B.C.D. 02-48

Employer Status Determination JUL 0 Z 2002

RailTex, Inc.

StatesRail, Inc.

This is the decision ofthe Railroad Retirement Board regarding the status of

RailTex, Inc., and StatesRail, Inc., as employers under the Railroad Retirement and

Railroad Unemployment Insurance Acts.

In a decision by the Board dated December 19, 1997, the Board held that

StatesRail was not an employer under the Acts because it was not under common

control with its rail affiliates, for which it was a holding company (B.C.D. No. 98­

1). In a decision dated February 17, 1995, RailTex was also held not to be an

employer under the Acts (B.C.D. 95-25) for the same reason.

RailAmerica, Inc. acquired StatesRail and RailTex on January 4, 2002, and

February 4, 2000, respectively. RailAmerica is not a covered employer under the

Acts but is the parent company of a number ofrail carriers1 * * * * * .

RailAmerica advises that neither StatesRail nor RailTex has employees and that 

StatesRail provides no services. RailTex leases rail equipment that it subleases to

its rail affiliates. RailAmerica contends that this subleasing does not constitute a

service: “This is not sendee; it is an accounting pass through that avoids having

either multiple equipment leases for each involved railroad or multiple party

equipment leases.”

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

relevant here, defines a covered employer as:

1 As ofMay 2000: Cascade & Columbia River Railroad (B.A. No. 3671); Dakota Rail, Inc. (B.A. No. 3640);

Delaware Valley Railway Company (B.A. No. 3384): Huron & Eastern Railroad Company (B.A. No. 3267);

Minnesota Northern Railroad, Inc. (B.A. No.4648); Otter Tail Valley Railroad, Inc. (B.A. No. 3654); Plainview

Terminal Company (B.A. No. 4863); Rail Operating Support Group, Inc. (B.A. No. 9533); Saginaw Valley Railway

Company (B.A. No. 3282); South Central Tennessee Railroad Company, Inc. (B.A. 5561); St. Croix Valley Railroad

Company (B.A. No. 2646); Ventura County' Railroad Company (B.A. No. 2786); and West Texas & Lubbock

Railroad Company, Inc. (B.A. No. 2871).

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

the Surface Transportation Board under Part A of

subtitle IV7 of title 49, United States Code;
RailTex, Inc.

StatesRail, Inc.

-2-

(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) ofthis 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 1(a) and 1(b) ofthe Railroad Unemployment Insurance Act (45 U.S.C. §§

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

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

Since they are now owned by RailAmerica, which is also the parent company of a

number ofrail carrier employers, the Board finds that both StatesRail and RailTex

are under common control with rail carriers. RailAmerica advises that StatesRail 

provides no services. Accordingly, the Board finds that StatesRail is not an

employer under the Acts.

RailTex, however, leases rail equipment, both locomotives and rolling stock that 

are subleased to and used by railroads within the corporate group. A majority of

the Board finds that the obtaining ofrail equipment for rail carriers constitutes 

service in connection with rail transportation. Even ifthe only purpose of

RailTex’s leases is one of convenience through consolidation of leases, a majority

ofthe Board finds that fulfillment ofthat purpose would constitute service in

connection with rail transportation. The Management Member dissents from the 

finding that RailTex provides service in connection with rail transportation because

leasing is not a sendee in connection with rail transportation under the decision in

Itel Corporation v. U, S. Railroad Retirement Board. 710 F.2d 1243 (7th Cir. 1983).
RailTex, Inc.

StatesRail. Inc.

Accordingly, it is the determination of a majority of the Board that RailTex

became an employer covered under the Acts effective as ofthe date ofits

acquisition by RailAmerica, February 4, 2000.

V. M. Speakman, Jr.

drome F. Kever (Dissenting in part)