Facts of the Case
The Mayo Foundation for Medical Education and Research ("Mayo") and the University of Minnesota ("University") sued the United States in a Minnesota federal district court seeking a refund for taxes paid under the Federal Insurance Contributions Act ("FICA"). They argued that payments made to doctors in their residency qualify for FICA's student exemption. The district court agreed and awarded judgment in favor of Mayo and the University.
On appeal, the U.S. Court of Appeals for the Eighth Circuit reversed, holding that the residents in this case did not qualify for the FICA exemption. The court reasoned that Treasury Regulation 26 U.S.C. § 3121(b)(10) excludes "full-time employees" from the FICA student exemption. Here, the resident doctors were full-time employees and, therefore, were excluded from the FICA exemption.
Questions
Can the Treasury Department categorically exclude all medical residents who meet the FICA definition of student and who would be subject to the FICA student exemption?
Conclusions
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Yes. Chief Justice John G. Roberts, Jr. writing for a unanimous Court, upheld the Treasury Department's rule that treats medical residents as full-time employees, and therefore not exempt from the payment of payroll taxes is a valid interpretation of federal law. Justice Elena Kagan did not take part in the decision.
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