US Supreme Court To Consider Tax Rule On Medical Residents

Yesterday, the U.S Supreme Court decided they would hear a case regarding the payment of social security taxes for students of medical colleges and teaching hospitals. As the Wall Street Journal explains, the law being challenged is an old Treasury Department rule asserting that medical residents and other "full-time employees" cannot qualify for the general student exemption from Social Security taxes.

At stake is the tax treatment of medical residents nationwide, of which there are currently about 100,000, and $700 million in annual revenue to the federal government, according to court papers.

The Mayo Clinic and the University of Minnesota challenged the Treasury ruling and have also sought refunds for Social Security taxes they already paid on behalf of medical residents.

The St. Louis-based 8th U.S. Circuit Court of Appeals sided with the IRS in a ruling last June.

In their petition to the Supreme Court, the Mayo Clinic and University of Minnesota said four other federal appeals courts have sided with hospitals against the government on the issue. That leaves medical residents in the 8th Circuit--which covers Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota and South Dakota--subject to taxes that their peers elsewhere in the U.S. do not have to pay, they argued.

The Social Security tax represents 12.4% of wages. Half of the tax is paid by the employer and half by the employee. For a medical resident earning a $50,000 stipend, that represents $3,100 paid by the resident and $3,100 paid by the hospital.

Continue reading at Wall Street Journal.com…

States Weigh Campaign-Finance Changes

From USAToday.com:

State lawmakers around the country are rushing to rewrite campaign-finance laws following the U.S. Supreme Court's recent ruling that opened the door to unlimited corporate and union money in elections and upended laws in nearly half the states.

The nation's highest court ruled last month that limits on corporate and union spending on independent political ads violate the Constitution's free-speech protections.

Bills pending in Iowa and Maryland, for instance, seek to blunt the ruling's effect by requiring shareholder approval of political spending and forcing public disclosure of corporate spending in state candidate elections. Two top Democrats in Congress, New York Sen. Chuck Schumer and Maryland Rep. Chris Van Hollen, recently proposed a bill that would impose similar disclosure requirements in congressional and presidential elections.

"States can't overturn it directly, but they can nip at the edges to make it more difficult for corporations to spend this kind of money," said Nathaniel Persily, a Columbia Law School professor and election-law expert.

"The shareholder-approval bills, if they become law, could have a dramatic effect," Persily added, "only because few companies are going to want to jump through the hoop of getting shareholder approval" before launching ad campaigns that call for the election or defeat of candidates.