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Medical residents must pay payroll tax

The Supreme Court Justices of the United States sit for a formal group photo in the East Conference Room of the Supreme Court in Washington on October 8, 2010. The Justices are (front row from left) Clarence Thomas, Antonin Scalia, John G. Roberts (Chief Justice), Anthony Kennedy, Ruth Bader Ginsburg; (back row from left) Sonia Sotomayor, Stephen Breyer, Sameul Alito and Elena Kagan, the newest member of the Court. UPI/Roger L. Wollenberg
The Supreme Court Justices of the United States sit for a formal group photo in the East Conference Room of the Supreme Court in Washington on October 8, 2010. The Justices are (front row from left) Clarence Thomas, Antonin Scalia, John G. Roberts (Chief Justice), Anthony Kennedy, Ruth Bader Ginsburg; (back row from left) Sonia Sotomayor, Stephen Breyer, Sameul Alito and Elena Kagan, the newest member of the Court. UPI/Roger L. Wollenberg | License Photo

WASHINGTON, Jan. 11 (UPI) -- The U.S. Supreme Court ruled unanimously Tuesday that medical residents are subject to federal payroll tax.

The Mayo Foundation for Medical Education and Research offers residency programs for doctors who have graduated from medical school but want additional instruction in a chosen specialty. The doctors learn through hands-on experience -- generally spending 50 to 80 hours a week caring for patients, though they also are required to attend formal education activities.

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The residents are paid annual stipends of $40,000 and also get health insurance, malpractice insurance and paid vacation time.

The Mayo Foundation, the Mayo Clinic and the University of Minnesota challenged the payroll tax levied on the resident stipends in federal court, and a federal judge agreed that residents were students not covered by the Federal Insurance Contributions Act. A federal appeals court reversed.

Tuesday, the U.S. Supreme Court agreed with the appeals court, saying that the U.S. Treasury Department's interpretation of federal law, as applied to the residents, was reasonable. In general, the courts "defer" to federal agencies in their interpretation of federal law as long as it is a "reasonable construction" even if the law is not entirely clear.

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"We do not doubt that Mayo's residents are engaged in a valuable educational pursuit or that they are students of their craft," Chief Justice John Roberts wrote in the unanimous opinion. "The question whether they are 'students' for purposes of [the federal statute] 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."

Justice Elena Kagan, who was U.S. solicitor general before taking her seat on the high court this term and was earlier involved in the issue, did not participate in the decision.

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