Tax on medical residents upheld by Supreme Court

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Medical residents are doctors, not students, when it comes to paying federal taxes, the Supreme Court ruled unanimously Tuesday in a decision that "disappointed" the University of Minnesota and the Mayo Clinic, who have been fighting the issue in court for years.

An opinion by Chief Justice John Roberts upholds an Internal Revenue Service requirement that medical residents pay Federal Insurance Contributions Act taxes.

The University of Minnesota and Mayo have argued that medical residents are students who qualify for a long-standing exemption from paying those taxes. Full-time students who work are generally exempt.

But the Supreme Court says medical residents -- who typically work 50 to 80 hours a week -- don't qualify.

The decision ends decades of legal back-and-forth and could cost medical schools $700 million in federal taxes annually. The employer and employee each pay half the tax. The University of Minnesota estimates that the U and its medical residents pay about $4.3 million a year.

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