Wisconsin Central Ltd. v. United States

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Congress adopted the Railroad Retirement Tax Act of 1937 in response to the Great Depression, federalizing private railroad pension plans. Private railroads and their employees pay a tax based on employees’ incomes; the federal government provides employees a pension often more generous than the social security system supplies employees in other industries. At the time of the Act’s adoption, railroads compensated employees not just with money but also with food, lodging, and railroad tickets. Railroads typically did not count these in-kind benefits when calculating an employee’s pension; neither did Congress in its new statutory pension scheme. Nor did Congress seek to tax these in-kind benefits, defining “compensation” as “any form of money remuneration.” Some railroads subsequently adopted employee stock option plans. The Supreme Court held that employee stock options are not taxable “compensation” under the Railroad Retirement Tax Act because they are not “money remuneration.” When Congress adopted the Act, “money” was understood as currency “issued by [a] recognized authority as a medium of exchange.” While stock can be bought or sold for money, it is not usually considered a medium of exchange. Congress wanted to tax monetary compensation in any of the many forms an employer might choose but did not want to tax things, like stock, that are not money. Congress knew the difference between “money” and “all” forms of remuneration and chose to use the narrower term in the context of railroad pensions. View "Wisconsin Central Ltd. v. United States" on Justia Law