In Mayo Foundation for Medical Education v. United States, the Supreme Court of the United States considered whether medical residents are “students” exempt from paying Social Security taxes. The case involved the Mayo Foundation’s residency programs, which provided stipends to doctors who had graduated from medical school and who sought additional instruction in a particular area of specialty. Residents in the programs participated in some formal educational activities, but the majority of their time was spent working with patients.

Nearly all wage-earning Americans pay taxes on their wages under the Federal Insurance Contributions Act (FICA), which Congress enacted to collect funds for Social Security. There are, however, a few exemptions under which certain workers do not have to pay FICA taxes. One such exemption is for students. Specifically, 26 U.S.C. § 3121(b)(10) 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.”

In a unanimous decision issued on January 11, 2011, the Supreme Court held that the Mayo Foundation’s medical residents were employees rather than students and, therefore, were subject to FICA taxes. The court relied in part on an Internal Revenue Service (IRS) regulation interpreting the student exemption, in which the IRS stated that individuals regularly scheduled to work 40 hours per week or more cannot claim the student exemption. Mayo Foundation for Medical Education and Research v. United States, No. 09-837 (U.S. Jan. 11, 2011)