News & Information

CCH® UNEMPLOYMENT INSURANCE — 8/12/14

Refund of taxes denied where state university’s medical residents were not covered by student exclusion under FICA

A state university’s medical residents were not covered by the student exclusion in the 42 U.S.C. §418 agreement between Texas and the Social Security Administration (SSA); therefore, the university’s claim for refund of the Social Security taxes it paid on behalf of its medical residents was denied. The §418 agreement was a contract that required the SSA to extend Social Security coverage to state employees covered by the agreement and obligated the state to pay FICA taxes for those employees. When the student exclusion was added to the agreement, the SSA’s long-held position was that medical residents were not students for purposes of the student exclusion and the university failed to show that the state defined the student exclusion differently. Moreover, the university paid Social Security taxes for its residents for several years after the student exclusion was added to the agreement and did not object to the SSA’s definition of "student." Summary judgment in favor of the United States was affirmed (University of Texas System v. U.S., CA-5, No. 13-50739, July 16, 2014).