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Supreme Court to decide whether medical residents qualify for FICA exception

The US Supreme Court has granted cert in Mayo Foundation for Medical Educ and Research v United States (Dkt No 09-837) to consider whether medical residents are qualified for the student FICA exception and to resolve a split in the circuits on the issue. A district court had ruled medical residents at the university, like those at Mayo, are “students” within the meaning of the statutory student exemption. However, the Eighth Circuit reversed, determining that the federal government could categorically exclude all medical residents, and other full-time 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.”

Essentially, the Eighth Circuit concluded that medical residents did not qualify for the student FICA exception. The Eighth Circuit reasoned that the statute is ambiguous on the question of whether a medical resident working full-time for a teaching hospital/medical school is a student who is enrolled and regularly attending classes. As such, the IRS interpreted the provision limiting the student FICA exception, to services that are incident to, and for the purpose of, pursuing a course of study, as not including full-time students. The Eighth Circuit acknowledged that the Second, Sixth, Seventh, and Eleventh Circuits had recently declared the student exception statute was “unambiguous.” However, it argued that its sister circuits’ interpretation of the student exemption “cannot be correct.”