Railroad Employee Argues Lost Wages Are Not Taxable Under RRTA

BNSF RAILWAY COMPANY,
Petitioner,
v.
MICHAEL D. LOOS,
Respondent.

IN THE
Supreme Court of the United States

On Writ of Certiorari
to the United States Court of Appeals
for the Eighth Circuit

BRIEF FOR RESPONDENT

MICHAEL A. WOLFF
JEROME J. SCHLICHTER
NELSON G. WOLFF
SCHLICHTER BOGARD & DENTON LLP
100 South Fourth Street
Suite 1200
St. Louis, Missouri 63102
(314) 621-6115

MICHAEL F. TELLO
TELLO LAW FIRM
2150 Third Avenue North
Suite 10
Anoka, Minnesota 55303
(612) 427-0159

DAVID C. FREDERICK
Counsel of Record
BRENDAN J. CRIMMINS
DANIEL S. SEVERSON
KELLOGG, HANSEN, TODD, FIGEL & FREDERICK, P.L.L.C.
1615 M Street, N.W.
Suite 400
Washington, D.C. 20036
(202) 326-7900
(dfrederick@kellogghansen.com)

DAVID M. BURKE
5188 Glen Meadow Drive
Centreville, Virginia 20120
(703) 424-5752

September 10, 2018

QUESTION PRESENTED

Whether the satisfaction of a judgment under the Federal Employers' Liability Act that includes an award of lost wages is subject to taxation under the Railroad Retirement Tax Act.

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TABLE OF CONTENTS

QUESTION PRESENTED

TABLE OF AUTHORITIES

GLOSSARY

INTRODUCTION

STATEMENT

SUMMARY OF ARGUMENT

ARGUMENT

CONCLUSION

STATUTORY ADDENDUM

TABLE OF AUTHORITIES

CASES

Advocate Health Care Network v. Stapleton, 137 S. Ct. 1652 (2017)

Alaska v. Federal Subsistence Bd., 544 F.3d 1089 (9th Cir. 2008)

Alton R.R. Co. v. Railroad Ret. Bd.,16 F.Supp. 955 (D.D.C. 1936)

Anderson v. United States, 929 F.2d 648 (Fed. Cir. 1991)

Bowen v. Georgetown Univ. Hosp., 488 U.S. 204 (1988)

Bowen v. Massachusetts, 487 U.S. 879 (1988)

Bowers v. Kerbaugh-Empire Co., 271 U.S. 170 (1926)

Branch v. Smith, 538 U.S. 254 (2003)

Burgess v. United States, 553 U.S. 124 (2008)

Burlington N. & S.F. Ry. Co. v. White, 548 U.S. 53 (2006)

Carcieri v. Salazar, 555 U.S. 379 (2009)

Central Illinois Pub. Serv. Co. v. United States, 435 U.S. 21 (1978)

Chesapeake & O. Ry. Co. v. United States, 571 F.2d 1190 (D.C. Cir. 1977)

Chevron U.S.A. Inc. v. Echazabal, 536 U.S. 73 (2002)

Chevron U.S.A. Inc. v. Natural Res. Council, Inc., 467 U.S. 837 (1984)

Chicago & N.W. Ry. Co. v. United Transp. Union, 402 U.S. 570 (1971)

Christensen v. Harris Cty., 529 U.S. 576 (2000)

Christopher v. SmithKline Beecham Corp., 567 U.S. 142 (2012)

Commissioner v. Schleier, 515 U.S. 323 (1995)

Consolidated Rail Corp. v. Gottshall, 512 U.S. 532 (1994)

CSX Transp., Inc. v., McBride, 564 U.S. 685 (2011)

Dodd v. United States, 545 U.S. 353 (2005)

Dotson v. United States, 87 F.3d 682 (5th Cir. 1996)

Elgin v. Department of Treasury, 567 U.S. 1 (2012)

Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612 (2018)

Erlenbaugh v. United States, 409 U.S. 239 (1972)

Federal Land Bank of St. Paul v. Bismarck Lumber Co., 314 U.S. 95 (1941)

Gerbec v. United States, 164 F.3d 1015 (6th Cir. 1999)

Groman v. Commissioner, 302 U.S. 82 (1937)

Hilton v. South Carolina Pub. Rys. Comm'n, 502 U.S. 197 (1991)

Hisquierdo v. Hisquierdo, 439 U.S. 572 (1979)

Iselin v. United States, 270 U.S. 245 (1926)

Jones & Laughlin Steel Corp. v. Pfeifer, 462 U.S. 523 (1983)

Kellogg Brown & Root Servs. v. United States, 135 S. Ct. 1970 (2015)

Lozano v. Montoya Alvarez, 572 U.S. 1 (2014)

Meese v. Keene, 481 U.S. 465 (1987)

Michigan v. EPA, 135 S. Ct. 2699 (2015)

Montello Salt Co. v. Utah, 221 U.S. 452 (1911)

New York Cent. R.R. Co. v. Winfield, 244 U.S. 147 (1917)

Nielsen v. BNSF Ry. Co., No. 0807-10580, 2012 WL 12526344 (Or. Cir. Ct., Multnomah Cty., Mar. 5, 2012)

NLRB v. Great Dane Trailers, Inc., 388 U.S. 26 (1967)

Norfolk & W. Ry. Co. v. Liepelt, 444 U.S. 490 (1980)

O'Gilvie v. United States, 519 U.S. 79 (1996)

P.C. Pfeiffer Co. v. Ford, 444 U.S. 69 (1979)

Pollock v. Farmers' Loan & Trust Co., 158 U.S. 601 (1895)

Posadas v. National City Bank of New York, 296 U.S. 497 (1936)

Railroad Ret. Bd. v. Alton R.R. Co., 295 U.S. 330 (1935)

Rapanos v. United States, 547 U.S. 715 (2006)

Redfield v. Insurance Co. of N. Am., 940 F.2d 542 (9th Cir. 1991)

Reiche v. Smythe, 80 U.S. (13 Wall.) 162 (1872)

Reiter v. Sonotone Corp., 442 U.S. 330 (1979)

Rowan Cos. v. United States, 452 U.S. 247 (1981)

Skidmore v. Swift & Co., 323 U.S. 134 (1944)

Social Sec. Bd. v. Nierotko, 327 U.S. 358 (1946)

Sosa v. Alvarez-Machain, 542 U.S. 692 (2004)

Stone v. INS, 514 U.S. 386 (1995)

Union Pac. R.R. Co. v. United States, 865 F.3d 1045 (8th Cir. 2017), cert. denied, 138 S. Ct. 2709 (2018)

United Sav. Ass'n of Texas v. Timbers of Inwood Forest Assocs., Ltd., 484 U.S. 365 (1988)

United States v. Bess, 357 U.S. 51 (1958)

United States v. Cleveland Indians Baseball Co., 532 U.S. 200 (2001)

United States v. Pierce, 147 F. 199 (2d Cir. 1906)

United States v. Quality Stores, Inc., 134 S. Ct. 1395 (2014)

United States v. Riverside Bayview Homes, Inc., 474 U.S. 121 (1985)

United States v. Stewart, 311 U.S. 60 (1940)

West Virginia Univ. Hosps., Inc. v. Casey, 499 U.S. 83 (1991)

Wisconsin Cent. Ltd. v. United States, 138 S. Ct. 2067 (2018)

STATUTES AND REGULATIONS

Act of Aug. 29, 1935, ch. 813, 49 Stat. 974

Act of July 31, 1946, ch. 709, 60 Stat. 722

Act of Aug. 9, 1975, Pub. L. No. 94-92, § 201, 89 Stat. 461, 464-65

Act of Aug. 9, 1975, Pub. L. No. 94-93, § 204, 89 Stat. 466, 466

Carriers Taxing Act of 1937, ch. 405, 50 Stat. 435

Civil Service Reform Act of 1978, 5 U.S.C. § 7703(b)(2)

Clean Water Act, 33 U.S.C. § 1251 et seq.

False Claims Act, 31 U.S.C. § 3729 et seq.

Federal Employers' Liability Act, 45 U.S.C.

Federal Insurance Contributions Act, 26 U.S.C.

    § 3101 et seq.

Internal Revenue Code (26 U.S.C.):

Internal Revenue Code of 1954, ch. 736, § 3201, 68A Stat. 1, 431

Longshore and Harbor Workers' Compensation Act, 33 U.S.C. § 901 et seq.

Railroad Retirement Act, ch. 868, 48 Stat. 1283 (1934)

Railroad Retirement Act, 45 U.S.C. §§ 231-231v

Railroad Retirement Act of 1935, ch. 812, 49 Stat. 967

Railroad Retirement Revenue Act of 1983, Pub. L. No. 98-76, tit. II, 97 Stat. 411, 419

Railroad Retirement Tax Act, 26 U.S.C. § 3201 et seq.

Railroad Unemployment Insurance Act, 45 U.S.C.

Revenue Act of 1916, ch. 463, 39 Stat. 756

Revenue Act of 1918, ch. 18, 40 Stat. 1057 (1919)

Revenue Act of 1928, ch. 852, 45 Stat. 791

Social Security Act, 42 U.S.C. § 301 et seq.

2 U.S.C. § 1301(4)

18 U.S.C. § 1952

18 U.S.C. § 1953

29 U.S.C. § 1002(10)

42 U.S.C. § 6903(23)

Minn. Stat. § 176.011(9)

26 C.F.R.:

ADMINISTRATIVE MATERIALS

Definition of Compensation for Purposes of the Railroad Retirement Tax Act, 44 Fed. Reg. 15,484 (Mar. 14, 1979)

Internal Revenue Service:

Republication of Regulations, 25 Fed. Reg. 13,032 (Dec. 20, 1960)

U.S. Railroad Retirement Bd., 2018 Annual Report, https://rrb.gov/sites/default/files/2018-08/2018_Annual_Report.pdf

LEGISLATIVE MATERIALS

138 Cong. Rec. (1992):

H.R. Rep. No. 75-1071 (1937)

Railroad Retirement:Hearings on H.R. 1362 Before the H. Comm. on Interstate and Foreign Commerce, 79th Cong. (1945):

S. Rep. No. 75-818 (1937)

S. Rep. No. 79-1710, pt. 2 (1946)

OTHER MATERIALS

C. Martin Alsager, Dictionary of Business Terms (1932)

Black's Law Dictionary (3d ed. 1933)

New Century Dictionary of the English Language (1934):

Oxford English Dictionary (1st ed. 1933):

David B. Schreiber, The Legislative History of the Railroad Retirement and Railroad Unemployment Insurance Systems (1978)

2A Norman J. Singer, Statutes and Statutory Construction (6th rev. ed. 2000)

Social Security Bd. Br., Social Sec. Bd. v. Nierotko, 327 U.S. 358 (1946) (No. 318) (U.S. filed Dec. 6, 1945), 1945 WL 48899

Frederick Stroud, Judicial Dictionary (2d ed. 1903):

Webster's New International Dictionary (2d ed. 1937)

Kevin Whitman, An Overview of the Railroad Retirement Program, 68 Soc. Sec. Bull. No. 2 (2008), available at https://www.ssa.gov/policy/docs/ssb/v68n2/v68n2p41.html

GLOSSARY

1918 Revenue Act	Revenue Act of 1918, ch. 18, 40 Stat. 1057 (1919)
1934 RRA	Railroad Retirement Act, ch. 868, 48 Stat. 1283 (1934)
1935 Act	Act of Aug. 29, 1935, ch. 813, 49 Stat. 974
1937 Act	Carriers Taxing Act of 1937, ch. 405, 50 Stat. 435
1946 Act	Act of July 31, 1946, ch. 709, 60 Stat. 722
AAR	American Association of Railroads
AAR Statement	Statement of Sidney S. Alderman, General Solicitor, Southern Railway, on Behalf of the Association of American Railroads, Railroad Retirement: Hearings on H.R. 1362 Before the H. Comm. on Interstate and Foreign Commerce, 79th Cong., pt. 2, at 563 (1945)
Board	Railroad Retirement Board
Code	Internal Revenue Code (26 U.S.C.)
FELA	Federal Employers' Liability Act
IRS	Internal Revenue Service
Latimer Statement	Statement of Murray W. Latimer, Chairman, Railroad Retirement Board, Railroad Retirement: Hearings on H.R. 1362 Before the H. Comm. on Interstate and Foreign Commerce, 79th Cong., pt. 1, at 31 (1945)
LHWCA	Longshore and Harbor Workers' Compensation Act
RRA	Railroad Retirement Act
RRTA	Railroad Retirement Tax Act
RUIA	Railroad Unemployment Insurance Act
Schreiber	David B. Schreiber, The Legislative History of the Railroad Retirement and Railroad Unemployment Insurance Systems (1978)
SSA	Social Security Act
Washington Agreement	Washington Job Protection Agreement (1936) (reproduced at Chesapeake & O. Ry. Co. v. United States, 571 F.2d 1190, 1206-12 (D.C. Cir. 1977) (Appendix))

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INTRODUCTION

Under the plain language of the Railroad Retirement Tax Act (“RRTA”), satisfaction of a judgment under the Federal Employers' Liability Act (“FELA”) is not taxable for the plaintiff. Tort damages do not fall within the RRTA's definition of taxable compensation — they are not remuneration “for services rendered.” Damages are paid for breach of a legal duty, not for services rendered. In satisfying a FELA judgment, a railroad pays an injured worker damages for its negligence, not remuneration for services the worker rendered. The Eighth Circuit properly construed the RRTA in concluding that petitioner's satisfaction of respondent's FELA judgment is not taxable under that statute.

Petitioner's argument (at 18) that the RRTA's text is “not so plain” is unavailing. Petitioner and the government seek to define “compensation” in the RRTA by resorting to a range of other statutes and cases, when the most direct path to understanding Congress's intent is in the RRTA's plain language.

Another basis to affirm the Eighth Circuit's judgment is the district court's correct determination that the Internal Revenue Code's general exemption for personal-injury damages awards from “income” also applies to this case. Since 1919, such awards generally have been exempt from income tax, and there is no indication Congress impliedly repealed that general rule for the RRTA's tax “imposed on income.” In the thousands of FELA cases that have gone to judgment in the past century, petitioner and its amici point to no situation in which the Internal Revenue Service (“IRS”) imposed RRTA taxes on a FELA damages judgment. Decades of experience confirm the result Congress intended.

STATEMENT

A. Statutory Background

This case involves the interrelationship of multiple statutory schemes: the RRTA imposes taxes to help fund retirement benefits for railroad workers; the Railroad Retirement Act (“RRA”) governs those benefits; the Federal Insurance Contributions Act (“FICA”) funds Social Security benefits for non-railroad workers; Internal Revenue Code § 104(a)(2) generally excludes personal-injury recoveries from income taxation; and FELA enables railroad workers to recover for injuries caused by their employers' negligence.

RRTA. As early as 1875, railroads developed private pension schemes, and by 1927 those plans covered as many as three-fourths of all railroad workers. See David B. Schreiber, The Legislative History of the Railroad Retirement and Railroad Unemployment Insurance Systems 1 (1978) (“Schreiber”). Those private pensions, however, were “generally inadequate, liable to capricious termination, and of little assistance to disabled employees”; and the Great Depression soon pushed them into “a state of crisis,” prompting Congress to design a federal pension system for retired and disabled railroad workers. Kevin Whitman, An Overview of the Railroad Retirement Program, 68 Soc. Sec. Bull. No. 2, at 41 (2008).

After the Railroad Retirement Act, ch. 868, 48 Stat. 1283 (1934) (“1934 RRA”), was declared unconstitutional in Railroad Retirement Board v. Alton Railroad Co., 295 U.S. 330 (1935), Congress enacted separate taxing and benefits statutes.¹ Although a federal district court enjoined enforcement of the tax statute, see Alton R.R. Co. v. Railroad Ret. Bd., 16 F. Supp. 955 (D.D.C. 1936), the Railroad Retirement Board (“Board”) began awarding annuities under the benefits statute. See Schreiber at 16-17. In 1936, the railroads and unions signed the Washington Job Protection Agreement (“Washington Agreement”), which provided protections for workers adversely affected by consolidation in the industry, including payments to workers deprived of employment or displaced to lower-paying positions. See Chesapeake & O. Ry. Co. v. United States, 571 F.2d 1190, 1206-12 (D.C. Cir. 1977) (reproducing agreement).

In 1937, pending appeal of the 1936 Alton decision, railroad management and unions reached a compromise agreement on the pension system, which became the basis for a revised version of the taxing and benefits statutes. The taxing bill was known as the Carriers Taxing Act of 1937, ch. 405, 50 Stat. 435 (“1937 Act”). In 1939, Congress incorporated that Act into the Internal Revenue Code and, in 1946, renamed it the RRTA.

The basic structure of the RRTA as enacted in 1937 remains in place today. Employers and employees each pay RRTA taxes. Employers pay “an excise tax” based on “compensation paid during any calendar year by such employer for services rendered to such employer.” 26 U.S.C. § 3221(a). The employee's tax is “imposed on the income of each employee.” Id. § 3201(a).

An “employee” under the RRTA is an “individual in the service of” an employer for “compensation.” Id. § 3231(b). An employee is in the “service” of an employer when he is “subject to the continuing authority of the employer to supervise and direct the manner of rendition of his service” and “he renders such service for compensation.” Id. § 3231(d)(1)-(2).

In the RRTA, Congress used the term “compensation” to define the tax base — what is subject to taxation. Specifically, the RRTA provides in pertinent part that “there is hereby imposed on the income of each employee a tax equal to [a specified] percentage of the compensation received during any calendar year by such employee for services rendered by such employee.” Id. § 3201(a)-(b). The RRTA defines “compensation” as “any form of money remuneration paid to an individual for services rendered as an employee to one or more employers.” Id. § 3231(e).

RRA. The RRA provides a pension system to railroad employees, 45 U.S.C. §§ 231-231v, which the Board administers, id. § 231f. Benefits are provided in two tiers. See Hisquierdo v. Hisquierdo, 439 U.S. 572, 574-75 (1979). Tier 1 benefits are equivalent to Social Security benefits. 45 U.S.C. § 231b(a). Tier 2 benefits are “like a private pension” and “tied to earnings and career service.” Hisquierdo, 439 U.S. at 574. The amount of Tier 2 benefits an employee receives is based on “years of service” and the average of the employee's highest 60 months of creditable “compensation.” 45 U.S.C. § 231b(b). “[Y]ears of service” means in pertinent part “the number of years an individual as an employee shall have rendered service to one or more employers for compensation or received remuneration for time lost.” Id. § 231(f)(1). Under the RRA, “compensation” means “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.” Id. § 231(h)(1).

FICA. “The same Congress that enacted the [RRTA] enacted a companion statute, [FICA], to fund social security pensions for employees in other industries.” Wisconsin Cent. Ltd. v. United States, 138 S. Ct. 2067, 2071 (2018). FICA and the RRTA share the same basic structure, but with different tax bases. Under FICA, employers also pay “an excise tax.” 26 U.S.C. § 3111(a). For employees, FICA taxes are “imposed on the income of every individual.” Id. § 3101(a).

The amount of the FICA tax on employee income is based on a percentage of “the wages (as defined in section 3121(a)) received by the individual with respect to employment.” Id. Congress defined the tax base for FICA (“wages”) differently from the tax base for the RRTA (“compensation”). FICA “wages” are defined in pertinent part as “all remuneration for employment, including the cash value of all remuneration (including benefits) paid in any medium other than cash.” Id. § 3121(a).

In 1992, legislation proposing to synchronize RRTA “compensation” with FICA “wages” was introduced. See 138 Cong. Rec. 2101-02 (1992). Congress did not adopt that proposal and has kept the respective taxbase definitions separate and distinct. See 26 U.S.C. § 3231(e)(2)(C) (incorporating FICA provision relating to successor employers into RRTA but substituting RRTA definitional terms).

§ 104(a)(2). Internal Revenue Code § 104(a)(2) excludes from gross income “the amount of any damages (other than punitive damages) received (whether by suit or agreement and whether as lump sums or as periodic payments) on account of personal physical injuries or physical sickness.” 26 U.S.C. § 104(a)(2). A version of that provision has remained in effect since the Revenue Act of 1918, ch. 18, § 213(b)(6), 40 Stat. 1057, 1066 (1919) (“1918 Revenue Act”). The § 104(a)(2) exclusion is not limited to damages for medical expenses or pain and suffering: “It also excludes from taxation those damages that substitute . . . for lost wages, which would have been taxed had the victim earned them.” O'Gilvie v. United States, 519 U.S. 79, 86 (1996). Juries are instructed not to consider federal or state income taxes in awarding damages. See Norfolk & W. Ry. Co. v. Liepelt, 444 U.S. 490, 496 (1980).

FELA. Enacted in 1908, FELA makes a railroad liable for negligently causing an employee's injuries. 45 U.S.C. §§ 51-60; see CSX Transp., Inc. v. McBride, 564 U.S. 685, 688 (2011). Congress sought to give railroads a compelling financial reason to provide a safe workplace. See Consolidated Rail Corp. v. Gottshall, 512 U.S. 532, 542 (1994) (“FELA was designed to put on the railroad industry some of the cost for the legs, eyes, arms, and lives which it consumed in its operations”). Congress passed FELA before the widespread adoption of workers' compensation schemes, and many States continue to exclude railroad employees from workers' compensation coverage “on the assumption that FELA provides adequate protection.” Hilton v. South Carolina Pub. Rys. Comm'n, 502 U.S. 197, 202 (1991). Because of the dangers of railroad work, railroads have faced many thousands of FELA cases. Pet. 22. During the 80-year coexistence of FELA and the RRTA, neither petitioner nor amici point to any instance in which the IRS has imposed RRTA taxes on payment in satisfaction of a FELA judgment.

No Treasury regulation expressly states that satisfaction of FELA judgments are subject to RRTA taxation. Instead, the IRS “has consistently held that compensatory damages, including lost wages, received on account of a personal physical injury are excludable from gross income with the exception of punitive damages” and that “[t]here is general agreement that to the extent damages are excludable from gross income, they are not subject to employment taxes.” Lawsuits, Awards, and Settlements Audit Techniques Guide 8, 14 (May 2011);² see also IRS, Memorandum from the Office of Chief Counsel at 8 (Oct. 22, 2008) (“Amounts excludable from gross income under § 104(a)(2) . . . are not wages for FICA and income tax withholding purposes.”);³ IRS P.L.R. 200303003, at 4 (Jan. 17, 2003) (“There is general agreement that to the extent damages are excludable from gross income under section 104(a)(2), they are not subject to employment taxes.”).⁴

B. “Compensation” Under The RRTA

The RRTA consistently has taxed employee “income,” with the tax base being a specified “percentage” of the defined term “compensation.” 26 U.S.C. § 3201(a). The RRTA's definition of “compensation” has changed over the years, however.

The RRTA's earliest predecessor statute from 1934 used “compensation” without defining the term. See 1934 RRA § 1, 48 Stat. 1283-84. The 1935 taxing statute defined compensation as “any form of money remuneration for active service, received by an employee from a carrier.” 1935 Act § 1(d), 49 Stat. 974.

1937 Taxing Statute. In the revised Carriers Taxing Act of 1937, Congress defined “compensation” as

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.

§ 1(e), 50 Stat. 436.

The 1937 Act intended to “make[ ] it clear that what is significant is that compensation has been earned by the employee, not that it has been actually received by him,” and “that compensation received by an employee in respect of months during which he was ill or on vacation is to be included in the compensation of the employee's tax liability.” S. Rep. No. 75-818, at 4 (1937); accord H.R. Rep. No. 75-1071, at 5-6 (1937) (same).

1946 Omnibus Amendments. In 1946, Congress substantially revised the RRTA, the RRA, and the Railroad Unemployment Insurance Act (“RUIA”). See Act of July 31, 1946, ch. 709, 60 Stat. 722 (“1946 Act”).⁵ Congress amended the RRTA's definition of taxable compensation to add the following:

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.

§ 3(f), 60 Stat. 725. Congress made the same change to the RRA, thus giving employees a boost toward achieving their months of creditable compensation for an RRA annuity. § 2, 60 Stat. 722.

Those RRTA and RRA amendments expanded the scope of the term “time lost” in two ways. First, they applied “time lost” to include not just payments to workers deprived of employment as a result of railroad mergers,⁶ but also payments for displacement to a less remunerative position under the 1936 Washington Agreement. See Chesapeake, 571 F.2d at 1208-09 (Appendix). The new definition of compensation clarified that “remuneration paid for time lost as an employee” also included a “displacement allowance” under the Washington Agreement — that is, “the amount he is paid by the employer for loss of earnings resulting from his displacement to a less remunerative position or occupation.” 1946 Act §§ 2, 3(f), 60 Stat. 722, 725 (emphasis added).

Second, the amendments expanded “time lost” payments to include payments for “absence on account of personal injury.” Id. That language “provide[d] for crediting pay for time lost on account of personal injuries even though the pay is included in a general settlement.” S. Rep. No. 79-1710, pt. 2, at 7-8 (1946) (emphasis added). The change “was necessary because the railroads were unwilling to make such payments subject to the provisions of the taxing act.” Schreiber at 53. Indeed, the American Association of Railroads (“AAR”) vociferously opposed the change, arguing that personal-injury settlements did not fall within either “remuneration for services rendered” or the concept of “pay for time lost.” See AAR Statement at 574-75 (“But when I pay an injured employee for a lost arm, I am settling a legal liability for his injury. I am paying him for his lost arm, not for his lost time. It is not remuneration for either services or for lost time, but it is compensation for injury and loss of the member and for loss of earning capacity. It clearly is not creditable or taxable compensation under these acts.”).

The amendments also created a default presumption to allocate an entire settlement payment to time lost, thereby increasing an employee's creditable compensation. See 1946 Act §§ 2, 3(f), 60 Stat. 722, 725. The railroads objected to that provision as well, arguing that “[i]t deliberately seeks to convert a personal-injury settlement into a lost-time settlement, when lost time is only one of the many elements or factors entering into the estimation of such settlements.” AAR Statement at 576.

The legislative history to the 1946 amendments repeatedly stated that “pay for time lost” in the personal-injury context refers to settlements of personal-injury claims.⁷ Our research found no reference in that legislative history to taxes being paid or owed on the satisfaction of FELA judgments.

1975 and 1983 Amendments. After further amendments, by 1970, the RRTA's definition of compensation mirrored the RRA's definition and read as follows:

(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) (emphases added).

In 1975, Congress removed the “pay for time lost” language from the definition of “compensation” in § 3231(e)(1) “by striking out the first sentence and inserting in lieu thereof: 'The term “compensation” means any form of money remuneration paid to an individual for services rendered as an employee to one or more employers.'” Act of Aug. 9, 1975, Pub. L. No. 94-93, § 204, 89 Stat. 466, 466. Congress retained the reference to “pay for time lost” in § 3231(e)(2). Although Congress amended the RRA at the same time, it did not alter the RRA's definition of compensation. See Act of Aug. 9, 1975, Pub. L. No. 94-92, § 201, 89 Stat. 461, 464-65.

In 1983, Congress substantially revised § 3231(e)(2), removing all language referring to payments by employers for time lost or personal injury. See Railroad Retirement Revenue Act of 1983, Pub. L. No. 98-76, tit. II, § 225(a)(1), 97 Stat. 411, 419, 424-25. As with the 1946 amendments, Congress simultaneously amended the RRA's definition of compensation: Congress expanded the definition of creditable compensation to encompass certain separation, subsistence, and termination allowances but did not amend the applicable provisions for time lost or personal injury. Id. § 403, 97 Stat. 434. The current RRTA contains no reference to pay for time lost or personal injury.

C. The Proceedings Below

Respondent Michael Loos incurred injuries when he fell through snow that covered an unmarked drain in petitioner's railyard. Before Loos filed this FELA suit, petitioner terminated his employment. App. 4a, 7a. The case was submitted to a jury, which, at petitioner's request, was instructed that “[t]he plaintiff will not be required to pay any federal or state income taxes on an amount that you award.” ECF#74, at 38 (request); JA91a (final instruction). The jury verdict found petitioner liable for negligence and awarded Loos total damages of $126,212.78, which included $85,000 for past pain, disability, and emotional distress, $11,212.78 for past medical expenses, and $30,000 for past wage loss. JA92a-95a.

Petitioner moved to offset the verdict by $3,765, the amount it claimed was due for RRTA withholdings on the wage-loss portion of the damages award. App. 28a-29a; JA11a-12a. The district court denied the offset, concluding that, because the damages were on account of personal physical injuries, § 104(a)(2) excluded them from taxation under the RRTA. App. 29a-30a.

The Eighth Circuit affirmed the judgment. App. 17a-24a. It held that the RRTA's definition of taxable compensation does not cover the damages for past wage loss awarded to respondent because, “[u]nder the RRTA's plain text, damages for lost wages are not remuneration 'for services rendered.'” App. 20a. Rather, the court explained, damages for lost wages are “remuneration for a period of time during which the employee did not actually render any services.” Id. Therefore, “damages for lost wages do not fit within the plain meaning of the RRTA.” Id.

The Eighth Circuit also rejected petitioner's argument that the court should “read the RRA definition of 'compensation'” — which includes “pay for time lost” — “into the RRTA.” App. 21a. Noting that Congress had expressly removed “pay for time lost” from the RRTA's definition of compensation, the court rejected petitioner's invitation to import “the very language Congress eliminated.” App. 23a. Having resolved the appeal based on the RRTA's definition of “compensation,” the court declined to address whether § 104(a)(2) provided an additional ground for excluding respondent's damages award from taxation. App. 24a.

SUMMARY OF ARGUMENT

The RRTA does not tax satisfaction of a FELA judgment for two independent reasons.

I. The Eighth Circuit correctly concluded that damages for personal physical injuries do not fall within the statutory definition of “compensation” because they are not “remuneration for services rendered.” When a railroad satisfies a FELA judgment, it pays for failing to uphold the standard of due care owed to an employee. The railroad pays for a tort, not for services rendered. Such a payment is therefore not “compensation” under the RRTA.

Petitioner tries (at 18) to avoid this outcome by arguing that the text is “not so plain.” Its case in chief is that, to define RRTA compensation, the Court must look to other statutes. That approach is unpersuasive.

Petitioner and the government argue that “pay for time lost” is an “illustrative example” in the definition of compensation in the RRA — a separate benefits statute — and so encompassed within the RRTA's shorter definition of compensation for taxation. In the RRA, however, “pay for time lost” is not an example of remuneration “for services rendered,” but rather an additional term that expands the RRA's definition of compensation. Pay “for time lost” is no longer in the RRTA's definition of compensation; when Congress deleted those words from the taxing statute in 1975 and 1983, its actions had meaning. Like FICA and the Social Security Act (“SSA”), the RRTA and the RRA are not in pari materia, and there is no basis for reading into the RRTA the RRA's reference to “pay for time lost.”

Even if “pay for time lost” could be impliedly read back into the RRTA, that term does not cover FELA judgments. It is a term of art originally understood to cover coordination allowances under the Washington Agreement and, later, personal-injury settlement payments. At most, taxable “pay for time lost” encompassed voluntary payments from the employer to the employee, not compliance with court orders to satisfy FELA judgments from a tortfeasor to a victim.

Retreating further, petitioner looks to the SSA and FICA to define RRTA taxes. But, as the Eighth Circuit recognized, the cases on which petitioner relies are inapposite, and this Court has instructed that the textual differences between the RRTA and FICA control. See Wisconsin Cent., 138 S. Ct. at 2070.

II. The district court also correctly ruled that the Internal Revenue Code's general exclusion of personal-injury awards from “income” in § 104(a)(2) applies to RRTA taxes, which also are “imposed on income.” When Congress enacted the RRTA in 1937, it acted against the backdrop of § 104(a)(2)'s predecessor personal-injury exclusion. When Congress later incorporated certain other gross income exclusions into the RRTA's definition of taxable compensation, Congress intended to recognize exemptions for both employees and employers because both taxes are based on a specified percentage of “compensation.” Through § 104(a)(2), however, Congress has always excluded personal-injury damages from employee income, including the RRTA's tax on that income. Petitioner's proposed rule would create the anomaly that railroad worker personal-injury awards are taxable under the RRTA even though the Code exempts all other such awards from the definition of “income.”

III. Petitioner's and the government's appeal to Chevron deference is misplaced. The current regulations do not address the question presented, and the government's recent litigating positions are not persuasive. In the more than 80 years that FELA and the RRTA have coexisted, petitioner and its amici cannot cite a single instance in which the IRS has imposed RRTA taxes on satisfaction of a FELA judgment.

ARGUMENT

I. A FELA JUDGMENT IS NOT TAXABLE COMPENSATION UNDER THE RRTA

A. The RRTA's Text Does Not Cover FELA Damages Judgments

1. The RRTA taxes remuneration “for services rendered”

a. The RRTA’s text taxes remuneration for services rendered, not remuneration for other purposes. Statutory interpretation begins with the text; when Congress includes an explicit statutory definition, courts are obliged to follow that definition. See Wisconsin Cent., 138 S. Ct. at 2070; see also Burgess v. United States, 553 U.S. 124, 130 (2008). Congress defined taxable compensation under the RRTA as remuneration “for services rendered.” That phrase therefore “limits the kinds of remuneration that will qualify for taxation.” Wisconsin Cent., 138 S. Ct. at 2071.

The services-rendered limitation appears in multiple places in the RRTA. The provision defining the tax rate imposed on employee income states: “Tier 1 tax. — In addition to other taxes, there is hereby imposed on the income of each employee a tax equal to the applicable percentage of the compensation received during any calendar year by such employee for services rendered by such employee.” 26 U.S.C. § 3201(a) (emphasis added). The Tier 2 tax likewise “impose[s]” a tax on employee “income” as a percentage of “compensation . . . for services rendered.” Id. § 3201(b) (emphasis added).

Congress reinforced the services-rendered limitation in defining “compensation,” the term that constitutes the tax base for determining Tier 1 and 2 taxes. RRTA “compensation” means “any form of money remuneration paid to an individual for services rendered as an employee to one or more employers.” Id. § 3231(e)(1) (emphasis added). Thus, both the tax-imposing provision and the provision defining the tax base specify that employee taxes under the RRTA apply only to payments “for services rendered.”

The ordinary meaning of “render services” refers to the performance of services for consideration. To “render” is to “give” or “furnish for consideration.” Webster's New International Dictionary 2109 (2d ed. 1937). To render “services” means to provide “labor for the benefit of another, or at another's command.” Id. at 2288. The RRTA specifies that an employee is in “service” when “subject to the continuing authority of the employer to supervise and direct the manner of rendition of his service” and “he renders such service for compensation.” 26 U.S.C. § 3231(d)(1), (2).

b. Congress's explicit limitation to remuneration “for services rendered” is consistent with the ordinary meaning of “remuneration” at the time of enactment as “recompense for services.” 2 New Century Dictionary of the English Language 1520 (1934); see also id. (to remunerate means “[t]o requite, recompense, or reward (a person) for services, work, trouble, etc.”); 8 Oxford English Dictionary 439 (1st ed. 1933) (defining “[r]emunerate” as “[t]o repay, requite, make some return for (services, etc.)” and “to pay (one) for services rendered or work done”); Black's Law Dictionary 1528 (3d ed. 1933) (“'remuneration' means a quid pro quo,” that is, “whatever consideration he gets for giving his services”); 3 Frederick Stroud, Judicial Dictionary 1708 (2d ed. 1903) (same).⁸

Congress could have chosen to tax other types of remuneration, such as for expenses or jury service. The RRA, for instance, makes military service count toward creditable compensation “in the same manner as though military service were service rendered as an employee.” 45 U.S.C. § 231b(i)(2). No similar provision exists to expand the scope of RRTA taxable compensation.

Congress's choice among alternative definitions of “compensation” also demonstrates its intent to tax pay for services and not other types of payments. Contemporaneous dictionaries defined “compensation” as encompassing not only payment for services but also compensation for loss. For example, Black's Law Dictionary defined “compensation” as not only “[t]he remuneration or wages given to an employee,” such as “[s]alary, pay, or emolument,” but also “[i]ndemnification; payment of damages; making amends; . . . that which is necessary to restore an injured party to his former position.” Black's Law Dictionary 377-78; see also C. Martin Alsager, Dictionary of Business Terms 67 (1932) (“compensation” means “[t]hat which is accepted as an equivalent for loss, privation, or services rendered; . . . indemnification; recompense; . . . restoration”); 2 Oxford English Dictionary 717-18 (“compensation” means “[t]hat which is given in recompense . . . remuneration,” as well as “[a]mends or recompense for loss or damage”).

Among the ordinary meanings for “compensation” at the time, Congress could have chosen “an equivalent for loss [or] privation.” Alsager, Dictionary of Business Terms 67. But “Congress did not adopt that ready alternative.” Advocate Health Care Network v. Stapleton, 137 S. Ct. 1652, 1659 (2017). Instead, Congress specifically defined “compensation” under the RRTA as “remuneration for services rendered.” “That drafting decision” deserves respect. Id.

c. Petitioner (at 21-22) and the government (at 13) erroneously argue that several statutory exemptions to the RRTA's definition of “compensation” imply a broader understanding of that term. In fact, the exemptions Congress created confirm what the general definition says: taxable compensation is limited to “remuneration for services rendered.”

Congress exempted from the RRTA's definition of taxable “compensation” payments made to an employee “under a plan or system established by an employer . . . on account of sickness or accident disability.” 26 U.S.C. § 3231(e)(1)(i). For Tier 1 taxes, Congress also exempted from compensation certain disability benefits under the RRA and sickness benefits resulting from on-the-job injury under the RUIA. Id. § 3231(e)(4)(A)-(B). Unlike damages for negligence, sickness and disability benefits are part of an employee's package of compensation for rendering services. Under the RRA, annuities are provided for employees who have “render[ed] compensated service,” 45 U.S.C. § 231a(e)(1), and benefits “accrue[ ]” based on “years of service” and disability, id. § 231a(a)(1). Similarly, an employee must be paid a certain amount of compensation for services rendered before receiving sickness benefits under the RUIA. Id. §§ 351(i), 352(a)(1)(B), 353. Those payments are “for services rendered” and thus otherwise would be taxable compensation if Congress had not exempted them.⁹

2. A FELA damages award is not remuneration for services rendered

In ordinary usage, “remuneration for services rendered” does not encompass a damages judgment for injuries caused by a tortfeasor's breach of duty. When an employer satisfies a FELA damages award, it pays for negligence, not “for services rendered.” “In legal parlance, the term 'damages' refers to money awarded as reparation for injury resulting from breach of legal duty.” Bowen v. Massachusetts, 487 U.S. 879, 913 (1988) (Scalia, J., dissenting) (emphasis added) (collecting sources). FELA damages compensate for an injury from employer negligence that the law says the employer should not have committed. See Winfield, 244 U.S. at 164 (Brandeis, J., dissenting) (FELA liability is “a penalty for wrongdoing” and a “remedy” that “mak[es] the wrongdoer indemnify him whom he has wronged”).

Damages for past wage loss under FELA also are not remuneration for services rendered. As the Eighth Circuit explained, “[d]amages for lost wages . . . compensate the employee for wages the employee should have earned had he been able to render services.” App. 19a-20a.¹⁰ In his separate opinion in United States v. Cleveland Indians Baseball Co., 532 U.S. 200 (2001), Justice Scalia similarly explained that “damages awards compensating an employee for lost wages” are “not” FICA “'wages' within the normal meaning of that term.” Id. at 221 (Scalia, J., concurring in the judgment) (emphasis omitted).¹¹ The same reasoning applies to “compensation,” which plays the same role as FICA wages in the RRTA's parallel statutory scheme.

B. Petitioner's Invocations Of Different Statutes To Define The RRTA Lack Merit

Petitioner's principal submission (at 18) is that the RRTA's statutory language is “not so plain” and that compensation under that Act should be defined by resort to other statutes. That argument fails.

1. The inclusion of “pay for time lost” in the RRA does not support reading the RRTA to tax FELA damages awards for past wage loss

Petitioner (at 23-34) and the government (at 20-30) contend that the Court should insert back into the RRTA's definition of compensation a term — “pay for time lost” — that is not in the current version of that statute (and was completely deleted from § 3231(e)(1) & (2) by 1983). That argument lacks merit. First, the RRTA does not tax, and cannot be read impliedly to tax, “pay for time lost.” Second, even if the RRTA were read to tax “pay for time lost,” that term does not reach satisfaction of a FELA judgment.

a. The RRTA does not tax “pay for time lost”

The RRTA's definition of compensation does not contain “pay for time lost.” Those words do not appear in the statute. See Meese v. Keene, 481 U.S. 465, 484 (1987) (“It is axiomatic that the statutory definition of the term excludes unstated meanings of that term.”).

Petitioner and the government nevertheless insist this Court must define the RRTA by looking to the RRA, which defines “compensation” as “any form of money remuneration paid to 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.” 45 U.S.C. § 231(h)(1) (emphasis added). Petitioner (at 23) and the government (at 22) unpersuasively argue that Congress's use of the word “including” in the RRA means pay for time lost is an illustrative example of “remuneration for services rendered” and thus part of the RRTA's definition even though Congress took out the “time lost” clause.

i. “Pay for time lost” is not a form of remuneration for services rendered

Other provisions of the RRA reinforce the conclusion that remuneration “for services rendered” does not include pay for “time lost” from work. For calculating creditable compensation toward an annuity, the RRA defines “years of service” as “the number of years an . . . employee shall have rendered service to one or more employers for compensation or received remuneration for time lost.” 45 U.S.C. § 231(f)(1) (emphasis added); see also id. § 231b(i)(2) (using similar phrasing — “or lost time” — to define “years of service” for computation of annuities). The use of the disjunctive “or” demonstrates Congress understood “remuneration for time lost” to be different from “compensation” for having “rendered service.”

That understanding was clear in 1946 when Congress amended the RRTA: In resisting expanding “pay for time lost” to encompass personal-injury settlements, the AAR, amicus here, argued settlement payments were “compensation for injury” and “not remuneration for either services or for lost time.” AAR Statement at 575 (emphasis added). See Wisconsin Cent., 138 S. Ct. at 2070 (courts must interpret statutory words “consistent with their ordinary meaning at the time Congress enacted the statute”) (alteration omitted).

Petitioner misreads (at 28) the RRTA's history in arguing that Congress added “pay for time lost” as an example of remuneration for services rendered. The House and Senate Reports indicate the change from “active service” (in 1935) to “services rendered” (in 1937) was meant to make clear “that compensation received by an employee in respect of months during which he was ill or on vacation is to be included in the compensation of the employee's tax liability.” S. Rep. No. 75-818, at 4; accord H.R. Rep. No. 75-1071, at 5-6 (same). Meanwhile, pay for time lost was distinct; it was not for active service or for services rendered.¹² Pay “for time lost” was a term of art Congress added in 1937 to reflect the 1936 Washington Agreement, which ensured railroad workers would receive a “coordination allowance” when workers were “deprived of employment” from railroad consolidation. See supra p. 9. Although affected employees could not work, the coordination allowances counted as “remuneration paid for time lost” and thus gave workers credit toward an annuity. “Even the [AAR] seems to have understood all this back in [1946].” Wisconsin Cent., 138 S. Ct. at 2072; see AAR Statement at 574 (“that is a definite concept; a payment for lost time”).

ii. “Pay for time lost” expands the definition of compensation

In the RRA's definition of “compensation,” the phrase “including remuneration paid for time lost as an employee,” 45 U.S.C. § 231(h)(1), adds to the ordinary meaning of “remuneration for services rendered.” Congress used the term “including” to signal the addition of a discrete item, not an illustration of an otherwise subordinate element. Dictionary definitions, statutory examples, and judicial interpretations all confirm that conclusion.

First, contemporaneous dictionary definitions confirm that “including” signals an addition. See Black's Law Dictionary 943 (“Including may, according to context, express an enlargement and have the meaning of and or in addition to. . . .”); 2 Stroud, Judicial Dictionary 945 (“'Include' is very generally used in Interp Clauses in order to enlarge the meaning of words or phrases occurring in the body of the statute; and when it is so used, these words or phrases must be construed as comprehending, not only such things as they signify according to their natural import but also, those things which the interp clause declares that they shall include.”); see also 1 New Century Dictionary 809 (“include” “often [means] to contain as a subordinate element,” but also means to “involve as a factor” and “to place in an aggregate, class, category, or the like”) (emphasis added).

Second, other statutory examples show Congress's use of “including” to expand a defined term beyond its ordinary meaning. For example, FELA defines “common carrier” to “include” entities “charged with the duty of the management and operation of the business of a common carrier.” 45 U.S.C. § 57. The word “include” in that context adds entities to the definition beyond the natural meaning of “common carrier.”

Another clear example is the so-called “situs” requirement in the Longshore and Harbor Workers' Compensation Act (“LHWCA”). That provision states:

The term “employer” means an employer any of whose employees are employed in maritime employment, in whole or in part, upon the navigable waters of the United States (including any adjoining pier, wharf, dry dock, terminal, building way, marine railway, or other adjoining area customarily used by an employer in loading, unloading, repairing, or building a vessel).

33 U.S.C. § 902(4) (emphasis added). The items introduced by the word “including” (pier, wharf, etc.) are not encompassed within the noun that precedes them (“navigable waters”); they add to the ordinary understanding of that term.¹³ The U.S. Code — past and present — contains many other similar examples showing that Congress uses “including” to expand the dictionary definition of a term.¹⁴

Third, this Court long has recognized Congress's use of “including” in an expansive sense. More than a century ago, this Court noted that “including” “may have the sense of addition . . . and of 'also.'” Montello Salt Co. v. Utah, 221 U.S. 452, 464-65 (1911); see also id. at 462-63 (“'We think the word “including” was used as the equivalent of “also,” a sense in which it is frequently used in tariff acts.'”) (quoting United States v. Pierce, 147 F. 199, 201 (2d Cir. 1906) (per curiam)). Just last Term, this Court recognized that “use of the word 'include' is not literal — any more than when Congress says something like “'a State “includes” Puerto Rico and the District of Columbia.'” Stapleton, 137 S. Ct. at 1658 (quoting 29 U.S.C. § 1002(10)).¹⁵

In short, Congress's use of “including” does not support the assertion that “pay for time lost” is a “form of money remuneration for services rendered.” U.S. Br. 26. Consequently, when Congress deleted “including remuneration paid for time lost” from the RRTA's definition of compensation, it removed a discrete element, not an illustrative example otherwise already encompassed within the meaning of “remuneration for services rendered.”

iii. Congress amended the RRTA to remove “pay for time lost”

In 1975 and 1983, Congress removed all references to “pay for time lost” from the RRTA's definition of compensation. See supra pp. 11-12. “'When Congress acts to amend a statute, [this Court] presume[s] it intends its amendment to have real and substantial effect.'” United States v. Quality Stores, Inc., 134 S. Ct. 1395, 1401 (2014) (quoting Stone v. INS, 514 U.S. 386, 397 (1995)). Moreover, this Court presumes that Congress acts purposefully in its disparate inclusion or exclusion. See Burlington N. & S.F. Ry. Co. v. White, 548 U.S. 53, 63 (2006). That presumption is particularly apt here.¹⁶

As the government points out (at 5), Congress revised the RRTA's definition of compensation several dozen times and knew how to craft the term. In 1983, for example, at the same time Congress amended RRTA taxable compensation to delete pay for time lost, Congress expanded the definition of RRA creditable compensation to encompass certain separation, subsistence, and termination allowances. See supra p. 12. Petitioner's request that the Court read the pay-for-time-lost phrase into the RRTA, “when it is clear that Congress knew how to specify ['compensation'] when it wanted to, runs afoul of the usual rule that 'when the legislature uses certain language in one . . . statute and different language in another, the court assumes different meanings were intended.'” Sosa v. Alvarez-Machain, 542 U.S. 692, 712 n.9 (2004) (quoting 2A Norman J. Singer, Statutes and Statutory Construction § 46.06, at 194 (6th rev. ed. 2000)).

Seeking to avoid this conclusion, petitioner (at 29-34) and the government (at 23-30) try hard to explain why Congress might not have intended to remove “pay for time lost” from the RRTA. Petitioner suggests that Congress intended merely to change when, not whether, time lost is taxed. But the plain text reflects both changes and therefore indicates Congress meant to shift from an “earned” to a “paid” basis and remove time-lost payments from taxable compensation. Because “pay for time lost” is not an example of “remuneration for services rendered,” petitioner and the government cannot explain why Congress had to remove not only the language about timing but also the reference to time-lost payments. In 1975, Congress replaced the first sentence of the definition of taxable compensation, thus signaling an intent to go beyond simply deleting the timing clause that specified when time lost “shall be deemed earned.” See supra pp. 11-12.

The government argues (at 14, 29-30) that the Eighth Circuit drew “mistaken inferences” from the statutory history and that Congress would not have exempted time-lost payments “sub silentio.” But Congress need not explain its intent in the legislative history for its amendments to have real and substantive effect. Reversing the Eighth Circuit's judgment would require this Court to read back into the statute words that Congress deleted. That, however, “'is not a construction of a statute, but, in effect, an enlargement of it by the court, so that what was omitted, [petitioner and the government] presum[e] by inadvertence, may be included within its scope. To supply omissions transcends the judicial function.'” West Virginia Univ. Hosps., Inc. v. Casey, 499 U.S. 83, 101 (1991) (quoting Iselin v. United States, 270 U.S. 245, 251 (1926) (Brandeis, J.)).

iv. The RRA and the RRTA are not in pari materia

Petitioner's assertion (at 25) that the RRTA and the RRA are in pari materia is incorrect and provides no basis for reading back into the RRTA the RRA's reference to “pay for time lost.”

The RRA has the same relationship to the RRTA as the SSA does to FICA. See Wisconsin Cent., 138 S. Ct. at 2071 (referring to FICA as RRTA's “companion statute” for “other industries”). This Court has expressly declined to construe in pari materia the SSA (the RRA's counterpart for non-railroad employees) and FICA (the RRTA's counterpart). See Cleveland Indians, 532 U.S. at 212-13. The Court explained that the “taxation and benefits eligibility contexts” are “discrete” and reflect different concerns. Id. at 213. Just as FICA taxes have “no direct relation” with Social Security benefits, id. at 212, so too 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, Hisquierdo, 439 U.S. at 574-75.¹⁷

The “pay for time lost” language is a significant linguistic difference between the RRTA and the RRA that precludes reading those statutes in pari materia. In addition, retirement benefits are based on “years of service” and levels of compensation, not taxes collected. 45 U.S.C. §§ 231a-231b. The Eighth Circuit correctly concluded these linguistic differences show that “'Congress intended its different words to make a legal difference.'” App. 21a (quoting White, 548 U.S. at 62-63 (declining to read statutes in pari materia)).

Congress's choice not to harmonize the RRTA and the RRA reinforces that conclusion. During the 1946 amendments, Congress considered codifying the RRTA's predecessor statute, the Carriers Taxing Act, as a part of the RRA and making all the definitions from the RRA “automatically applicable to the Carriers Taxing Act.” S. Rep. No. 79-1710, pt. 2, at 9. In 1992, Congress also considered conforming RRTA “compensation” to the definitions of compensation in the RRA and the RUIA. See 138 Cong. Rec. at 2102 (Sec. 4108).¹⁸ Congress did not adopt those proposals, however, confirming that the differences between the RRA's and the RRTA's definitions of “compensation” “convey differences in meaning.” Wisconsin Cent., 138 S. Ct. at 2071.

The authorities cited by petitioner and the government establish that the in pari materia canon applies only to interpreting provisions within the same statute¹⁹ or to resolving ambiguities among statutes that address the same subject.²⁰ Reading statutes in pari materia is inappropriate where, as here, the statutes are in different titles of the U.S. Code (Title 26 and Title 45), administered by different agencies (the Treasury Department and the Board) pursuant to different regulations, and address different subjects — “the discrete taxation and benefits eligibility contexts.” Cleveland Indians, 532 U.S. at 213.

b. In any event, “pay for time lost” does not encompass satisfaction of a FELA judgment

The statutory history of the RRTA and the RRA reveals that the concept of “pay for time lost” does not reach satisfaction of a FELA judgment. The presence of that phrase in the RRA does not advance petitioner's argument for that reason as well.

In 1937, Congress included a reference to “pa[y] for time lost” in the RRTA's definition of compensation. § 1(e), 50 Stat. 436. In 1946, over the AAR's protests, Congress expanded “pa[y] for time lost” to include remuneration for “absence on account of personal injury.” § 3(f), 60 Stat. 725. That broader definition encompassed payments for personal injuries in settlement of a FELA claim. See supra pp. 9-10 & n.7. There is no evidence, however, that Congress ever considered the satisfaction of a FELA judgment to be taxable under that broader (since eliminated) language.

Even the broadest definition of “pay for time lost” in effect from 1946 to 1975 would not have covered the damages judgment in this case because a settlement is fundamentally different from satisfaction of a FELA judgment. In settlements, the railroad ordinarily does not admit liability — it reaches a voluntary agreement with the employee in exchange for not accepting liability for negligence. By contrast, a judgment from a court following suit is an involuntary payment made as an order to redress negligence.

Contemporaneous enactments contain express references to judgments, which confirms that “pay for time lost” never encompassed satisfaction of a FELA judgment. In 1946, Congress simultaneously amended the RRTA, the RRA, and the RUIA. In the RUIA, Congress specified that the Board is entitled to reimbursement for “any sum or damages paid or payable to [an] employee . . . through suit, compromise, settlement, judgment, or otherwise on account of any liability.” 1946 Act § 323, 60 Stat. 741 (emphases added).²¹ Thus, the same Congress that amended the definitions of “compensation” in the RRTA and the RRA to have “pay for time lost” reach settlement payments for personal injuries simultaneously referred in the RUIA to “damages” and “judgment.” Those linguistic differences reinforce the conclusion that pay for time lost does not reach satisfaction of FELA judgments. See Kellogg Brown & Root Servs., 135 S. Ct. at 1977 (in determining that “offense” did not include “civil violation” in False Claims Act tolling provision, Court found it “revealing that Congress ha[d] used clearer and more specific language” to designate civil violations in contemporaneous antitrust tolling statute).

Congress could have chosen to tax FELA judgments but did not. If Congress had wanted to make FELA judgments subject to taxes, it could have defined “compensation” as “remuneration for services rendered as an employee and damages paid or payable to an employee through suit or judgment.” “That amendment would have accomplished exactly what [petitioner] argue[s] Congress intended[,] . . . [b]ut Congress did not adopt that ready alternative.” Stapleton, 137 S. Ct. at 1659; see also Lozano v. Montoya Alvarez, 572 U.S. 1, 16 (2014) (when legislators do not adopt “obvious alternative” language, “the natural implication is that they did not intend” the alternative). The wording Congress chose indicates its intent not to make satisfaction of FELA judgments taxable.

2. Decisions interpreting the Social Security Act and FICA likewise do not support reading the RRTA to tax FELA damages for past wage loss

“Reaching further afield,” Wisconsin Cent., 138 S. Ct. at 2073, petitioner relies on cases involving the SSA and FICA — Social Security Board v. Nierotko, 327 U.S. 358 (1946), and Quality Stores. Those cases are inapposite and offer no reason to disregard the RRTA's plain language.

a. Nierotko represents a discredited analysis this Court subsequently limited. There, the Court addressed whether back pay awarded to a reinstated employee by the National Labor Relations Board counted as “wages” under the SSA. The SSA defined “wages” as “all remuneration for employment” and defined “employment” as “any service, of whatever nature, performed.” 327 U.S. at 362-63. The government argued that, “[s]ince 'back pay' is not received for 'service performed,' it does not come within the statutory definition” of “wages.” Social Security Bd. Br. at 4, No. 318 (U.S. filed Dec. 6, 1945), 1945 WL 48899. But the government also acknowledged that the SSA's “humanitarian purpose” “would be advanced if workers [we]re not deprived of some of their old-age protection because they [we]re the victims of unlawful employer practices.” Id. at 24.

Instead of following Congress's explicit statutory definition, the Court focused on the SSA's remedial purpose: the “very words 'any service . . . performed . . . for his employer,' with the purpose of the Social Security Act in mind[,] import breadth of coverage.” 327 U.S. at 365 (emphasis added; ellipses in original). The Court held that back pay for the wrongful discharge period qualified as “wages” under the SSA. Id. at 369-70. Furthermore, despite statutory language specifying that “wages” were “to be 'paid' in certain 'quarters,'” the Court instead concluded it “ha[d] no doubt that [the back pay] should be allocated to the periods when the regular wages were not paid as usual.” Id. at 370.

Fifty-six years later, Cleveland Indians limited Nierotko and undermined its reasoning. There, the issue was whether settlement payments should be taxed under FICA by reference to the year they were paid or the years in which they should have been paid. 532 U.S. at 205. The government argued that the plain language of the statute — “wages paid” — required taxes to be applied to the year the settlement payments were paid. Id. at 209. The company argued that, “[b]ecause Nierotko read the . . . 'wages paid' language for benefits eligibility purposes to accommodate an allocation-back rule for backpay, . . . the identical . . . 'wages paid' language for tax purposes must be read the same way.” Id. at 212. The Court rejected that argument.

The Cleveland Indians Court recognized that Nierotko was not based on a literal construction of the statutory text but “in all likelihood reflected concern that the benefits scheme created in 1939 would be disserved by allowing an employer's wrongdoing to reduce the quarters of coverage an employee would otherwise be entitled to claim toward eligibility” for benefits. Id. Thus, Cleveland Indians declined to follow Nierotko in interpreting identical language in FICA: “Nierotko dealt specifically and only with Social Security benefits eligibility, not with taxation.” Id.²²

Cleveland Indians makes clear that the Nierotko holding is an “exception” that does not apply here. Id. at 215-16. “[T]he concern that animate[d] Nierotko's treatment of backpay in the benefits context has no relevance to the tax side” of FICA, id. at 216, let alone any relevance to the tax implications under the RRTA of a plaintiff's FELA judgment — Nierotko says nothing about what counts as taxable “income” or “compensation” under the RRTA.

Petitioner also relies (at 20) on Quality Stores, but that case is off point. There, the Court held that severance payments are taxable “wages” under FICA. As the Court explained, “[s]everance payments are made in consideration for employment — for a 'service . . . performed'” — and are thus FICA wages. 134 S. Ct. at 1400 (ellipsis in original); see also id. (severance packages are designed “to reward employees for a greater length of good service and loyalty”). Likewise, severance payments are remuneration “for services rendered” and so would be taxable under the RRTA. For similar reasons, vacation pay and sick pay are also remuneration “for services rendered” — those items of compensation accrue with service time. See, e.g., NLRB v. Great Dane Trailers, Inc., 388 U.S. 26, 27-28 & n.3 (1967) (“vacation pay” “accrued” under collective-bargaining agreement). Those payments are not a mere gratuity, but rather part of a package of benefits to retain the employee in the employer's service. They are made in consideration for past or anticipated services and are thus “for services rendered.” FELA damages, by contrast, are paid for the employer's breach of a legal duty that causes injury.

Quality Stores cited Nierotko only for the proposition that the term “wages” is interpreted broadly “in the Social Security statutory context.” 134 S. Ct. at 1400; see also id. (emphasizing that Nierotko's interpretation of “service” was “with respect to Social Security”). The Court did not cast any doubt on Cleveland Indians and did not reach the question presented here.

b. Petitioner (at 20 n.20) and the government (at 18-19) unpersuasively assert that “there is no meaningful textual difference” between FICA “wages” and RRTA “compensation.”

Last Term, this Court in Wisconsin Central addressed some of the linguistic differences between FICA and the RRTA. Although those statutes share the same basic structure, with a tax imposed on income and a tax base defined as a subset of income, Congress used different language to “carefully distinguish” the respective tax bases. 138 S. Ct. at 2073. The Court noted and explained the difference between “all remuneration” in FICA and “money remuneration” in the RRTA. Id. at 2071.

The RRTA's focus on “services rendered” is another significant difference between the two statutes. FICA's tax on income applies to “all remuneration for employment,” 26 U.S.C. § 3121(a), which Congress defined broadly as “any service, of whatever nature, performed . . . by an employee for the person employing him,” id. § 3121(b). By contrast, the RRTA's tax on income applies to “money remuneration paid to an individual for services rendered as an employee,” id. § 3231(e)(1), and includes a particularized definition of “service,” id. § 3231(d). Under the RRTA, an individual “is in the service of an employer” when he “renders such service for compensation” and is: “subject to the continuing authority of the employer to supervise and direct the manner of rendition of his service”; “rendering professional or technical services and is integrated into the staff of the employer”; or “rendering, on the property used in the employer's operations, other personal services the rendition of which is integrated into the employer's operations.” Id. § 3231(d)(1), (2).

FICA does not define “service” and includes no similar “focus on the authority and control that an employer exercises over an employee in determining whether the employee is performing a 'service.'” Union Pac. R.R. Co. v. United States, 865 F.3d 1045, 1053 (8th Cir. 2017), cert. denied, 138 S. Ct. 2709 (2018). In applying the statutory text in Union Pacific, “the Eighth Circuit w[as] right.” Wisconsin Cent., 138 S. Ct. at 2074. Union Pacific informed the Eighth Circuit's decision here. App. 20a.

Congress's intent to establish different definitions in FICA and the RRTA is clear. Consider § 3231(e)(2)(C)(i), where Congress incorporated a provision of FICA into the RRTA but expressly substituted the RRTA's definition of “services” with “employment” “each place it appears.” That provision shows, contrary to the government's contention (at 16-17), Congress's intent to draw a distinction between the language in FICA and the RRTA.

In arguing that Nierotko and Quality Stores control, petitioner functionally asks this Court to expand the phrase “services rendered” in the RRTA to match FICA's broader definition of “wages.” But Congress's choice to make “compensation” a “narrower term” “requires respect, not disregard.” Wisconsin Cent., 138 S. Ct. at 2072.²³

In any event, personal-injury damages are not FICA “wages” either. Justice Scalia reached that conclusion in Cleveland Indians, and this Court has never held to the contrary: Nierotko concerned Social Security benefits, and Quality Stores concerned severance payments. Petitioner's effort to define the RRTA taxable compensation via other statutes fails.

C. The Court Of Appeals' Approach Advances Congress's Purposes

1. Congress has enacted several statutes reflecting special solicitude for railroad workers. FELA is a “humanitarian” statute that this Court has “liberally construed . . . to further Congress' remedial goal” to facilitate “recovery by injured workers.” Gottshall, 512 U.S. at 542-43; see also Winfield, 244 U.S. at 162 (Brandeis, J., dissenting) (FELA was “emergency legislation” given the hazards railroad workers face). The RRA also is a remedial statute Congress designed to supplant private railroad retirement and disability pensions that proved unreliable. See Wisconsin Cent., 138 S. Ct. at 2070. Subjecting FELA judgments to taxes is inconsistent with those statutes.

2. Imposing RRTA taxes on FELA damages awards also creates “incentives for strategic behavior that Congress did not intend.” Cleveland Indians, 532 U.S. at 216-17. Petitioner and its amicus, the AAR, seek a result that would increase their tax liability: If petitioner prevails, it will owe employer excise taxes in this case, see 26 U.S.C. § 3221, and for all future FELA judgments.

The railroads are pursuing that counterintuitive objective because subjecting FELA judgments to RRTA taxes gives railroads additional bargaining leverage in settlement negotiations with injured workers. When the railroad satisfies a judgment, whatever amount the jury allocates to past wage loss would be subject (under petitioner's proffered rule) to taxation. If the parties enter into a (pre- or post-trial) settlement agreement, however, they can allocate less of the railroad's settlement payment to taxable past wage loss and more to other categories not subject to RRTA taxes. Therefore, the railroad can use the threat of tax liability to coerce a worker to accept a settlement less than an actual or potential damages award.

3. Petitioner's proposed rule creates unnecessary conflict with well-established FELA jury instructions, which state that damages awards are not subject to federal and state income taxes. See Liepelt, 444 U.S. at 498. That instruction is necessary because juries otherwise might “assume that a plaintiff's recovery . . . will be subject to federal taxation, and that the award should be increased substantially in order to be sure that the injured party is fully compensated.” Id. at 496.²⁴ At petitioner's request, the district court gave the model Eighth Circuit jury instruction, JA91a, ensuring that the jury was not confused about taxation.

Under petitioner's proposed rule, the jury will be instructed that the verdict is subject to some taxes (RRTA) but not to others (state and federal income). That approach is unnecessarily confusing to jurors and undermines Congress's goals in FELA cases of compensating plaintiffs. See Jones & Laughlin Steel Corp. v. Pfeifer, 462 U.S. 523, 537 (1983) (citing Liepelt and noting that lost-wages awards “should be estimated in after-tax terms”). The Court should reject that inequitable result, which contravenes the RRTA's plain text and the jury's determination.

II. A FELA JUDGMENT IS NOT TAXABLE INCOME UNDER THE RRTA

The district court correctly ruled that a separate provision of the Code — § 104(a)(2) — excludes satisfaction of a FELA judgment from RRTA taxes. That provision provides an independent basis for affirming the judgment.

A. Section 104(a)(2) Excludes Personal-Injury Damages From The RRTA's Tax On Employee Income

1. Section 104(a)(2) provides in pertinent part that “gross income does not include . . . the amount of any damages (other than punitive damages) received (whether by suit or agreement and whether as lump sums or as periodic payments) on account of personal physical injuries or physical sickness.” 26 U.S.C. § 104(a)(2). The Internal Revenue Code defines “gross income” in pertinent part as “all income from whatever source derived.” Id. § 61. The effect of those provisions taken together is that the category of “all income” does not include damages for personal physical injuries.

Section 104(a)(2)'s exclusion from income for personal-injury damages applies to the RRTA's tax on employee income. The RRTA tax at issue is expressly “imposed on the income of each employee.” 26 U.S.C. § 3201 (emphasis added); see Wisconsin Cent., 138 S. Ct. at 2070 (“Under the [RRTA's] terms, . . . employees pay a tax based on employees' incomes.”).²⁵ Congress's decision to impose the RRTA's employee tax on income triggers the application of § 104(a)(2), which specifies that personal-injury damages are not income for purposes of the Code.

2. The RRTA's statutory history reinforces the conclusion that § 104(a)(2)'s exclusion applies to RRTA employee taxes. The RRTA consistently has levied a tax on employee “income.” The 1935 statute was entitled “An Act: To levy an excise tax upon carriers and an income tax upon their employees, and for other purposes.” 49 Stat. 974 (emphasis added). The statute accordingly “levied, collected, and paid upon the income of every employee” a tax. Id. § 2, 49 Stat. 975 (“INCOME TAX ON EMPLOYEES”) (emphasis added).

The 1937 Carriers Taxing Act, the predecessor to the current RRTA, was also titled “An Act: To levy an excise tax upon carriers and certain other employers and an income tax upon their employees, and for other purposes.” 50 Stat. 435 (emphasis added). It likewise “levied, collected, and paid upon the income of every employee a tax.” Id. § 2(a), 50 Stat. 437 (“INCOME TAX ON EMPLOYEES”) (emphasis added). When Congress passed the 1937 Act, FELA had been on the books for nearly 30 years, and the U.S. tax code had exempted personal-injury damages awards from income tax since 1919. See 1918 Revenue Act § 213(b)(6), 40 Stat. 1066. If Congress had intended to tax FELA damages awards in the Carriers Taxing Act of 1937 — an act that “levied” a tax “upon . . . income” — it would have done so expressly. See Posadas v. National City Bank of New York, 296 U.S. 497, 503 (1936) (implied repeals disfavored).

In 1946, when it amended the RRTA, Congress retained the tax on income: “In addition to other taxes, there shall be levied, collected, and paid upon the income of every employee a tax. . . .” 1946 Act § 3(a), 60 Stat. 723 (emphasis added).

In 1954, although Congress modified the phraseology, the RRTA's employee tax remained an income tax: “Rate of Tax. In addition to other taxes, there is hereby imposed on the income of every employee a tax. . . .” Internal Revenue Code of 1954, ch. 736, § 3201, 68A Stat. 1, 431 (emphasis added). Since 1954, that phrasing has remained. This consistent statutory language confirms that the RRTA tax is imposed on income.²⁶ Because § 104(a)(2) excludes damages for personal physical injuries from income, it excludes those awards from taxable income under the RRTA.

B. Applying § 104(a)(2) To The RRTA's Employee Tax Comports With The Prevailing Approach Under FICA

1. FICA's structure parallels the RRTA's: the employee tax is also “imposed on the income” of individuals. 26 U.S.C. § 3101(a). In the FICA context, this Court has recognized that “wages” — the term that defines the FICA tax base — “is a narrower concept than 'income.'” Rowan, 452 U.S. at 254; see also Central Illinois Pub. Serv. Co. v. United States, 435 U.S. 21, 29 (1978) (explaining that “wages” subject to withholding is “much narrower than subjectability to income taxation”).

In Rowan, the Court addressed whether “wages” encompassed the value of meals and lodging, which under § 119 of the Code are (like personal-injury damages) excluded from gross income. See 452 U.S. at 248, 251 & n.8. This Court accepted the argument that “[b]ecause 'wages' is a narrower concept than 'income' . . . the value of the meals and lodging . . . — which the Government acknowledge[d] is not 'income' [under § 119] — therefore cannot be 'wages' under FICA.” Id. at 254. Although there (as here) the government contended that FICA “compose[d] a distinct system of taxation to which the rules of income taxation, such as the exclusion . . . in § 119, do not apply,” the Court was “not persuaded by this contention.” Id. at 257. The Court indicated that principles from income taxation apply to employment taxes. See id. at 257-58 (Congress did not necessarily “intend[ ] to tax remuneration in kind without regard to principles developed under income taxation,” such as the exclusion found in § 119). The Court therefore invalidated Treasury regulations that were “far from consistent” and would have required otherwise. Id. at 258-59, 263.

Following that reasoning, the courts of appeals consistently have held that § 104(a)(2) excludes damages awards from FICA taxes. See Gerbec v. United States, 164 F.3d 1015, 1025-27 (6th Cir. 1999); Dotson v. United States, 87 F.3d 682, 689-90 (5th Cir. 1996); Redfield v. Insurance Co. of N. Am., 940 F.2d 542, 548 (9th Cir. 1991); Anderson v. United States, 929 F.2d 648, 653-54 (Fed. Cir. 1991).²⁷ IRS pronouncements are to like effect. See supra pp. 6-7.

2. The Solicitor General tries (at 32) to distance himself from authorities recognizing that § 104(a)(2) applies to FICA wages, as well as the brief he approved in the Eighth Circuit below, which argued that § 104(a)(2) applies to FICA wages but not RRTA compensation.²⁸ The government, however, offers no persuasive reason why this Court should disregard the settled logic of those authorities.

Petitioner (at 25-26) and the government (at 33) insist RRTA taxable compensation and RRA creditable compensation should be symmetrical. But that is not the scheme Congress established. For instance, military service can count toward a railroad employee's “years of service” for an RRA annuity. 45 U.S.C. § 231b(i)(2). Military service, however, is not taxed under the RRTA, and so the railroad does not pay the employer excise taxes that help to fund the more generous railroad retirement pensions. Congress is presumed to have made an intentional choice in defining creditable and taxable compensation. See Hisquierdo, 439 U.S. at 574-75 (no direct relationship between taxes and benefits). And the Court may not “rewrite the statute that Congress has enacted.” Dodd v. United States, 545 U.S. 353, 359 (2005).

C. Petitioner's Responses Lack Merit

Petitioner and the government do not mention that the RRTA tax is “imposed on income.” That omission is dispositive, for courts “'are obliged to give effect, if possible, to every word Congress used.'” Carcieri, 555 U.S. at 391 (quoting Reiter v. Sonotone Corp., 442 U.S. 330, 339 (1979)). Instead of the text, petitioner and the government rest on erroneous structural arguments.

1. The textual relationship of the RRTA to § 104(a)(2), not their location in the Code, governs

Petitioner suggests (at 38) that because § 104(a)(2) appears in a different part of the Internal Revenue Code it does not apply to the RRTA. Congress, however, expressly has forbidden reading significance into the “location or grouping of any particular section or provision or portion” of the Internal Revenue Code. 26 U.S.C. § 7806. “Congress codified [the personal-injury-damages exclusion] in § [104(a)(2)] of the income-tax provisions of the Code. . . . But that does not mean that Congress implicitly foreclosed the applicability of the rule to other provisions of the Code.” Rowan, 452 U.S. at 258 n.13. The statutory text is clear: the RRTA's employee tax is imposed on income, and so § 104(a)(2) applies.

2. Cross-references to fringe-benefit exclusions do not negate the general exclusion for personal-injury damages

Contrary to petitioner's suggestions (at 40-42), Congress's cross-references in the RRTA to certain other exclusions from gross income do not indicate Congress meant to deprive railroad workers of the benefit of § 104(a)(2) in obtaining payment in satisfaction of FELA judgments. If anything, the text of those exclusions undermines petitioner's position: the provisions expressly refer to exclusions from “income,” rather than “gross income,” thus showing Congress understands gross income exclusions to apply to all income. See 26 U.S.C. § 3231(e)(5)-(6), (9)-(11). Those legislative choices negate petitioner's only textual theory for avoiding the application of § 104(a)(2) to the RRTA's employee tax.

a. When Congress expressly incorporated gross income exclusions into the RRTA's definition of “compensation,” it made those exclusions applicable to both employee and employer taxes. For those taxes, Congress set the tax base as a specified “percentage” of “compensation.” See 26 U.S.C. §§ 3201(a)-(b) (employee tax), 3221(a)-(b) (employer tax). By contrast, exclusions not expressly cross-referenced — like § 104(a)(2) — apply only to the employee tax because that tax is imposed on “income,” id. § 3201(a)-(b), whereas the employer tax is “an excise tax,” id. § 3221(a)-(b). If Congress had wanted § 104(a)(2) to exclude personal-injury damages from railroad employer taxes, it would have incorporated that exclusion into the RRTA's definition of taxable compensation. See White, 548 U.S. at 63 (disparate inclusion and exclusion presumed intentional).²⁹ Therefore, petitioner and the government are mistaken in arguing that applying § 104(a)(2) to the RRTA renders the cross-references meaningless.

b. Closer consideration of the exemptions on which petitioner relies confirms that Congress did not mean to deny the operation of § 104(a)(2) to injured railroad workers. Each of the exclusions Congress cross-referenced in the RRTA concerns fringe benefits that an employer provides to an employee, such as stock options, provision of meals and lodging, employee achievement awards, and education assistance. See 26 U.S.C. § 3231(e)(5)-(6), (9)-(11). Those voluntary transfers from the employer enhance the employer-employee relationship — they are forms of money remuneration for services rendered. Without cross-references, these items ordinarily would fall within the RRTA's definition of taxable compensation as “any form of money remuneration paid to an individual for services rendered as an employee.” Id. § 3231(e)(1). By contrast, a FELA damages award is not “for services rendered” — it is for loss, privation, and injury. Congress therefore had no need specifically to exclude what already falls outside the RRTA's definition of compensation. See Chevron U.S.A. Inc. v. Echazabal, 536 U.S. 73, 81 (2002) (negative implication canon applies to terms “understood to go hand in hand”).

Moreover, the timing and context of Congress's cross-references to these gross income exclusions in the RRTA further confirm that Congress did not mean to negate the application of § 104(a)(2) to the RRTA's tax on employee income. The following table shows when and where Congress added cross-references to gross income exclusions in the RRTA and FICA.

Subject

Exclusion from Income: Date Added	RRTA Section: Date Added	FICA Section: Date Added
Employee achievement awards
§ 74(c): 1986	§ 3231(e)(5): 1986	§ 3121(a)(20): 1986
Amounts received under Federal or State student loan forgiveness
§ 108(f)(4): 2004	§ 3231(e)(5): 2004	§ 3121(a)(20): 2004
Qualified scholarships
§ 117: 1954	§ 3231(e)(5): 1984	§ 3121(a)(20): 1984
Fringe benefits
§ 132: 1984	§ 3231(e)(5): 1984	§ 3121(a)(20): 1984
Employer-provided educational assistance
§ 127: 1978	§ 3231(e)(6): 1984	§ 3121(a)(18): 1978
Value of meals and lodging furnished by employer
§ 119: 1954	§ 3231(e)(9): 1989	§ 3121(a)(19): 1983
Medical savings account contributions
§ 106(b): 1996	§ 3231(e)(10): 1996	not added
Employer contributions to health savings accounts
§ 106(d): 2003	§ 3231(e)(11): 2003	not added
Qualified stock options
§ 421(a), § 422(a)-(b), § 423(a)-(b): 1964	§ 3231(e)(12): 2004	§ 3121(a)(22): 2004

Congress cross-referenced each of these exclusions between 1978 and 2004 — some 40 to 70 years after the RRTA's enactment. In many of those provisions, Congress added cross-references to the RRTA or FICA at the same time that it created the gross income exclusion — e.g., §§ 74(c), 106(b), 106(d), 108(f), 127, 132. That history shows that — in addition to applying the exclusion to the excise tax on employers — Congress was clarifying the tax on employee income, and not seeking indirectly to exclude exemptions not cross-referenced.³⁰

If Congress had wanted § 104(a)(2) to apply only to taxes withheld under FICA but not the RRTA, it could have so designated. Cf., e.g., 26 U.S.C. § 3231(e)(3) (specifying that rule for cash tips applies “[s]olely for purposes of the taxes imposed by section 3201” of RRTA). Congress did not make that choice.

In the end, the purpose of exclusions is to reduce tax liability, not to increase it. By cross-referencing gross income exclusions in the RRTA, Congress made doubly sure that it reduced a railroad employee's potential tax burden. In adding the cross-references relating to fringe benefits, Congress evinced no intent indirectly to increase taxes on railroad employees who suffered physical injuries from employer negligence.

III. TREASURY HAS NOT ADDRESSED WHETHER A FELA JUDGMENT IS TAXABLE UNDER THE RRTA, AND ITS LITIGATING POSITIONS DO NOT WARRANT DEFERENCE

A. Chevron Deference Is Inappropriate In This Case

“[I]n light of all the textual and structural clues,” there is “no ambiguity for the agency to fill.” Wisconsin Cent., 138 S. Ct. at 2074.³¹ Even if the statute were ambiguous, the Treasury Department has not formally ruled on the precise question.

The current Treasury regulations state that “compensation” “has the same meaning as the term wages in section 3121(a)” of FICA, “except as specifically limited by the [RRTA].” 26 C.F.R. § 31.3231(e)-1(a)(1) (emphasis added). “Compensation” “includes amounts paid to an employee for loss of earnings during an identifiable period as the result of the displacement of the employee to a less remunerative position or occupation as well as pay for time lost.” Id. § 31.3231(e)-1(a)(4). The regulations do not speak to payments for personal injuries.

At one point, Treasury regulations specified that “compensation” included “a payment . . . made to an employee with respect to a personal injury [that] includes pay for an identifiable period of absence from active service.” Republication of Regulations, 25 Fed. Reg. 13,032, 13,067 (Dec. 20, 1960) (§ 31.3231(e)-1(b)(3)) (emphasis added). But the Secretary deleted that language in 1979. See Definition of Compensation for Purposes of the Railroad Retirement Tax Act, 44 Fed. Reg. 15,484, 15,484-85 (Mar. 14, 1979) (deleting subparagraph (b)(3)). Thus, even assuming an award of lost wages in a FELA judgment counts as such a payment, the current RRTA regulations do not attempt to impose taxes on satisfaction of that judgment. The Treasury Department has not since issued regulations or guidance indicating that it considers satisfaction of FELA judgments to be “compensation” or “income” taxable under the RRTA.

That change in the regulations underscores that the government has not “followed [its interpretation] consistently since the inception of the statute.” Wisconsin Cent., 138 S. Ct. at 2075 (Breyer, J., dissenting). Treasury is entitled to no deference when the regulations say nothing about FELA damages awards. See Christensen v. Harris Cty., 529 U.S. 576, 587 (2000) (when regulation “does not address the issue,” it receives no deference).

B. The Regulations' Inclusion Of “Pay For Time Lost” Does Not Support Petitioner's Position

Petitioner (at 34-36) and the government (at 33-34) claim significance from the current regulations still including “pay for time lost” within the definition of compensation. That phrase does not include satisfaction of a judgment. See supra pp. 32-34.

Even assuming that “pay for time lost” encompasses a FELA damages award, the Treasury's inclusion of that language in its regulations is an impermissible interpretation of the statute, because the agency cannot rewrite the law by keeping the language Congress removed. Chevron “does not license interpretive gerrymanders under which an agency keeps parts of statutory context it likes while throwing away parts it does not.” Michigan v. EPA, 135 S. Ct. 2699, 2708 (2015).³²

C. The Revenue Rulings Do Not Support Petitioner's Argument

Contrary to petitioner's suggestion (at 43-44), the Revenue Rulings do not answer the question presented. Those rulings pertain to settlements, not FELA judgments. “[B]ecause neither revenue ruling is directly on point,” the Eighth Circuit rightly gave them “no consideration.” App. 24a n.11. In any event, IRS “interpretive rulings do not have the force and effect of regulations,” and “they may not be used to overturn the plain language of the statute.” Schleier, 515 U.S. at 336 n.8. Tellingly, the government does not even cite them in its brief.³³

D. History Supports The Court Of Appeals' Interpretation

The novelty of petitioner's arguments highlights why its interpretation is incorrect. For more than 80 years, FELA and the RRTA have coexisted, yet no one — not petitioner, not the government, and not the AAR whose members employ 95% of all railroad employees — points to any instance in which the IRS has imposed RRTA taxes on satisfaction of a FELA judgment. The railroads have only recently raised this issue in litigation beginning in 2012.³⁴ The government has piggy-backed on these cases to advance its self-serving position that satisfaction of FELA judgments are taxable under the RRTA.

The government's position is inconsistent with the RRTA's plain text. It also conflicts with the settled treatment of § 104(a)(2) in the parallel FICA context. Although the government disavows those authorities, it provides no persuasive reason to do so. Affirming the Eighth Circuit ensures consistent outcomes across the RRTA and FICA and thus confirms that the statutory scheme operates to effectuate Congress's goal “to promote simplicity and ease of administration” in the tax code. Rowan, 452 U.S. at 257. The government's position on the precise question, advanced for the first time in recent litigation and contrary to many years of practical experience, therefore has no “power to persuade.” Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944); see also Alaska v. Federal Subsistence Bd., 544 F.3d 1089, 1095 (9th Cir. 2008) (“We do not afford Chevron or Skidmore deference to litigation positions unmoored from any official agency interpretation because 'Congress has delegated to the administrative official and not to appellate counsel the responsibility for elaborating and enforcing statutory commands.'”) (quoting Bowen v. Georgetown Univ. Hosp., 488 U.S. 204, 212 (1988)).

CONCLUSION

The judgment of the court of appeals should be affirmed.

Respectfully submitted,

MICHAEL A. WOLFF
JEROME J. SCHLICHTER
NELSON G. WOLFF
SCHLICHTER BOGARD & DENTON LLP
100 South Fourth Street
Suite 1200
St. Louis, Missouri 63102
(314) 621-6115

MICHAEL F. TELLO
TELLO LAW FIRM
2150 Third Avenue North
Suite 10
Anoka, Minnesota 55303
(612) 427-0159

DAVID C. FREDERICK
Counsel of Record
BRENDAN J. CRIMMINS
DANIEL S. SEVERSON
KELLOGG, HANSEN, TODD, FIGEL & FREDERICK, P.L.L.C.
1615 M Street, N.W.
Suite 400
Washington, D.C. 20036
(202) 326-7900
(dfrederick@kellogghansen.com)

DAVID M. BURKE
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(703) 424-5752

September 10, 2018