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Mayo asserted that its medical residents were exempt from Federal Insurance Contributions Act (FICA) taxes under I.R.C. § 3121(b)(10) and that 26 C.F.R. § 31.3121(b)(1)-2(d)(3)(iii), the Treasury Department's (TD) Full-time Employee Rule, was invalid.
I.R.C. § 3121(b)(10) did not define student or address medical residents. The specific exclusions in § 3121(b)(6)(B), (7)(C)(ii), cast doubt on a claim that Congress specifically intended to insulate medical residents from FICA. The Rule was promulgated pursuant to I.R.C. § 7805(a)'s explicit authorization, after notice-and-comment, indicating that Chevron provided the appropriate framework. Focusing on hours worked and hours spent in studies reasonably distinguished between workers who studied and students who worked: employees working enough hours to be considered full-time filled the conventional measure of available time with work. The Rule did not distinguish between classroom education and clinical training, but education from service. The TD reasonably concluded the Rule avoided the litigation and uncertainty under a case-by-case approach and that taxing residents under FICA would further the Social Security Act (SSA). It was not irrational to find the residents--who worked long hours, were highly skilled, and typically shared some or all of the terms of employment of career employees--were the kind of workers Congress intended to contribute to and benefit from the SSA.
The Court of Appeals' judgment finding the Rule valid was affirmed. 8-0 decision. Justice Kagan took no part in the consideration or decision of the case.
LEXIS.com users can view the enhanced version of Mayo Found. for Med. Educ. & Research v. United States, 2011 U.S. 609 (U.S. Jan. 11, 2011).
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