B.C.D. 01-13 JAN 2 4 2001

EMPLOYER STATUS DETERMINATION

KBN, Inc.

This is the determination of the Railroad Retirement Board concerning the status of

KBN, Inc., as an employer under the Railroad Retirement Act (45 U.S.C. § 231 et

sea.) and the Railroad Unemployment Insurance Act (45 U.S.C. § 351 et sea.).

Information regarding KBN was provided by Mr. Thomas F. McFarland, counsel for

KBN. On August 31, 2000, KBN acquired Minnesota Northern Railroad. Inc., and

St. Croix V7alley Railroad Company from RaiLAmerica, Inc. Minnesota Northern

Railroad and St. Croix Valley Railroad are employers under the Acts (B.A. numbers,

4648 and 2646, respectively). RaiLAmerica is not an employer under the Acts. Mr.

McFarland advises that KBN is strictly a holding company! that it has no

employees and provides no services to its subsidiary railroads.

Section l(a)(l) of the Railroad Retirement Act (45 U.S.C. § 231(a)(1)), insofar as 

relevant here, defines a covered employer as:

(i) any carrier by railroad subject to the jurisdiction of the

Surface Transportation Board under Part A of subtitle IV of title 49,

United States Code!

(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 (except trucking service,

casual service, and the casual operation of equipment or facilities) in

connection with the transportation of passengers or property by

railroad * * *.

Sections l(a) and l(b) of the Railroad Unemployment Insurance Act (45 U.S.C. §§

351(a) and (b)) contain substantially similar definitions, as does section 3231 of the

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

There is no evidence that KBN is an employer within the meaning of section

l(a)(l)(i) of the Railroad Retirement Act. Accordingly, we turn to section l(a)(l)(ii)

in order to determine whether KBN is an employer within the meaning of that

section. Under section l(a)(l)(ii), a company is a covered employer if it meets both 

of two criteria: if it provides "service in connection with" rail transportation and if it

is owned by or under common control with a rail carrier employer. If it fails to meet 

either criterion, it is not a covered employer within section l(a)(l)(ii).
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KBN, Inc.

In a decision regarding a claim for refund of taxes under the Railroad Retirement

Tax Act, the United States Court of Appeals for the Federal Circuit held that a

parent corporation which owns a rail carrier subsidiary is not under common

control with the subsidiary within the meaning of § 3231. Union Pacific

Corporation v. United States. 5 F.3d 523 (Fed. Cir. 1993). The facts regarding

common control in the Union Pacific case are indistinguishable from those

presented in the case of KBN, Inc. Accordingly, a majority of the Board, Labor

Member dissenting, finds that KBN, Inc. is not under common control with its rail

carrier subsidiaries.

Regardless of the finding of the majority on the issue of common control, however, 

the evidence of record is that KBN does not provide any services to its subsidiary

railroads. Accordingly, KBN does not meet the other essential criterion specified 

under section l(a)(l)(ii) for a non-carrier to be an employer. It is the determination

of the Board, Labor Member concurring in the result, that KBN is not an employer 

under the Railroad Retirement and Railroad Unemployment Insurance Acts.

V. M. Speakman, Jr. (Dissenting in

part; Concurring in part)