Employer Status Determination

RailTex Service Company, Inc.

This is the decision of the Railroad Retirement Board regarding the

status of RailTex Service Company, Inc. (RSCI) as an employer under

the Railroad Retirement and Railroad Unemployment Insurance Acts.

The status of RSCI has not previously been considered.

This decision is based on information provided by Ms. Julie

Herbert, Tax Manager, of RSCI. RSCI is 100% owned by RailTex, Inc.

RailTex, Inc. has been determined not to be an employer under the

Acts. See B.C.D. No. 95-25, March 16, 1995. RailTex, Inc. also

owns several railroad carriers subject to the Interstate Commerce

Act.

RSCI was incorporated on January 1, 1991. RSCI began operations on 

January 1, 1991. RSCI's employees provide other RailTex

subsidiaries with consulting services such as financing, 

accounting, safety, human resources, real estate, tax planning and 

preparation, electronic data processing, and other managerial

services. All of the revenues of RSCI are derived from providing

these services to its affiliated railroads.

Section 1(a)(1) of the Railroad Retirement Act (RRA) (45 U.S.C.

§ 231(a) (1) (i)), defines a covered employer as to include "any

express company, sleeping-car company, and carrier by railroad, 

subject to subchapter I of chapter 105 of title 49" of the United

States Code. There is no evidence suggesting that RSCI is an

employer within this subsection.

However, section 1(a) (1) of the Railroad Retirement Act further

defines a covered employer as:

(ii) any company which is directly or indirectly

owned or controlled by, or under common control with one 

or more employers as defined in paragraph (i) of this 

subdivision and which operates any equipment or facility

or performs any service (other than trucking service, 

casual service, and the casual operation of equipment and

facilities) in connection with the transportation of

passengers or property by railroad * * *.

Sections 1(a) , 1(b) and 1(d) (1) of the Railroad Unemployment

Insurance Act (RUIA) (45 U.S.C. §§ 351(a), (b) and (d)(1)) contain

substantially similar definitions, as does section 3231 of the

Railroad Retirement Tax Act (RRTA) (26 U.S.C. § 3231) .

The evidence of record shows that RSCI is under common control with

railroad employers as defined in section 1(a) (1) (i) of the Railroad

Retirement Act because it is owned and controlled by RailTex, Inc.

which also owns several covered rail employers. Thus, the question

presented is whether RSCI performs any "service ... in connection

BCD 1995-82 BA # 6805
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RailTex Service Company, Inc.

with [rail] transportation." If RSCI does perform any service in

connection with rail transportation, it will be considered an 

employer under the Acts. The question of what constitutes service

in connection with railroad transportation has been addressed in

many decisions of the Board and in numerous decisions by the United

States Courts of Appeals.

As noted earlier, RSCI provides various consulting services for its

affiliated railroads. This service includes financial accounting,

electronic data processing, and human resources. In Railroad

Retirement Board v. Duquesne Warehouse Co. . 149 F. 2d 507 (D.C.Cir.

1945), aff'd 326 U.S. 446, 90 L.Ed. 192, 66 S.Ct. 238 (1946), the

Court of Appeals held that a warehouse corporation owned by a

railroad and engaged in loading and unloading railroad cars and

other handling of property transported by railroad, and in other

activities which enabled the railroad to perform its rail 

transportation more successfully, was performing "services in

connection with" the transportation of property by railroad and

therefore was an employer under the Railroad Unemployment Insurance

Act. The Court of Appeals quoted approvingly from the opinion of

the Board that the carrier affiliate coverage provision includes

services which are an integral part of or closely related to the

rail transportation system of a carrier. The Board stated that the

provision includes within its coverage carrier affiliates engaged

in activities which are themselves railroad transportation or which

are rendered in connection with goods in the process of

transportation, and also carrier affiliates engaged in activities

which enable a railroad to perform its rail transportation.

In Adams v. Railroad Retirement Board. 214 F. 2d 534 (9th Cir.

1954), the Court held that the provision of "accounting services, 

the services of a purchasing department, * * * correspondence and

stenographic services *** bridge and building services, a safety

engineer and repairs for its automotive equipment and its general

rolling stock" by a carrier's affiliate were services in connection

with rail transportation so as to render the affiliate an employer

under the Acts. Adams, at 542. In Southern Development Co. v.

Railroad Retirement Board, 243 F. 2d 351 (8th Cir. 1957) , the Court,

at 355, held that a railroad affiliate which owned and operated an 

office building "almost exclusively for use by a railroad company

for ticket selling and general offices could reasonably be

considered [to be performing] a service connected with and

supportive of rail transportation" and was an employer under the

Acts .

More recently, the United States Court of Appeals for the Seventh

Circuit, in Livingston Rebuild Center, Inc. , v. Railroad Retirement

Board. 970 F.2d 295 (7th Cir. 1992), found that a company
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RailTex Service Company, Inc.

affiliated with a railroad carrier engaged in the business of

repairing and rebuilding railroad cars and engines and which

derived at least 25% of its revenue from its affiliated railroad

was performing a service in connection with transportation by rail. 

See also, Railroad Concrete Crosstie Corporation v. Railroad

Retirement Board. 709 F.2d 1401 (11th Cir. 1983).

Finally, section 202.7 of the Board's regulations (20 CFR 202.7) 

states that a service is in connection with rail transportation if

such service "is reasonably directly related, functionally or 

economically, to the performance of obligations which a company or 

person or companies or persons have undertaken as a common carrier

by railroad...."

Based on a review of the evidence of record, the Board's

regulations, and the various court decisions applying section

1(a) (1) (ii) of the Railroad Retirement Act, it is the determination

of the Board that the various consulting services being provided

are reasonably related to the fulfillment of the common carrier

obligations of its affiliated railroads and, therefore, that these

services are services in connection with the transportation of

passengers or property by railroad. Accordingly, it is the 

determination of the Board that RSCI is an employer under the Acts

as of the date it commenced opera

V. M. Speakman, Jr.