Earlier this month, the Eight Circuit Court of Appeals overturned the lower court’s decision in a case that involved a dispute over whether the Railroad Retirement Tax Act (RRTA) requires a railroad to pay taxes upon issuing stock as compensation to employees.

In an opinion mirroring, and even explicitly referencing, the textualist sentiment of Justice Gorsuch’s opinion in Hensen v. Santander, the Eight Circuit addressed the parties’ respective positions as to what the words “money” and “compensation” mean in the context of the RRTA. While the federal government argued that “money” has a broad and sometimes intangible meaning, Union Pacific maintained that “money” must refer to a “medium of exchange” – i.e., something tangible and of value that may be given in exchange for goods or services. The Eighth Circuit found Union Pacific’s reading of the text to be more compelling than the government’s.

In its discussion, the Court further distinguished the RRTA from FICA, which includes a more all-encompassing definition for compensation subject to taxation. The Court explained that, since the RRTA and FICA’s predecessor were drafted during the same time period, any difference or distinction between each law’s definition of compensation must have been intentional.

It is certainly worth noting that the Eighth Circuit referenced and rejected a recent holding by the Seventh Circuit in Wisconsin Cent Holding v. United States that stock may be considered “money remuneration” that is tantamount to cash, reasoning that “one cannot pay for produce at the local grocery store with stock.”

The Eighth Circuit also reversed the lower court’s decision concerning ratification payments made pursuant to a union’s collective bargaining agreements, because those payments were not made pursuant to “employment” of the individual by Union Pacific.

With that, the Eighth Circuit completely reversed the summary judgment rulings previously entered in favor of the United States and against Union Pacific, thus entitling Union Pacific to a $75 million refund for taxes paid over the course of 10 years on stock compensation and ratification payments.

The full text of the Eight Circuit’s opinion is available here.