Wisconsin Central Ltd. v. United States


Wisconsin Central Ltd v. United States involved an appeal filed by several railroads on the issue of whether stock options were a form of taxable compensation under the Railroad Retirement Tax Act.

The Supreme Court reversed the holding of the Court of Appeals that ruled that stock options were taxable compensation.


In this case, railroad companies had adopted stock options plans to encourage employee performance. The railroad companies sought a refund of taxes paid on the grounds that stock options were not a form of taxable compensation.

Writing for the majority, Justice Gorsuch engaged in a statutory construction exercise, analyzing the language in the statute that makes remuneration in the form of “money” taxable. The case came down to competing definitions of “money” offered by the government and the railroads.

The majority analyzed the statute at the time Congress passed it to understand the definition of “money.” The Court reviewed how railroads paid their employees at the time of the RRTA. The railroads paid their employees not only in money but also in train tickets, food, and lodging. At the time, Congress did not view these benefits as taxable. Congress only intended to reach “money compensation.” At the time that Congress passed the law, money was understood to only be currency. As such, stock options did not fall under the definition based on the view of the statute as frozen in time.

The Court looked at other laws from the same time period and found similar results. For example, another statute reached “all remuneration in money, or in something which may be used in lieu of money.” However, that regulation did not list stock as something that was taxable. This decision applies to railroad options because their taxation rules come from their own specific statute. It does not apply beyond that to other forms of stock option payments.


Writing for the dissent, Justice Breyer conceded that the language of the statute regarding the word “compensation” was ambiguous. As opposed to reading the plain language of the statute and considering what Congress may have meant at the time, the dissent engaged in its own exercise of statutory interpretation. In the dissent’s view, stock works the same way as a paycheck. It must be converted to cash just the same way as a check. The dissent looked at money and how it changed over time, as opposed to how it was at the exact point in time when Congress passed the law.

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