MAYO FOUNDATION FOR MEDICAL EDUCATION AND RESEARCH ET AL. v. UNITED STATES
No. 09-837
SUPREME COURT OF THE UNITED STATES
Argued November 8, 2010—Decided January 11, 2011
562 U.S. 44
Theodore B. Olson argued the cause for petitioners. With him on the briefs were Matthew D. McGill, Amir C. Tayrani, and John W. Windhorst, Jr.
Matthew D. Roberts argued the cause for the United States. With him on the brief were Deputy Solicitor Gen-eral Kneedler, Acting Assistant Attorney General DiCicco, Deputy Solicitor General Stewart, Teresa E. McLaughlin, and Bridget M. Rowan.*
CHIEF JUSTICE ROBERTS delivered the opinion of the Court.
Nearly all Americans who work for wages
I
A
Most doctors who graduate from medical school in the United States pursue additional
Mayo residents also take part in “a formal and structured educational program.” Brief for Petitioners 5 (internal quotation marks omitted). Residents are assigned
B
Through the Social Security Act and related legislation, Congress has created a comprehensive national insurance system that provides benefits for retired workers, disabled workers, unemployed workers, and their families. See United States v. Lee, 455 U. S. 252, 254, 258, and nn. 1, 7 (1982). Congress funds Social Security by taxing both employers and employees under FICA on the wages employees earn. See
Congress has, however, exempted certain categories of service and individuals from FICA‘s demands. As relevant here, Congress has excluded from taxation “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 such school, college, or university.”
Since 1951, the Treasury Department has applied 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” there. 16 Fed. Reg. 12474 (adopting
For its part, the Social Security Administration (SSA) also articulated in its regulations a case-by-case approach to the corresponding student exception in the Social Security Act. See
Facing that flood of claims, the Treasury Department “determined that it [wa]s necessary to provide additional clarification of the ter[m]” “student” as used in
On December 21, 2004, the Department adopted an amended rule prescribing 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.” Id., at 76408;
C
After the Department promulgated the full-time employee rule, Mayo filed suit seeking a refund of the money it had withheld and paid on its residents’ stipends during the second quarter of 2005. 503 F. Supp. 2d 1164, 1166-1167 (Minn. 2007); Regents of Univ. of Minn. v. United States, Civ. No. 06-5084 (D Minn., Apr. 1, 2008), App. to Pet. for Cert. 47a. Mayo asserted that its residents were exempt under
The District Court granted Mayo‘s motion for summary judgment. The court held that the full-time employee rule is inconsistent with the unambiguous text of
The Government appealed, and the Court of Appeals reversed. 568 F. 3d 675. Applying our opinion in Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U. S. 837 (1984), the Court of Appeals concluded that “the statute is silent or ambiguous on the question whether a medical resident working for the school full-time is a ‘student‘” for purposes of
We granted Mayo‘s petition for certiorari. 560 U. S. 938 (2010).
II
A
We
Mayo nonetheless contends that the Treasury Department‘s full-time employee rule must be rejected under Chevron step one. Mayo argues that the dictionary definition of “student“—one “who engages in ‘study’ by applying the mind ‘to the acquisition of learning, whether by means of books, observation, or experiment‘“—plainly encompasses residents. Brief for Petitioners 22 (quoting Oxford Universal Dictionary 2049-2050 (3d ed. 1955)). And, Mayo adds, residents are not excluded from that category by the only limitation on students Congress has imposed under the statute—that they “be ‘enrolled and regularly attending classes at [a] school.‘” Brief for Petitioners 22 (quoting
Mayo‘s reading does not eliminate the statute‘s ambiguity as applied to working professionals. In its reply brief, Mayo acknowledges that a full-time professor taking evening classes—a person who presumably would satisfy the statute‘s class-enrollment requirement and apply his mind to learning—could be excluded from the exemption and taxed because he is not “predominant[ly]” a student. Reply Brief for Petitioners 7. Medical residents might likewise be excluded on the same basis; the statute itself does not resolve the ambiguity.
The District Court interpreted
To the extent Congress has specifically addressed medical residents in
In sum, neither the plain text of the statute nor the District Court‘s interpretation of the exemption “speak[s] with the precision necessary to say definitively whether [the statute] applies to” medical residents. United States v. Eurodif S. A., 555 U. S. 305, 319 (2009).
B
In the typical case, such an ambiguity would lead us inexorably to Chevron step two, under which we may not disturb an agency rule unless it is “‘arbitrary or capricious in substance, or manifestly contrary to the statute.‘” Household Credit Services, Inc. v. Pfennig, 541 U. S. 232, 242 (2004)
Mayo asks us to apply the multifactor analysis we used to review a tax regulation in National Muffler, supra. There we explained:
“A regulation may have particular force if it is a substantially contemporaneous construction of the statute by those presumed to have been aware of congressional intent. If the regulation dates from a later period, the manner in which it evolved merits inquiry. Other relevant considerations are the length of time the regulation has been in effect, the reliance placed on it, the consistency of the Commissioner‘s interpretation, and the degree of scrutiny Congress has devoted to the regulation during subsequent re-enactments of the statute.” Id., at 477.
The Government, on the other hand, contends that the National Muffler standard has been superseded by Chevron. The sole question for the Court at step two under the Chevron analysis is “whether the agency‘s answer is based on a permissible construction of the statute.” 467 U. S., at 843.
Since deciding Chevron, we have cited both National Muffler and Chevron in our review of Treasury Department regulations. See, e. g., United States v. Cleveland Indians Baseball Co., 532 U. S. 200, 219 (2001) (citing National Muffler); Cottage Savings Assn. v. Commissioner, 499 U. S. 554, 560-561 (1991) (same); United States v. Boyle, 469 U. S. 241, 246, n. 4 (1985) (citing Chevron); see also Atlantic Mut. Ins. Co. v. Commissioner, 523 U. S. 382, 387, 389 (1998) (citing Chevron and Cottage Savings).
Although we have not thus far distinguished between National Muffler and Chevron, they call for different analyses of an ambiguous statute. Under National Muffler, for example, a court might view an agency‘s interpretation of a statute with heightened skepticism when it has not been consistent over time, when it was promulgated years after the relevant statute was enacted, or because of the way in which the regulation evolved. 440 U. S., at 477. The District Court in this case cited each of these factors in rejecting the Treasury Department‘s rule, noting in particular that the regulation had been promulgated after an adverse judicial decision. See 503 F. Supp. 2d, at 1176; see also Brief for Petitioners 41-44 (relying on the same considerations).
Under Chevron, in contrast, deference to an agency‘s interpretation of an ambiguous statute does not turn on such considerations. We have repeatedly held that “[a]gency inconsistency is not a basis for declining to analyze the agency‘s interpretation under the Chevron framework.” National Cable & Telecommunications Assn. v. Brand X Internet Services, 545 U. S. 967, 981 (2005); accord, Eurodif S. A., supra, at 316. We have instructed that “neither antiquity nor contemporaneity with [a] statute is a condition of [a regulation‘s] validity.” Smiley v. Citibank (South Dakota), N. A., 517 U. S. 735, 740 (1996). And we have found it immaterial to our analysis that
Aside from our past citation of National Muffler, Mayo has not advanced any justification for applying a less deferential standard of review to Treasury Department regulations than we apply to the rules of any other agency. In the absence of such justification, we are not inclined to carve out an approach to administrative review good for tax law only. To the contrary, we have expressly “[r]ecogniz[ed] the importance of maintaining a uniform approach to judicial review of administrative action.” Dickinson v. Zurko, 527 U. S. 150, 154 (1999). See, e. g., Skinner v. Mid-America Pipeline Co., 490 U. S. 212, 222-223 (1989) (declining to apply “a different and stricter nondelegation doctrine in cases where Congress delegates discretionary authority to the Executive under its taxing power“).
The principles underlying our decision in Chevron apply with full force in the tax context. Chevron recognized that “[t]he power of an administrative agency to administer a con-gressionally created . . . program necessarily requires the formulation of policy and the making of rules to fill any gap left, implicitly or explicitly, by Congress.” 467 U. S., at 843 (internal quotation marks omitted). It acknowledged that the formulation of that policy might require “more than ordinary knowledge respecting the matters subjected to agency regulations.” Id., at 844 (internal quotation marks omitted). Filling gaps in the Internal Revenue Code plainly requires the Treasury Department to make interpretive choices for statutory implementation at least as complex as the ones other agencies must make in administering their statutes. Cf. Bob Jones Univ. v. United States, 461 U. S. 574, 596 (1983) (“In an area as complex as the tax system, the agency Congress vests with administrative responsibility must be able to exercise its authority to meet changing conditions and new problems“). We see no reason why our review of tax regulations should not be guided by agency expertise pursuant to Chevron to the same extent as our review of other regulations.
As one of Mayo‘s amici points out, however, both the full-time employee rule and the rule at issue in National Muffler were promulgated pursuant to the Treasury Department‘s general authority under
Since Rowan and Vogel were decided, however, the administrative landscape has changed significantly. We have held that Chevron deference is appropriate “when it appears that Congress delegated authority to the agency generally to make rules carrying the force of law, and that the agency interpretation claiming deference was promulgated in the exercise of that authority.” Mead, 533 U. S., at 226-227. Our inquiry in that
We believe Chevron and Mead, rather than National Muffler and Rowan, provide the appropriate framework for evaluating the full-time employee rule. The Department issued the full-time employee rule pursuant to the explicit authorization to “prescribe all needful rules and regulations for the enforcement” of the Internal Revenue Code.
We have explained that “the ultimate question is whether Congress would have intended, and expected, courts to treat [the regulation] as within, or outside, its delegation to the agency of ‘gap-filling’ authority.” Id., at 173 (emphasis deleted). In the Long Island Care case, we found that Chevron provided the appropriate standard of review “[w]here an agency rule sets forth important individual rights and duties, where the agency focuses fully and directly upon the issue, where the agency uses full notice-and-comment procedures to promulgate a rule, [and] where the resulting rule falls within the statutory grant of authority.” 551 U. S., at 173. These same considerations point to the same result here. This case falls squarely within the bounds of, and is properly analyzed under, Chevron and Mead.
C
The full-time employee rule easily satisfies the second step of Chevron, which asks whether the Department‘s rule is a “reasonable interpretation” of the enacted text. 467 U. S., at 844. To begin, Mayo accepts that “the ‘educational aspect of the relationship between the employer and the employee, as compared to the service aspect of the relationship, [must] be predominant‘” in order for an individual to qualify for the exemption. Reply Brief for Petitioners 6-7 (quoting
We disagree. Regulation, like legislation, often requires drawing lines. Mayo does not dispute that the Treasury Department reasonably sought a way to distinguish between workers who study and students who work, see IRS Letter Ruling 9332005 (May 3, 1993). Focusing on the hours an individual works and the hours he spends in studies is a perfectly sensible way of accomplishing that goal. The Department explained that an individual‘s service and his “course of study are separate and distinct activities” in “the vast majority of cases,” and reasoned that “[e]mployees who are working enough hours to be considered full-time employees . . . have filled the conventional measure of available time with work, and not study.” 69 Fed. Reg. 8607. The Department thus did not distinguish classroom education from clinical training but rather education from service. The Department reasonably concluded that its full-time employee rule would “improve administrability,” id., at 76405, and it thereby “has avoided the wasteful litigation and continuing uncertainty that would inevitably accompany any purely case-by-case approach” like the one Mayo advocates, United States v. Correll, 389 U. S. 299, 302 (1967).
As the Treasury Department has explained, moreover, the full-time employee rule has more to recommend it than administrative convenience. The Department reasonably determined that taxing residents under FICA would further the purpose of the Social Security Act and comport with this Court‘s precedent. As the Treasury Department appreciated, this Court has understood the terms of the Social Security Act to “import a breadth of coverage,” 69 Fed. Reg. 8605 (quoting Social Security Bd. v. Nierotko, 327 U. S. 358, 365 (1946)), and we have instructed that “exemptions from taxation are to be construed narrowly,” Bingler v. Johnson, 394 U. S. 741, 752 (1969). Although Mayo contends that medical residents have not yet begun their “working lives” because they are not “fully trained,” Reply Brief for Petitioners 13 (internal quotation marks omitted), the Department certainly did not act irrationally in concluding that these doctors—“who work long hours, serve as highly skilled professionals, and typically share some or all of the terms of employment of career employees“—are the kind of workers that Congress intended to both contribute to and benefit from the Social Security system, 69 Fed. Reg. 8608.
The Department‘s rule takes into account the SSA‘s concern that exempting residents from FICA would deprive residents and their families of vital disability and survivorship benefits that Social Security provides. Id., at 8605. Mayo wonders whether the full-time employee rule will result in residents being taxed under FICA but denied coverage by the SSA. The Government informs us, however, that the SSA continues to adhere to its longstanding position that medical residents are not students and thus remain eligible for coverage. Brief for United States 29-30; Tr. of Oral Arg. 33-34.
We do not doubt that Mayo‘s residents are engaged in a valuable educational pursuit
It is so ordered.
JUSTICE KAGAN took no part in the consideration or decision of this case.