railway company stock transferred to employees when they exercise their stock options are not money remuneration that doesn't make any sense at all your honor they are outside doesn't make any sense because it's convertible to money immediately right like stock same thing if you're on meaningful difference between a share of stock and then a piece of currency because of the opportunity for appreciation your honor that the term money remuneration was a look money appreciates in you it depends on the market depending on you know conditions of supply and demand and bit may buy more today than it buoyant than it bought a week ago you are with respect i don't think the fact of the inflation which can affect the value of money at a high level really answers the question here and we believe just doesn't make us any sense this distinction you're arguing should join the difference does it make whether you get with the get cash or you get the stock option you know that can be converted to cash very easily and i say well in our case actually more than half of the shares were not converted to cash in the the recipients well you have a choice i mean their value comes in different forms and you can hold on the stock you think it's going to appreciate over time and so on but it but you always have the option of converting to cash that's true your honor but at the time it's distributed it is it is non monetary property that is so on realistic because it's just like money it has value it can be converted to cash instantly is a correct mr reilly that that in this instance  employees did have the option of exercising these options in a way so that the only visible sign of it is a transfer to their checking accounts that's right that's one of the the that looks an awful lot like money should the should the tax treatment depend upon the form of in which lee option is exercised well your honor and in response to judge posner as well it really isn't just the form the company itself treats equity based compensation in the in the explanation of the option and the and the share distribution program to the employee and they say this ties your economic future to the company in a way that your salary cannot accomplish so does the company's inten determine taxation well no it's not so much the intent your honor it's that the company is observing the distinction that that we're making to the corner which is that appreciating property that is is is simply you know is not  in ordinary day to day commerce as a medium of exchange bike people that you need a distinction we don't have a lot of time but let me just ask you to address what seem to me your biggest problems chevron the phrase in any form and the statutory exclusions for qualified stock options and other non cash benefits which are difficult to understand if you were position were correct about the narrow scope of  money remuneration yes you are well thank you yes this is actually you know the in chevron terms as a chevron step one case this is a statutory interpretation case there is a distinct irreducible difference in the statutory definition of statutory distinction that this court should implement and enforce not refer it over to the internal revenue service in this case who for a lot of years the you paid the tax we did you are well the value of the withholding tax i guess that's right the taxes look the tax is actually imposed on the appreciation of the difference between the strike price the exercise price and the value of the share on the day it was distributed on the day the option was well as i do someone holds this and does not who will say they do eventually purchase the stop if i exercise it is that the time it's taxed that's right that's right stands next or so that in the mean time when it's distributed arguing or are they saying something else now there are there's actually you're under no dispute about sort of when the incidence of tax rises if it arises that all i position is that is that rare retirement tax doesn't arise on the shares because they're not within the scope of money stock options not be taxable but script for company stores would be which which is more liquid the well the well the surface certainly more liquid but if in one place it in one place here is the distinction your honor and i agree with you know this is absolutely where where you have to get to the core of the case and it goes to the any form of as i think judge posner mentioned a minute ago in this case form just means piece work salaries wages commissions  you guys paid taxes on this for a long long time but it does look that way now but it's you know the here's the reason it would it isn't and would not be a tax dodge your honor is that the employees wouldn't wouldn't stand for for compensation in stock options or option you don't know if you get it if you what these options don't mature immediately they there's actually a four year vesting period so you couldn't destroy you know the employees would insist on on money remuneration as well as their stock options that options they fluctuate that's part of our argument but i don't know what you mean by as well as they want to have the stock options and they want to have the cash right yeah i mean the stock options are money it's just in a different form right that's a possible interpretation has to be the only one that makes any practical sense when you're honored the deed at that there's i would say the  suggested so now now you're talking about asset right and you expect to get interest on that in the meantime i know they don't pay very much right now but and at some point it matures right and then and you r money back but every room in government that i mean time get that back so there's that everything has to be looked at least my view of what when the value is realized the money and you may have an argument least from my point of view that there is a time when it wouldn't be but that's the problem you also have this judge hamilton pointed out and they actually do while ago been panned for a long time it was only now that you're into that into the court as opposed to the tax court to get a refund which is the way you have to go i understand it well one response that we would like to point out to the court is that canadian national actually did wasn't privatized and went public till nine hundred ninety six and these are options and our first year of a refund claim is two thousand and six so while it wasn't instantaneous it was in our case it was pretty close to the time when the you know the stock options and ultimately the share distributions were even available to make a refund claim if you give me one second i'll respond to your point about why this why i reading make sense of all the words in the statute the way that the q s o exclusion the qualified stock option that i am reading says money rem ration doesn't include are not qualified stock options because shares are not money that is that is our art and i believe that's correct in our case all of the exclusions and qualified stock option is the main one that was enacted seventy years later sixty nine years later we had no way to cation whatsoever that it was intended to address the overall question of stock options it addressed these specific tax they were issue of qualified stock options and it was meant to correct and i arrest administrative mistake that that had arisen in the ninety's and two thousand it the qualified stock option exclusion simply has nothing to do where we find what you just told us the  toward the end of our pages it's footnote nineteen in the in our opening brief pages twenty six to twenty seven the qualified stock option exclusion was in acted against specifically in response to what was perceived as irania treatment by the internal revenue service for so called incentive stock options a tax favored flavor of stock option that is separate from the ones that issue here and so the point was the q s o exclusion shouldn't be read to affect the meaning of money correct so you're touring the country defending the surely it would appear so you're just it just judge me and question about when the the tax rises just to clarify that in the case of these not qualified stock options i'm please aren't tax until they exercise the option so they get an option that a right to purchase stock at some set price and then there's some later exercise date where they can exercise the stock which means they get basically a better for the bargain they get to exercise th situation where you would sell the stock and have your tax arise in the same day in fact that was one of the options the employees had here that they could simply tell the transfer agent they wanted to exercise their option and take the cash and then the transfer agent would take the tax withholding so there's an initial there's a base that they do have to have to have received and you're saying that's when you say that's that's what the and they have to pay the appreciation yeah basically space is the base basis whether we want to call it that they got value for initially i guess you're saying it will basically they got from the company the right to purchase the price at an increased price and that they basically pay what the fair market value the difference in the fair market value of what they pay is what they pay tax so normally  something that they can exercise and convert to cash and there is no tax imposed on the employee in the case of the kind of not qualified stock options that are we're dealing with here until they exercise the option and that does differ from qualified stock options which congress exempted from income tax so there's no tax on that text there's been no dispute in these cases that that would be tax fica taxes all remuneration for employment and not the option itself i mean if the op has never exercised the not the types of options that we're dealing with here aren't under section eighty three tax when you get the option they're taxed when you exercise it so and when you have a vested right in the stock that's not subject to a substantial risk of forfeiture and so basically if the employees get some non vested right in the stock or or an option that they may never exercise that's not with taxes taxed under section eighty three when it's exercised in the case of the knock off i stock options but that's the same for income tax purposes and for fica to ursus and we're just urging the court to reach the same result for retirement tax taxes which are the type of certainly doesn't clearly limit what's taxable to cash as the railroads urge but rather that that language is susceptible to broader meaning in fact the union pacific district court  concluded that the statutory language and ambiguously would be stock options and i think when you look at the phrase overall any form of money we're going to ration it certainly contemplates things other than cash first of all that every tour to look at it has said that any form  benefits purposes of compensation as any form of money remuneration as including not only money but services committee or privileges that are given as remuneration for employment so i think that would include any any commodity and certainly the statu seems to lose track of at least the word money yes and i think if you look at the letters you if if i could see if we do have a difference in statutory language and i know that the government wants to basically try to make  that the government recognizes in the meanings of similar but distinct terms between those two statutes well i think if there is a difference in the general definition but in  that you when you look at the statute as a whole there exclusions are not catch benefits which indicate that that's not a limitation to money but there are other differences in the specific exclusions i mean there are some things that are specifically excluded under fica that are not  non cash exclusions particularly those under thirty to thirty one hundred nine and eighty five which are examples of noncash exclusions and they're the statute actually cars out the specific types of exclusions for non cash employee fringe benefits things like sorts of things because they're carved out of the statute as accepted at least to the indication that things that are specifically accepted would be included in the supreme court and quality stores applied this exact same analysis and determining  road was we were going through the same time well actually what happened your honor is that the railroad that the congress sort of came up with we need to do something around the same time and the railroads had some existing pension plans and really different am not sure what the committee division was but i know that the retirement statute was started first because it was viewed as an accident see to make sure that wherever workers were taken care of that the industry was particularly important to national commerce and that there were these pension plans that were falling apart and forcing older workers who should have who who were not opening up jobs for younger workers to not retire because they didn't have their pensions columns in place before nine hundred thirty for  first statute fibro i'm sorry hello or those sorts of pension really i think some of them dated back to the eight hundred eighty s but they were very variable in form they weren't the sort of contributory plans that this war was some were funded by the employees some were exclusively by the railroads and they vary tremendously and they were all failing plants which is why congress needed to step in and so because social security wasn't projected to be in place until the late thirty's they moved forward with a separate retirement system but the idea was basically the same remedial purpose but they the river of retirement system that they initially promulgated was struck down twice by the court and this money remuneration language arose in the second iteration of the statute in the one nine hundred thirty five version and it included extend an exception for free transportation even though this money remuneration language came in which certainly suggests that congress didn't mean just money or just cash and in that context because they are even in that first thank you your honor first the issue is far from settled there is we know there's an appeal pending in the eighth circuit and there was recent district court decision from florida so it's pretty clear it's going to go to the eleventh circuit so this issue is still in flux so we would we would encourage the court to make your own decision on the the issues in play and not simply defer to the fifth circuit in this case the you know answer your question judge hamilton the these did go on actually parallel somewhat separate tracks the retirement legislation was mostly in the commerce committee and the fica and social security legislation is mostly in the ways and means and finance so and this is actually touches on the point raised in the a our brief in many ways  retirement is railroad legislation whereas spike and social security work were tax and benefit legislation and your are the only other point i'd like to make is simply that the fact that any property can be valued in terms of any other property anything has a dollar value with respect that doesn't answer the question in this case so the it's not you know shares of stock are not money they can be valued in money you can buy in for money you can sell them for money but they're not money and and we believe that's the core of the case statutory distinction that should be fair thank you very much thank you thank you very much to both counts