William N. Ernzen and Helen C. Ernzen v. United States

William and Helen Ernzen, a railroad retiree and his wife, appeal the grant of summary judgment in favor of the government in their action for an income tax refund. The Ernzens sought refunds for their 1985 and 1986 returns, seeking to exclude from income taxes they had paid in previous years on their Tier II railroad retirement benefits. Since Tier II benefits were taxed in part to rescue the Railroad Retirement System from insolvency and since those benefits are taxed in the same manner as private pensions, the Ernzens argued that their income tax payments were not taxes per se, but “contributions” to the Railroad Retirement System which, under general annuity principles, could be excluded from income when received as benefits. The district court granted summary judgment in favor of the government. 715 F.Supp. 1483 . We have jurisdiction under 28 U.S.C. section 1291 and affirm.

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William Ernzen worked for railroad companies from 1937 to 1975. During that period, he made employee contributions to the Railroad Retirement System (RRS), a federally administered retirement system for railroad employees, which is operated pursuant to the Railroad Retirement Act of 1974, 45 U.S.C.A.…