantiation, 2 BOUVIER LAW DICTIONARY (Desk ed. 2012) (“[T]he process of ... the proof of a thing in issue by sufficient evidence.” “Substantial proof, or its provision.“).
Identification by separate payment or specific indication does not “establish” that the expenses fell within
IV. CONCLUSION
We AFFIRM IN PART the summary judgment as it pertains to whether relocation benefits are exempt under