Supreme Court Holds Medical Residents are Not Students for Purposes of FICA

Abstract

“How do you draw the line between a student who is working and a worker who is studying?” This question, asked by Justice Sotomayor during oral arguments for Mayo Foundation v. U.S., highlighted the issue as to whether medical residents should be considered students for FICA purposes. Specifically at issue was whether residents that worked and received training at the Mayo Foundation for Medical Education and Research were exempt from FICA under the “student exemption” in section 3121(b)(10) of the Internal Revenue Code. Following several adverse decisions, the Treasury Department recently amended a long-standing regulation by adding a “full-time employee” limitation, which effectively removes residents from the exemption. The district court invalidated the amended regulation, however the Eighth Circuit reversed. In January 2011, the U.S. Supreme Court resolved the issue in favor of the government based on its finding that the regulation is a permissible construction of the statute.