WASHINGTON, Nov. 8 (UPI) -- The U.S. Supreme Court Monday heard a case in which it will determine whether medical school residents are primarily employees or students for tax purposes.
In Mayo Foundation Medical Education and Research vs. United States of America, the medical school and medical center petitioners maintained the IRS should not have required them to collect taxes, that their medical residents were students rather than employees.
The 8th U.S. Circuit Court of Appeals had ruled the IRS's student exception was meant only for students who are employed part time while attending classes, and not for residents who are, for the most part, the hospitals' full-time employees.
The justices focused on whether a resident is predominantly a student or an employee. Justice Sonia Sotomayor queried whether the amount of supervision over a resident may be determinative and wondered how work could be separated from learning on any job.
Justice Stephen Breyer, joined by Justice Samuel Alito, concentrated on an analysis that work should be "incidental" to the learning, that the work shouldn't "bulk too large in respect to the whole" residency experience. Theodore B. Olson, the medical establishments' lawyer, agreed, saying the non-educational aspect is "subservient" to the educational process.
Chief Justice John Roberts said "this is basically a very familiar situation of an apprentice who is both an employee and both a student," and that it makes sense to defer to the IRS in making such categorizations.
The Justice Department attorney, Matthew D. Roberts, said the Federal Insurance Contribution Act covers those who are "predominantly" students, which doesn't include medical residents. He said the Treasury Department's policy is that medical residents are employees who should help fund Social Security and earn credit toward disability benefits, and that it's hard to determine on a case-by-case basis what the predominant purpose is in a study-and-employment situation.
Justice Ruth Bader Ginsburg asked whether all resident programs qualify as schools. While Olson said he was unable to answer that, the Justice Department's Roberts said no, the IRS meant to exempt "only those institutions whose primary function is the provision of formal instruction."
