Payment Matters: Supreme Court Upholds IRS Rule that Hospitals Must Pay FICA Taxes on Resident Stipends


The United States Supreme Court issued its decision this month in Mayo Foundation for Medical Education v. U.S. [PDF], No. 09-837 (Jan. 11, 2011), upholding IRS regulations that treat medical residents as employees, as opposed to students. As a result, teaching hospitals must pay FICA taxes on their residents’ earnings. The Mayo Foundation opinion brushes aside precedents that constrained agency rulemaking authority, and thereby further entrenches the Court’s deferential approach to judicial review of agency rulemaking, which was announced in Chevron U.S.A. v. National Resources Defense Council, 467 U.S. 837 (1984).

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