Tax Legal Services · Primary-source case analysis

Mayo Foundation: Treasury Could Treat Full-Time Medical Residents as Employees for FICA

By Aneeta Mishra and Timothy Chan

Published April 15, 2026

Mayo Foundation resolved whether institutions could treat medical residents working full time as students whose services were exempt from Social Security taxes.

The student exception and the full-time rule

FICA generally taxes wages paid by employers and employees but excludes services performed by a student enrolled and regularly attending classes at a school. Treasury adopted a rule providing that a worker whose normal schedule is forty hours or more per week is not a student for this exception. The rule expressly used a medical resident as an example.

The challenge by teaching hospitals

Mayo and the University of Minnesota paid FICA taxes on stipends to medical residents and sought refunds. They argued that residents qualified as students and that Treasury’s categorical full-time-employee rule was invalid. The district court agreed, but the Eighth Circuit reversed.

One administrative-law framework

The Supreme Court declined to apply a special, less-deferential standard simply because the regulation arose under the tax laws. It used the general Chevron framework then governing review of agency interpretations and concluded that Treasury reasonably distinguished workers who study from students who work.

Holding

The Court unanimously affirmed the Eighth Circuit and upheld the regulation. Medical residents working the schedule described by the rule could be treated as employees subject to FICA. The decision concerned the validity of the regulation, not an individualized factual exemption outside its terms.

Key takeaways

• The student exception does not cover workers treated as full-time employees under the regulation.
• Medical training and educational features did not invalidate Treasury’s categorical rule.
• The Court applied the ordinary framework for reviewing agency rules.
• Current disputes must account for later changes in administrative-law doctrine while starting with the operative regulation.