Union Pacific Railroad Company, in its own capacity and in its capacity as successor to Union Pacific Railroad Company, Plaintiff - Appellant v. United States of America, Defendant - Appellee
No. 16-3574
United States Court of Appeals For the Eighth Circuit
Submitted: June 6, 2017; Filed: August 1, 2017
Association of American Railroads, Amicus on Behalf of Appellant(s). Appeal from United States District Court for the District of Nebraska - Omaha. Before WOLLMAN, ARNOLD, and GRUENDER, Circuit Judges.
United States Court of Appeals For the Eighth Circuit
The Union Pacific Railroad Company seeks a refund of about $75 million in taxes that it paid the federal government from 1991 to 2007 under the Railroad Retirement Tax Act. UP maintains that the RRTA did not require it to pay taxes when it paid employees in stock or made what are called ratification payments to union-member employees. The district court rejected the refund requests and granted summary judgment to the government. We reverse and remand.
Anyone who has earned a paycheck in this country is probably familiar with the Federal Insurance Contributions Act, if not by name then by effect. The FICA requires employers to withhold a tax equal to a percentage of an employee‘s wages.
Rail carriers and their employees are not subject to FICA taxation; instead, they pay a somewhat different tax under the RRTA. See
UP is a rail carrier that is obligated to pay RRTA taxes. During the time at issue, UP paid employees in company stock in addition to a monetary salary. UP paid RRTA taxes on the stock payments, but now it asks the government to refund the money because, it says, the RRTA did not require it to make those payments. The government disagrees, arguing that employers who pay employment taxes under the FICA are obligated to pay taxes on stock payments, and the Internal Revenue Service, by regulation, treats the FICA and the RRTA the same on this matter. See
Generally, when Congress authorizes an agency to issue regulations interpreting a statute that the agency enforces, we defer to the agency‘s interpretation of an ambiguous statute so long as the interpretation is reasonable. We must first determine whether the statute is ambiguous, and if not, we apply the statute as written; if it is ambiguous, we must decide whether the agency‘s interpretation is reasonable. Encino Motorcars, LLC v. Navarro, 136 S. Ct. 2117, 2124–25 (2016).
Beginning, as we must, with the statutory text, see Henson v. Santander Consumer USA Inc., 137 S. Ct. 1718, 1721 (2017), we see that the RRTA tax is based on an employee‘s “compensation,” which is generally defined as “any form of money remuneration paid to an individual for services rendered as an employee to one or more employers.”
But the parties dispute why the word “money” precedes “remuneration” in the RRTA. UP maintains that “money” takes on the ordinary meaning it had at the time the RRTA was enacted since the RRTA does not define it. Citing a handful of dictionaries, UP argues that “money” meant “a medium of exchange.” UP notes that “money” can have a more restrictive meaning, such as referring only to cash or coins, but since the phrase “any form of” precedes the word “money,” then it seems that Congress intended the RRTA to reach remuneration paid in any medium of exchange, not just cash or coins. To the government and the district court, on the other hand, “money” does not do any work; it is a superfluity, akin to its impotence in phrases like “money judgment” or “money damages.” Alternatively, they point out, citing their own handful of dictionaries,
We think that UP has the better argument. First, we are not convinced that the expansive definition of “money” that the government advances reflects the ordinary, common meaning of that term. See Perrin v. United States, 444 U.S. 37, 42 (1979). In fact, one of the dictionaries on which the government relies notes that in its “popular sense, ‘money’ means any currency, tokens, bank-notes, or other circulating medium in general use as the representative of value.” See Black‘s Law Dictionary 1200 (3d ed. 1933). A number of contemporary legal authorities agree. UP points to an instructive case decided near the time that the RRTA was enacted in which a testatrix left her “money” to one person and her personal property to another. In re Boyle‘s Estate, 37 P.2d 841, 841 (Cal. Dist. Ct. App. 1934). The trial court awarded stock that the decedent had owned to the legatee of the “money.” The appeals court reversed, noting that “[t]here is no doubt that the word ‘money’ when taken in its ordinary and grammatical sense does not include corporate stocks,” and nothing indicated that “money” was used “in any sense other than its ordinary and accepted meaning.” Id. at 842. The court explicitly considered broader definitions of money but did not apply them. Our court, moreover, explained during that same era that “[t]he sole function of money is as a necessary medium of exchange in all commerce which has passed the barter stage,” Emery Bird Thayer Dry Goods Co. v. Williams, 107 F.2d 965, 971 (8th Cir. 1939), which seems inconsistent with the notion that “money” in its ordinary context means any property whatsoever. More recently, the United States Tax Court said:
A final problem we have with extending the definition of “money received” in section 1001(b) to encompass preferred stock is its great dissimilarity to money in any practical sense. Assuming without deciding that the term includes not only actual money, but “money equivalents” as well, it is difficult to see how stock of any sort could reasonably be viewed as such.
Nestle Holdings, Inc. v. C.I.R., 94 T.C. 803, 814–15 (T.C. 1990). In short, “[t]here are numerous ways to define ‘moneys,’ but dictionaries mostly agree that the term refers to a generally accepted medium of exchange.” In re Hokulani Square, Inc., 776 F.3d 1083, 1085–86 (9th Cir. 2015).
Second, a regulation adopted about four months after the passage of the RRTA explained: “The term compensation means all remuneration in money, or in something which may be used in lieu of money (scrip and merchandise orders, for example), which is earned by an individual for services performed as an employee.” Employers’ Tax, Employees’ Tax, and Employee Representatives’ Tax Under the Carriers Taxing Act of 1937, 2 Fed. Reg. 2198, 2202 (Oct. 15, 1937) (codified at 26 C.F.R. § 410.5 (1938)). If money meant either nothing or all property, as the government asserts, then there would be no reason to note that scrip or merchandise orders also constituted “compensation.” Those examples are illuminating only if “money” has a more restrictive meaning.
Third, consider the statutory context. Congress enacted the FICA‘s predecessor in 1935—the same year when Congress made its second attempt in passing the RRTA. In the 1934, 1935, and 1937 versions of the RRTA, Congress chose a different word—compensation—for the RRTA from the one it chose for the FICA—wages. These differences in the relevant terms call to mind the oft-cited principle that differences in statutory language convey differences in meaning. Henson, 137 S. Ct. at 1723. And when Congress does not adopt obvious alternative language, the natural implication is that it did not intend the alternative. Advocate Health Care Network v. Stapleton, 137 S. Ct. 1652, 1659 (2017). Congress has, moreover, preserved the distinction. In defining the term “successor employers,” the RRTA adopts the FICA definition except that Congress substitutes “compensation” (as the RRTA defines it) where the FICA says “remuneration.” See
The government insists, however, that various non-cash exemptions from the general definition of “compensation” show that “money remuneration” means something broader than just mediums of exchange or else the exemptions would be superfluous. Why would Congress, the argument goes, create exemptions for non-cash payments if the general definition already excluded those payments? The Fifth Circuit relied on this argument to conclude that the statute is at least ambiguous. See BNSF, 775 F.3d at 754–55. The government emphasizes that the Supreme Court took a similar analytical tack when interpreting the term “wages” under the FICA, so we should do so here. See Quality Stores, 134 S. Ct. at 1400.
We have no quarrel in general with the approach that the government suggests, and we recognize that the Supreme Court has used it—but in a different context. We decline to give it any weight here because it rests on a false premise in the RRTA context. None of the exemptions that the government identifies will be rendered superfluous under our reading of the statute because each can include payments consistent with a medium-of-exchange interpretation of “money.” Take, for example, the exemption for remuneration in “qualified stock options,”
The government likewise calls our attention to the exemption for health and disability insurance, see
Another provision of relevance exempts “the value of meals or lodging furnished by or on behalf of the employer if at the time of such furnishing it is reasonable to believe that the employee will be able to exclude such items from income under section 119.” See
We consider, finally, the fringe-benefit exemption in
The government points out that the FICA contains some of the same exemptions verbatim, presumably implying that the exemptions must have the same breadth in each of the tax schemes. We do not understand why this is necessarily so. The exemptions may apply to more transactions under the FICA, but that does not mean that they lack meaning under our interpretation of the RRTA. And though the payments by mediums of exchange may not be frequent in the circumstances to which those exemptions apply compared to payments made in other property, the point is that no exemption is empty of meaning.
Another reason that the exemptions do not do much to support the government‘s view is that they can be made to indicate that “money” is not as broad as the government suggests. The RRTA exempts cash tips under $20.
Perhaps most important, Congress enacted the exemptions years after enacting the general definition of compensation. Under the government‘s theory, these later-adopted exemptions would impliedly repeal our reading of the original definition of “money remuneration.” We do not favor a construction that later-enacted statutes impliedly repeal an earlier one unless the intention of Congress to repeal is clear and manifest. Nat‘l Ass‘n of Home Builders v. Defs. of Wildlife, 551 U.S. 644, 662 (2007). The later statute must expressly contradict the earlier one, unless such a construction is absolutely necessary to give the words of the later statute any meaning. As just explained, the later-enacted exemptions have meaning, and Congress never announced an intention to alter the original scope of “money remuneration” to something beyond a medium of exchange. We keep in mind what Justice Cardozo said about implied repeals: “We cannot believe that in this process of amendment the word ‘seamen’ lost the broad meaning that it had in the law to be amended, and was narrowed by the exclusion of a particular species of seamen, i.e., seamen having command. The change is too sudden to be accepted as intended unless unmistakably declared.” Warner v. Goltra, 293 U.S. 155, 159 (1934). In short, we disagree that the statutory exemptions to the definition of “compensation” reveal much, if anything, about the meaning of “money remuneration.”
We recognize that one of our sister circuits recently held that payments in stock are a form of money remuneration because stock has become practically equivalent to cash: “just as today 100 dimes is the exact monetary equivalent of a $10 bill,” the court asserted, “so is a stock certificate that can be sold for $10.” Wis. Cent. Ltd. v. United States, 856 F.3d 490, 492 (7th Cir. 2017). We respectfully disagree. Even stocks with readily ascertainable share prices are not “money” because they are not mediums of exchange. One cannot pay for produce at the local grocery store with stock. Like any type of property, stock does have cash value and can be exchanged for money, but we do not think it is a medium of exchange. The Seventh Circuit expressly rejected the idea that its holding rendered payments in any form of property taxable under the RRTA, noting that, for example, an employer would not have to pay RRTA taxes on a birthday cake. But as the dissent in that case recognized, see id. at 494 n.1, even a cake has market value and can be exchanged for money. We discern no limiting principle in the government‘s expansive interpretation that would prevent all property from being swept into the RRTA‘s text, so we decline to follow the Seventh Circuit‘s lead.
Finally, the government maintains that we should interpret the RRTA to reach as far as the FICA because the two statutes share a similar purpose. Vague notions about the statutes’ purposes, however, cannot be used to override their actual texts. See Henson, 137 S. Ct. at 1725. We also decline to wade into the policy pros and cons of construing the statutes differently or for not taxing remuneration in stock under the RRTA. Even if we thought that the government had the better of the policy arguments, we cannot look past the RRTA‘s plain language. See Sandoz Inc. v. Amgen Inc., 137 S. Ct. 1664, 1678 (2017). So we refuse the government‘s invitation to remove “money” from the books, either by erasing
Because we conclude that the RRTA unambiguously does not require payment of RRTA taxes on remuneration in stock, we owe no deference to the IRS‘s regulation defining the RRTA‘s “compensation” and the FICA‘s “wages” identically, and we reverse the district court‘s grant of summary judgment to the government and denial of UP‘s motion for summary judgment on this issue.
We turn now to the other broad issue in the case and consider whether the RRTA required UP to pay taxes when it made so-called ratification payments to employees when their unions ratified collective bargaining agreements. These payments were intended to encourage unions to ratify collective bargaining agreements; they typically required the recipient to be employed with UP on a certain date, and the amount paid out was tied to the number of hours that the employee had worked the previous year.
Everyone agrees that the ratification payments are “money remuneration.” UP argues, though, that no tax is due under the RRTA because these payments are not “for services rendered” by the employee. See
We disagree with the district court‘s approach because instead of taxing payment for “services,” the FICA taxes payment for “employment,” which is defined broadly as “any service, of whatever nature, performed . . . by an employee for the person employing him.”
We conclude that the ratification payments were not made to employees for services rendered to UP because UP does not exercise control over whether a union ratifies a collective bargaining agreement. Indeed, ratification is a union activity that the Railway Labor Act protects from employer interference since that law is designed “to provide for the complete independence of carriers and of employees in the matter of self-organization.”
The government also emphasizes that UP made the ratification payments from its payroll, which, it maintains, means they were “for services rendered.” It is true that payroll payments are presumed to be compensation for services rendered.
The district court therefore erred in granting the government‘s motion for summary judgment and denying UP‘s motion for summary judgment because the RRTA did not require UP to pay taxes when it paid employees in stock or made ratification payments to them.
Reversed and remanded.