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Business and Policy Areas
Business and Policy Areas

Supreme Court Upholds Regulations Denying Student FICA Exception to Medical Residents

January 14, 2011

The U.S. Supreme Court upheld the IRS regulations making medical residents ineligible for the student exemption from FICA withholding.  The Court concluded that the 2005 rule excluding medical residents was a reasonable interpretation of the underlying statute, which was silent on the matter.

In the case, Mayo Foundation for Medical Education and Research v. United States, Mayo was appealing a ruling by the U.S. Court of Appeals of the Eighth Circuit which upheld an IRS regulation stating that stipends paid to medical residents working more than 40 hours per week are subject to employment taxes. 

The ruling ends an ongoing dispute over the treatment of medical residents for purposes of the student exemption from FICA withholding.  Chief Justice Roberts wrote the unanimous opinion, stating,

“We do not doubt that Mayo's residents are engaged in a valuable educational pursuit or that they are students of their craft. The question whether they are ‘students’ for purposes of §3121, however, is a different matter. Because it is one to which Congress has not directly spoken, and because the Treasury Department's rule is a reasonable construction of what Congress has said, the judgment of the Court of Appeals must be affirmed.”

The Supreme Court’s decision upholds the regulations that became effective April 1, 2005. Refund claims for FICA withheld by medical schools prior to April 1, 2005, are currently being processed for settlement by the U.S. Justice Department, for institutions that filed timely claims with the IRS for amounts of medical resident FICA paid prior to that date.  


Mary Bachinger
Director, Tax Policy