Opinion ID: 4192345
Heading Depth: 2
Heading Rank: 2

Heading: RRTA Tax Withholding

Text: In relation to Loos’s succesful FELA claim, BNSF cross-appeals the district court’s denial of its Rule 59(e) motion seeking to set off the amount of RRTA tax that it argues it is required to withhold and to remit from the portion of Loos’s recovery designated for lost wages. The district court denied the requested offset, determining that the income tax exclusion for personal-injury awards, see 26 U.S.C. § 104(a)(2), excepted the award for lost wages from RRTA taxation. We review for an abuse of discretion a district court’s denial of a Rule 59(e) motion to amend or alter the judgment. Avon State Bank v. BancInsure, Inc., 787 F.3d 952, 959 (8th Cir. 2015). However, “where the Rule 59(e) motion seeks review of a purely legal question,” id. at 959 n.3, “the district court abuses its discretion if it makes a legal error,” Am. Civil Liberties Union of Minn. v. Tarek ibn Ziyad Acad., 643 F.3d 1088, 1093 (8th Cir. 2011). The Railroad Retirement Act (“RRA”), 45 U.S.C. §§ 231-231v, is the railroadindustry equivalent to the Social Security Act (“SSA”) and provides retirement benefits funded by employment taxes collected under the RRTA, 26 U.S.C. §§ 320102, 3211-12, 3221, 3231-33, 3341; see Cowden v. BNSF Ry. Co., No. 4:08CV01534 ERW, 2014 WL 3096867, at  (E.D. Mo. July 7, 2014) (unpublished). The RRTA imposes two tiers of taxes, which are levied against both the employee and the employer based on the amount of the employee’s compensation. Cowden, 2014 WL 3096867, at . Tier 1 taxes “are analogous to taxes imposed on nonrailroad workers by the Federal Insurance Contributions Act (FICA).” Id. Tier 2 taxes provide benefits similar to a private multi-employer pension fund. Id. (citing Hance v. Norfolk S. Ry. Co., 571 F.3d 511, 522 (6th Cir. 2009)). Though closely related, the RRA and RRTA are administered by separate administrative agencies (the Railroad -14- Retirement Board (“RRB”) and the Internal Revenue Service (“IRS”), respectively), see id., and operate under separate regulations, compare 20 C.F.R. §§ 201-206, 20912, 216-22, 225-30, 232-38, 240, 243, 250, 255, 258-62, 266, 295 (implementing the RRA) with 26 C.F.R. §§ 31.3201-02, 31.3211-12, 31.3221, 31.3231 (implementing the RRTA). Both the RRA and the RRTA define the term “compensation.” See 45 U.S.C. § 231(h); 26 U.S.C. § 3231(e). The RRA defines “compensation” as “any form of money remuneration paid to an individual for services rendered as an employee to one or more employers . . . including remuneration paid for time lost as an employee.” 45 U.S.C. § 231(h)(1). The RRA defines “pay for time lost” as “the amount [the employee] is paid by an employer with respect to an identifiable period of absence from the active service of the employer, including absence on account of personal injury.” Id. § 231(h)(2). The RRB has interpreted that definition to encompass FELA judgment awards for lost wages and, thus, considers FELA judgment awards when calculating the employee’s benefits. See Railroad Retirement Board, Railroad Retirement Service Credits and Pay for Time Lost 2 (2011). The RRTA also defines “compensation” as “any form of money remuneration paid to an individual for services rendered as an employee to one or more employers” but does not expressly include pay for time lost. 26 U.S.C. § 3231(e)(1). The IRS interprets “compensation” under the RRTA as having “the same meaning as the term wages in [FICA] . . . except as specifically limited by the [RRTA] . . . or regulation.” 26 C.F.R. § 31.3231(e)–1(a)(1). The regulation further provides that “[t]he term compensation is not confined to amounts paid for active service, but includes amounts paid for an identifiable period during which the employee is absent from the active service of the employer . . . as well as pay for time lost.” Id. § 31.3231(e)–1(a)(3)-(4). Under this regulation, damages for lost wages fit well -15- within the definition of “compensation.” Loos challenges this interpretation of the RRTA. Under Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., we must first determine whether “Congress has directly spoken to the precise question at issue.” 467 U.S. 837, 842 (1984). If so, “that is the end of the matter: for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress.” Id. at 842-43. However, “if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency’s answer is based on a permissible construction of the statute.” Id. at 843. Although damages for lost wages are a “form of money remuneration paid to an individual,” the RRTA only considers such remuneration “compensation” if it is paid “for services rendered as an employee.” In cases interpreting FICA, the Supreme Court has defined this concept broadly to refer to “not only work actually done but the entire employer-employee relationship for which compensation is paid to the employee by the employer.” Social Sec. Bd. v. Nierotko, 327 U.S. 358, 365-66 (1946) (deeming the SSA to cover back pay); United States v. Quality Stores, Inc., 134 S. Ct. 1395, 1400 (2014) (relying on Neirotko to deem severance payments “wages” under FICA). However, we recently determined that the FICA definition cannot be imported into the RRTA because “instead of taxing payment for ‘services,’ the FICA taxes payment for ‘employment,’ which is defined broadly . . . .” Union Pac. R.R. Co. v. United States, No. 16-3574, slip op. at 12 (8th Cir. Aug. 1, 2017) (citing 26 U.S.C. § 3121(b)). Accordingly, we cannot rely upon cases interpreting the language of FICA to expand the RRTA’s definition of “services rendered” to encompass the entire employee-employer relationship generally. Id. Under the RRTA’s plain text, damages for lost wages are not remuneration “for services rendered.” Damages for lost wages are, by definition, remuneration for a -16- period of time during which the employee did not actually render any services. Instead, the damages compensate the employee for wages the employee should have earned had he been able to render services. Unlike FICA, the plain language of the RRTA refers to services that an employee actually renders, not to services that the employee would have rendered but could not. See 26 U.S.C. § 3231(e)(1); see also id. § 3231(d) (defining “service”). Thus, damages for lost wages do not fit within the plain meaning of the RRTA. On the other hand, BNSF and the Government contend that the RRA and RRTA are in pari materia, and, thus, we should read the RRA definition of “compensation” into the RRTA. The RRA and RRTA, they argue, accomplish a unified purpose: the RRA provides benefits, while the RRTA funds them. Thus, because the RRA expressly considers pay for time lost in calculating benefits, it makes sense that the RRTA would tax pay for time lost to pay for those benefits. See Phillips v. Chi. Cent. & Pac. R.R. Co., 853 N.W.2d 636, 649 (Iowa 2014); accord Liberatore v. Monongahela Ry. Co., 140 A.3d 16, 29 (Sup. Ct. Pa. Apr. 7, 2016) (considering the RRA and RRTA in pari materia). However, “[g]iven these linguistic differences, the question here is not whether identical or similar words should be read in pari materia to mean the same thing. Rather, the question is whether Congress intended its different words to make a legal difference.” See Burlington N. & Santa Fe Ry. Co. v. White, 548 U.S. 53, 62-63 (2006). That Congress expressly included pay for time lost in the RRA’s definition of “compensation” yet omitted it from the RRTA’s definition of “compensation” suggests that Congress did not intend the RRTA to include pay for time lost. The history of the RRTA confirms that this difference is intentional. Prior to 1975, the RRTA’s definition of “compensation” expressly included “pay for time lost,” using language and structure identical to that of the RRA: -17- (1) The term “compensation” means any form of money remuneration earned by an individual for services rendered as an employee to one or more employers, or as an employee representative, including remuneration paid for time lost as an employee, but remuneration paid for time lost shall be deemed earned in the month in which such time is lost . . . . (2) A payment made by an employer to an individual through the employer’s payroll shall be presumed, in the absence of evidence to the contrary, to be compensation for service rendered by such individual as an employee of the employer in the period with respect to which the payment is made. An employee shall be deemed to be paid “for time lost” the amount he is paid by an employer with respect to an identifiable period of absence from the active service of the employer, including absence on account of personal injury, and the amount he is paid by the employer for loss of earnings resulting from his displacement to a less remunerative position or occupation. If a payment is made by an employer with respect to a personal injury and includes pay for time lost, the total payment shall be deemed to be paid for time lost unless, at the time of payment, a part of such payment is specifically apportioned to factors other than time lost, in which event only such part of the payment as is not so apportioned shall be deemed to be paid for time lost. 26 U.S.C. § 3231(e)(1), (2) (1970) (emphasis added). In 1975, Congress amended the RRTA to remove the express inclusion of “pay for time lost” within the definition of “compensation” in § 3231(e)(1), but it retained the definition of “pay for time lost” in § 3231(e)(2). Cowden, 2014 WL 3096867, at -6. In 1983, Congress further amended section 3231(e) to “remove[] all language addressing payments for time lost and for personal injury.” Id. at . Thus, “[i]t is beyond dispute that the plain language of the RRTA once provided for payments for time lost on account of personal injury, but no longer does.” Phillips, 853 N.W.2d at 647. -18- While BNSF and the Government’s argument that the RRTA should tax what the RRA uses to calculate benefits makes sense as a statutory scheme, this was expressly the statutory scheme that existed before the 1983 amendments. We are not convinced that we should import from the RRA the very language Congress eliminated from the RRTA. While “under the in pari materia canon of statutory construction, statutes addressing the same subject matter generally should be read as if they were one law,” Wachovia Bank v. Schmidt, 546 U.S. 303, 315-16 (2006) (quotation omitted), the relationship between the RRTA and the RRA does not require it, see Hisquierdo v. Hisquierdo, 439 U.S. 572, 575 (1979) (explaining that RRTA “taxes paid by and on behalf of an employee do not necessarily correlate with the benefits to which the employee may be entitled” under the RRA). Therefore, we conclude that we should not read the RRTA and the RRA in pari materia and that it is inappropriate to import the RRA’s definition of “compensation” into the RRTA. Accordingly, we conclude that the RRTA is unambiguous and does not include damages for lost wages within the definition of “compensation.” Therefore, the regulations providing to the contrary receive no deference under Chevron, because “the agency[] must give effect to the unambiguously expressed intent of Congress.”11 467 U.S. at 842-43. Because we affirm the district court’s decision on this alternate basis, we need not consider whether it was correct that 26 U.S.C. § 104(a)(2) applies to the RRTA. 11 We give no consideration to Revenue Ruling 85-97, 1985-2 C.B. 5, 1985 WL 287177 (1985), or Revenue Ruling 61-1, 1961-1 C.B. 14, 1996 WL 12630 (Jan. 1961), because neither revenue ruling is directly on point, and neither takes account of the 1983 amendments. -19-