Wis. Cent. Ltd. v. United States

• Decision Date: 21 June 2018
• Docket Number: No. 17–530.,17–530.
• Parties: WISCONSIN CENTRAL LTD., et al., Petitioners v. UNITED STATES.
• Court: U.S. Supreme Court

138 S.Ct. 2067

201 L.Ed.2d 490

WISCONSIN CENTRAL LTD., et al., Petitioners

v.UNITED STATES.

No. 17–530.

Supreme Court of the United States

Argued April 16, 2018.

Decided June 21, 2018.

Thomas H. Dupree Jr., Washington, D.C., for Petitioners.

Rachel P. Kovner, Washington, D.C., for Respondent.

Richard F. Riley Jr., William J. McKenna, David T. Ralston Jr., Jonathan W. Garlough, Foley & Lardner LLP, Chicago, IL, Thomas H. Dupree Jr., Rajiv Mohan, Gibson, Dunn & Crutcher LLP, Washington, D.C., for Petitioners.

Noel J. Francisco, Solicitor General, Richard E. Zuckerman, Principal Deputy Assistant Attorney General, Malcolm L. Stewart, Deputy Solicitor General, Rachel P. Kovner, Assistant to the Solicitor General, Gilbert S. Rothenberg, Francesca Ugolini, Ellen Page DelSole, Attorneys, Department of Justice, Washington, D.C., for Respondent.

Justice GORSUCH delivered the opinion of the Court.

As the Great Depression took its toll, struggling railroad pension funds reached the brink of insolvency. During that time before the modern interstate highway system, privately owned railroads employed large numbers of Americans and provided services vital to the nation's commerce. To address the emergency, Congress adopted the Railroad Retirement Tax Act of 1937. That legislation federalized private railroad pension plans and it remains in force today. Under the law's terms, private railroads and their employees pay a tax based on employees' incomes. 26 U.S.C. §§ 3201(a) - (b), 3221(a) - (b). In return, the federal government provides employees a pension often more generous than the social security system supplies employees in other industries. See Hisquierdo v. Hisquierdo, 439 U.S. 572, 573–575, 99 S.Ct. 802, 59 L.Ed.2d 1 (1979).

Our case arises from a peculiar feature of the statute and its history. At the time of the Act's adoption, railroads compensated employees not just with money but also with food, lodging, railroad tickets, and the like. Because railroads typically didn't count these in-kind benefits when calculating an employee's pension on retirement, neither did Congress in its new statutory pension scheme. Nor did Congress seek to tax these in-kind benefits. Instead, it limited itself to taxing employee "compensation," and defined that term to capture only "any form of money remuneration." § 3231(e)(1).

It's this limitation that poses today's question. To encourage employee performance and align employee and corporate goals, some railroads (like employers in many fields) have adopted employee stock option plans. Typical of many, the plan before us permits an employee to exercise stock options in various ways—purchasing stock with her own money and holding it as an investment; purchasing stock but immediately selling a portion to finance the purchase; or purchasing stock at the option price, selling it all immediately at the market price, and taking the profits. App. 41–42. The government argues that stock options like these qualify as a form of taxable "money remuneration" under the Act because stock can be easily converted into money. The railroads reply that stock options aren't "money" at all and remind us that when Congress passed the Act it sought to mimic existing industry pension practices that generally took no notice of in-kind benefits. Who has the better of it? Courts have divided on the answer, so we agreed to take up the question.

We start with the key statutory term: "money remuneration." As usual, our job is to interpret the words consistent with their "ordinary meaning ... at the time Congress enacted the statute." Perrin v. United States, 444 U.S. 37, 42, 100 S.Ct. 311, 62 L.Ed.2d 199 (1979). And when Congress adopted the Act in 1937, "money" was ordinarily understood to mean currency "issued by [a] recognized authority as a medium of exchange." Webster's New International Dictionary 1583 (2d ed. 1942); see also 6 Oxford English Dictionary 603 (1st ed. 1933) ("In mod[ern] use commonly applied indifferently to coin and to such promissory documents representing coin (esp. government and bank notes) as are currently accepted as a medium of exchange"); Black's Law Dictionary 1200 (3d ed. 1933) (in its "popular sense, ‘money’ means any currency, tokens, bank-notes, or other circulating medium in general use as the representative of value"); Railway Express Agency, Inc. v. Virginia, 347 U.S. 359, 365, 74 S.Ct. 558, 98 L.Ed. 757 (1954) ("[M]oney ... is a medium of exchange"). Pretty obviously, stock options do not fall within that definition. While stock can be bought or sold for money, few of us buy groceries or pay rent or value goods and services in terms of stock. When was the last time you heard a friend say his new car cost "2,450 shares of Microsoft"? Good luck, too, trying to convince the IRS to treat your stock options as a medium of exchange at tax time. See Rev. Rul. 76–350, 1976–2 Cum. Bull. 396 ; see also, e.g., In re Boyle's Estate, 2 Cal.App.2d 234, 236, 37 P.2d 841 (1934) ("[T]he word ‘money’ when taken in its ordinary and grammatical sense does not include corporate stocks"); Helvering v. Credit Alliance Corp., 316 U.S. 107, 112, 62 S.Ct. 989, 86 L.Ed. 1307 (1942) (distinguishing between "money and ... stock").

Nor does adding the word "remuneration" alter the calculus. Of course, "remuneration" can encompass any kind of reward or compensation, not just money. 8 Oxford English Dictionary 439. But in the sentence before us, the adjective "money" modifies the noun "remuneration." So "money" limits the kinds of remuneration that will qualify for taxation; "remuneration" doesn't expand what counts as money. When the statute speaks of taxing "any form of money remuneration," then, it indicates Congress wanted to tax monetary compensation in any of the many forms an employer might choose—coins, paper currency, checks, wire transfers, and the like. It does not prove Congress wanted to tax things, like stock, that aren't money at all.

The broader statutory context points to the same conclusion the immediate text suggests. The 1939 Internal Revenue Code, part of the same title as our statute and adopted just two years later, expressly treated "money" and "stock" as different things. Consider a few examples. The Code described "stock of the corporation" as "property other than money." § 27(d). It explained that a corporate distribution is taxable when distributed "either (A) in [the company's] stock ... or (B) in money." § 115(f)(2). And it discussed transfers of "money in addition to ... stock or securities." § 372(b). While ultimately ruling for the government, even the Court of Appeals in this case conceded that the 1939 Code "treat[ed] ‘money’ and ‘stock’ as different concepts." 856 F.3d 490, 492 (C.A.7 2017).

That's not all. The same Congress that enacted the Railroad Retirement Tax Act enacted a companion statute, the Federal Insurance Contributions Act (FICA), to fund social security pensions for employees in other industries. And while the Railroad Retirement Tax Act taxes only "money remuneration," FICA taxes "all remuneration"—including benefits "paid in any medium other than cash." § 3121(a) (emphasis added). We usually "presume differences in language like this convey differences in meaning." Henson v. Santander Consumer USA Inc., 582 U.S. ––––, ––––, 137 S.Ct. 1718, 1723, 198 L.Ed.2d 177 (2017). And that presumption must bear particular strength when the same Congress passed both statutes to handle much the same task. See INS v. Cardoza–Fonseca, 480 U.S. 421, 432, 107 S.Ct. 1207, 94 L.Ed.2d 434 (1987). The Congress that enacted both of these pension schemes knew well the difference between "money" and "all" forms of remuneration. Its choice to use the narrower term in the context of railroad pensions alone requires respect, not disregard.

Even the IRS (then the Bureau of Internal Revenue) seems to have understood all this back in 1938. Shortly after the Railroad Retirement Tax Act's enactment, the IRS issued a regulation explaining that the Act taxes "all remuneration in money, or in something which may be used in lieu of money." 26 C.F.R. § 410.5 (1938). By way of example, the regulation said the Act taxed things like "[s]alaries, wages, commissions, fees, [and] bonuses." § 410.6(a). But it nowhere suggested that stock was taxable. Nor was the possibility lost on the IRS. The IRS said the Act did tax money payments related to stock—"[p]ayments made by an employer into a stock bonus ... fund." § 410.6(f). But the agency did not seek to extend the same treatment to stock itself. So even assuming the validity of the regulation, it seems only to confirm our understanding.

To be sure, the regulation also lists "scrip and merchandise orders" as examples of qualifying mediums of exchange. § 410.5. For argument's sake, too, we will accept that the word "scrip" can sometimes embrace stock. But even if "scrip" is capable of bearing this meaning, at the time the IRS promulgated the regulation in 1938 that was not its ordinary meaning. As even the government acknowledged before the Court of Appeals, "scrip" ordinarily meant "company-issued certificates" that employees could use in lieu of cash "to purchase merchandise at a company store." Brief for United States in Nos. 16–3300 etc. (CA7 2017), p. 37. This understanding fits perfectly as well with the whole phrase in which the term appears; both "scrip and merchandise orders" were frequently used at the time to purchase goods at company stores. See, e.g., Webster's New International Dictionary 2249 (defining "scrip" as a "certificate ... issued to circulate in lieu of government currency" or "by a corporation that pays wages partly in orders on a company store"); Keokee Consol. Coke Co. v. Taylor, 234 U.S. 224, 226, 34 S.Ct. 856, 58 L.Ed. 1288 (1914) (company gave its employees "scrip ... as an advance of monthly wages in payment for labor performed" that could be used to purchase merchandise at the company store); Gatch, Local Money in the United States...