• Second Circuit Overturns Two Decisions Finding Medical Residents Subject to FICA
  • June 5, 2009 | Authors: Pierre Georges Bonnefil; Héctor A. Chichoni; Robert S. Groban; Jang Hyuk Im; William M. Poole
  • Law Firms: Epstein Becker & Green, P.C. - New York Office ; Epstein Becker & Green, P.C. - Miami Office ; Epstein Becker & Green, P.C. - New York Office ; Epstein Becker & Green, P.C. - San Francisco Office ; Epstein Becker & Green, P.C. - Atlanta Office
  • The U.S. Court of Appeals for the Second Circuit has reversed two New York federal district courts that held that medical residents are "categorically ineligible" for Federal Insurance Contributions Act (FICA) tax exemptions for students. See United States v. Memorial Sloan-Kettering Cancer Center, No. 07-0926 (2d Cir. Mar. 25, 2009).

    The two cases raised the issue of whether postgraduate medical residents can invoke the FICA exemption for students. In each case, the district court ruled, as a matter of law, that postgraduate medical residency programs are not schools and that medical residents are not students.

    In the decision, Judge Peter V. Hall wrote that Congress has not defined the term ‘student' so there was no basis for the lower court's conclusion that a postgraduate doctor could never be eligible for the exception. After extensively reviewing the legislative history, the Second Circuit concluded:

    "We agree with the Sixth, Seventh, and Eleventh Circuits that the statue is unambiguous and that whether medical residents are ‘students' and the Hospitals ‘schools' is a question of fact, not a question of law," "… [T]he Hospitals do not urge us to adopt an unusual or strained interpretation of the statutory text. They seek only the opportunity to prove, through the introduction of evidence, that their residents come within the terms of the text."

    The Second Circuit reversed and remanded for further fact finding on these issues.