Justices Uphold Treasury Rule That Medical Residents Subject to FICA Tax

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The U.S. Supreme Court unanimously holds that the Treasury Department acted reasonably in promulgating a rule that says medical residents are not exempt from paying employment taxes under the Federal Insurance Contributions Act. In Mayo Foundation for Medical Education and Research v. United States, “the Supreme Court provided some much needed clarity to the question of how much deference is owed to a final regulation,” Ronald L. Buch Jr. of Bingham McCutchen LLP in Washington, D.C., tells BNA. “Unfortunately for taxpayers, that clarity may have heightened the bar for taxpayers when challenging final regulations.” The high court opinion by Chief Justice Roberts deals with regulations providing that medical residents who work more than 40 hours per week do not qualify for the student exception under Section 3121(b)(10) of the Internal Revenue Code.