Wisconsin Central Ltd v. United States

Case Name:  Wisconsin Central Ltd v. United States

Court:  Supreme Court

Date: 2018


In Wisconsin Central Ltd v. United States (585 U. S. ____ (2018), the Supreme Court was asked to decide whether stock options that a railroad pays to its employees are subject to income tax under the Railroad Retirement Tax Act of 1937. In a 5-4 decision, the Court held that stock options are not monetary remuneration, and thus, they are not taxable.


The Wisconsin Central Railroad was challenging an appeals court ruling affirming the district court’s decision that these stock options were taxable. The appellant had been granting employees stock options that the federal government was seeking to tax.

At issue was language in the law that said that compensation subject to tax was any kind of “money remuneration.” At the time the law was passed, railroads had been giving employees food, lodging, and railroad tickets. These were considered “in-kind” compensation and were not taxable.

The railroad argued that stock options were in-kind compensation, while the government states that they were money remuneration because they could easily be converted into money.

Writing for the majority, Justice Gorsuch sided with the railroad. The Court interpreted the words “money remuneration” in the statute and held that the word remuneration was modified and limited by the word “money.”

Here, stock options are not accepted for goods and services and cannot be considered money. Justice Gorsuch went back to 1937 to explain what money meant at the time. He rejected the appeals court’s finding that the definition of “money” has evolved over time.

The majority believed that, when interpreting the words of the statute, they should place themselves in the shoes of the drafter of the law at the time they wrote it. Justice Gorsuch argued that just because something may have an expressed value does not automatically make it money.


Accordingly, these stock options are not considered taxable since they do not meet the statutory definition.

Justice Breyer authored the dissent. He examined stock options and the way that they work in practice to reach the result that they would be considered money remuneration. Justice Breyer argued that the government should not be limited to what may have been considered money in the 1930s, when today’s reality is far different.

As a result of the case, railroad employers may now look to take advantage of paying their employees in options to save money on their taxes. They may also seek to pay other forms of non-cash compensation to minimize their tax burden.

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