The Mayo Foundation for Medical Education and Research, the Mayo Clinic, and the Regents of the University of Minnesota (collectively, Mayo) offer residency programs to doctors who have graduated from medical school and seek additional instruction in a chosen specialty.(The three entities offering the residency programs will be referred to collectively as "Mayo.")These programs, which typically last for three to five years, train physicians primarily through hands-on experience.Although residents are required to take part in formal educational activities, these doctors generally spend the bulk of their timetypically 50 to 80 hours a weekcaring for patients.Residents are generally supervised in this work by more senior residents and by faculty members known as attending physicians.Mayo pays its residents annual stipends (ranging from $41,000 to $56,000 at the time of the case described below) and provides them with health insurance, malpractice insurance, and paid vacation time.

Congress enacted the Federal Insurance Contributions Act (FICA) in order to collect funds for the Social Security program.FICA requires employees and employers to pay taxes on all "wages" employees receive.The statute defines "wages" to include "all remuneration for employment."FICA also broadly defines "employment" as "any service ... performed ... by an employee for the person employing him."However, FICA excludes from taxation any "service performed in the employ of ... a school, college, or university ... if such service is performed by a student who is enrolled and regularly attending classes at [the school, college, or university]."26 U.S.C. 3121(b)(10).The Social Security Act, which governs workers' eligibility for benefits, contains a corresponding student exception that is nearly identical to 3121(b)(10).

Since 1951, the United States Treasury Department (Department) has construed the student exception to exempt from taxation students who work for their schools "as an incident to and for the purpose of pursuing a course of study" (quoting a Treasury Department regulation).For many years, the Department determined whether an individual's work was "incident to" his studies by performing a case-by-case analysis that focused on the number of hours worked and the course load taken.Because the case-by-case approach proved to be problematic administratively and in other ways, the Department "determined that it [wa]s necessary to provide additional clarification" of the term "student," as used in 3121(b)(10), particularly with respect to individuals who perform "services that are in the nature of on the job training" (quoting the Federal Register).

Therefore, after solicitation of comments and a public hearing, the Department issued a new regulation in late 2004.This regulation, referred to here as the full-time employee rule, stated that an employee's service is "incident" to his studies only when "[t]he educational aspect of the relationship between the employer and the employee, as compared to the service aspect of the relationship, [is] predominant."The full-time employee rule categorically provides that "[t]he services of a full-time employee"which includes an employee normally scheduled to work 40 hours or more per week"are not incident to and for the purpose of pursuing a course of study."According to the rule, this analysis "is not affected by the fact that the services ... may have an educational, instructional, or training aspect."In addition, the rule offers the example of a medical resident whose normal schedule requires him to perform services 40 or more hours per week, and concludes that such a resident is not a student.

Mayo filed suit, asserting that the full-time employee rule was invalid.A federal district court agreed and granted summary judgment in Mayo's favor after finding the full-time employee rule inconsistent with FICA's unambiguous text.The U.S. Court of Appeals for the Eighth Circuit reversed.The Eighth Circuit concluded that the Department's regulation was a permissible interpretation of an ambiguous statute.The Supreme Court granted Mayo's petition for certiorari.

TRUE/FALSE QUESTIONS ( with short explanation)

a) The Treasury Department is an administrative department within the Executive Branch of government, and the President can fire the Secretary of Treasury at any time with or without cause.

b) The Treasury Department's full-time student regulation was not entitled to Chevron deference, because Congress clearly defined the term student in passing the Internal Revenue Code's FICA exemption for student employees of colleges and universities.

c) The U.S. Congress can overturn the Treasury Department's full-time student regulation if the House of Representatives and the U.S. Senate pass and reconcile resolutions overturning the regulation and restoring the definition of full-time student advocated by Mayo, and the final, reconciled resolution is signed by the President.

d) The Treasury Department's full-time student regulation was an unreasonable interpretation of the FICA provision in the Internal Revenue Code, and hence is arbitrary and capricious.

e) The revised regulation issued by the Treasury Department in late 2004 which redefined the full-time student exception which was exempt from taxation and excluded medical residents who were required to perform services 40 or more hours per week was improperly implemented through its rule making function.