Labor & Employment Law

FICA tax for medical residents - Supreme Court argument

On November 8 the US Supreme Court will hear oral arguments in Mayo Foundation for Medical Education and Research v. United States. [Details; Briefs]

This case will resolve the question of whether the IRS can categorically exclude medical residents from the student exemption from Social Security tax.

"Residents" participating in accredited graduate medical education programs receive substantial payments (called stipends) from the Mayo Foundation for medical and patient care services provided by the residents at affiliated and unaffiliated hospitals and clinics.

The Internal Revenue Code exempts certain students from Social Security taxes.

Recently promulgated Treasury Regulations categorically exclude all medical residents and other fulltime employees from the definition of "student" in 26 U.S.C. § 3121(b)(10), which exempts from Social Security taxes "service performed in the employ of a school, college, or university" by a "student who is enrolled and regularly attending classes at such school, college, or university."

The trial court held that the regulation was invalid. The 8th Circuit reversed, holding that the regulation "is a permissible interpretation of the statutory student exception."

The US Supreme Court granted certiorari to review the 8th Circuit judgment.

Question presented:

Whether the Treasury Department can categorically exclude all medical residents and other fulltime employees from the definition of "student" in 26 U.S.C. § 3121(b)(10), which exempts from Social Security taxes "service performed in the employ of a school, college, or university" by a "student who is enrolled and regularly attending classes at such school, college, or university."

Full post as published by Ross' Employment Law Blog on November 08, 2010 (boomark / email).