TaxNewsFlash-Exempt Organizations

September 23, 2008
No. 2008-90

PRINTABLE VERSION

Seventh Circuit Holds Student FICA Exception Not Per Se Inapplicable to Medical Residents

The U.S. Court of Appeals for the Seventh Circuit has joined the Eleventh Circuit by holding today that the so-called "student FICA exception" in section 3121(b)(10) is not per se inapplicable to medical residents as a matter of law; rather, a case-by-case analysis is required to determine whether medical residents qualify for the statutory exemption from FICA taxation. University of Chicago Hospitals v. United States, No 07-1838, (7th Cir. September 23, 2008).

For an electronic version of the Seventh Circuit’s decision: University of Chicago Hospitals

Summary

The University of Chicago Hospitals brought a refund action to recover FICA taxes paid in 1995 and 1996 on behalf of its medical residents.

The federal district court denied the government's motion for summary judgment that the medical residents are categorically not "students" under section 3121(b)(10) and therefore not exempt from FICA tax as a matter of law.

The Seventh Circuit affirmed the district court’s finding and held that the student FICA exception unambiguously does not categorically exclude medical residents as "students" potentially eligible for exemption from FICA taxes.

For more information, contact Rick Speizman, National Partner-In-Charge, KPMG’s Exempt Organizations Tax Practice (ExoTax), at (202) 533-3084 or rspeizma@kpmg.com

To print a copy of this TaxNewsFlash article, go to: File>Print>Preferences or Properties>Landscape.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN BY KPMG TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.

The KPMG logo and name are trademarks of KPMG International.

KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever.

The information contained in TaxNewsFlash-Exempt Organizations is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

Direct comments, including requests for subscriptions, to US-KPMGWNT@kpmg.com. For more information, contact KPMG’s Federal Tax Legislative and Regulatory Services Group at + 1 202.533.4366, 2001 M Street NW, Washington, DC 20036-3310.

To unsubscribe from TaxNewsFlash-Exempt Organizations, reply to US-KPMGWNT@kpmg.com and type ‘Exempt Organizations: Unsubscribe' in the subject line, then click on the SEND button.

Privacy | Legal