Court finds residents are workers for tax purposes (Jan. 11, 2011)

The Supreme Court held that the services of a medical resident do not fall within the student exception of the Federal Insurance Contribution Act.

The Mayo Foundation and the University of Minnesota file a lawsuit against the Internal Revenue Service in 2005 to fight the government's claim that they owed FICA taxes on their wage payments to full-time medical residents.

The U.S. District Court for the District of Minnesota found that IRS regulations limiting the student FICA exception to students who are not full-time employees is not a permissible interpretation of the statute.

In June 2009, a three-judge panel on the 8th U.S. Circuit Court of Appeals reversed, noting: "we must defer to the regulation limiting this exception to students who are not full-time employees because it is a permissible interpretation of the statute."

On Jan. 11, 2011, a unanimous Supreme Court affirmed the lower court order in an opinion by Chief Justice John Roberts. Justice Elena Kagan did not take part in consideration of the case.

Question presented: Whether the Treasury Department can 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.”