Union Pacific Railroad Com. v. United States

          Submitted: June 6, 2017

         Appeal from United States District Court for the District of Nebraska - Omaha

          Before WOLLMAN, ARNOLD, and GRUENDER, Circuit Judges.

          ARNOLD, Circuit Judge.

          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. 26 U.S.C. § 3102(a). In addition, an employer must pay a share of the tax. 26 U.S.C. § 3111(a). These taxes fund social-security and medicare benefits. See United States v. Quality Stores, Inc., 134 S.Ct. 1395, 1399 (2014).

         Rail carriers and their employees are not subject to FICA taxation; instead, they pay a somewhat different tax under the RRTA. See 26 U.S.C. §§ 3201, 3221(a)-(b). As its name suggests, RRTA taxes fund benefits under the Railroad Retirement Act. See BNSF Ry. Co. v. United States, 775 F.3d 743, 750 (5th Cir. 2015); 45 U.S.C. §§ 231-231v. Congress first enacted versions of the RRTA and the RRA in 1934 to stabilize the railroad industry's private pension plans during the Depression. Courts struck down that statute, see R.R. Ret. Bd. v. Alton R.R. Co., 295 U.S. 330, 362 (1935), and its 1935 replacement, see Alton R.R. Co. v. R.R. Ret. Bd., 16 F.Supp. 955, 958-59 (D.D.C. 1936), but Congress's 1937 version survived. Today, the RRA and RRTA resemble both a social welfare plan and a private pension program; one tier of benefits and taxes corresponds to what one would expect to receive from and to pay for social security and medicare, while the other tier ties benefits to earnings and career service. Hisquierdo v. Hisquierdo, 439 U.S. 572, 574-75 (1979).

         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 26 C.F.R. § 31.3231(e)-1(a)(1). The district court agreed with the government's interpretation of the statutes and regulations at issue, so it granted summary judgment in the government's favor and denied UP's motion for summary judgment, which judgments we review de novo. Dunham v. Portfolio Recovery Assocs., LLC, 663 F.3d 997, 1000 (8th Cir. 2011).

         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." 26 U.S.C. § 3231(e)(1). On the other hand, the FICA levies a tax on an employee's "wages, " which are "all remuneration for employment, including the cash value of all remuneration (including benefits) paid in any medium other than cash." 26 U.S.C. § 3121(a). It seems to us that the FICA sweeps more broadly than the RRTA: The FICA expressly mentions the cash value of remuneration not paid in cash, such as payments in property, whereas the RRTA does not. And the determiner "all" qualifies "remuneration" in the FICA definition, appearing to make "remuneration" unlimited, whereas the word "money" qualifies "remuneration" in the RRTA.

         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, that "money" can have an expansive meaning relating to capital or finance in general, especially when "money" does the work of an adjective.

         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., ...