please the court jeremy mar well for the university of texas appellants for decades congress has allowed states to choose which of their own employees participate in the social security system and pay social security tax states make this choice  through an agreement with the social security administration u t central contention in this case is that the tax questions are controlled by the plain language of the social security regulation which requires a case by case i just mean why are they controlled by the agreement i liked your opening statement but then it seems to me that nobody has spent very much time on contract construction kind of arguments and why is that why well aren't we construing this agreement so i think you are construing this agreement and you're construing the word student as it occurs in that agreement and i think you can find in our favor if you construe that in light of the social security regulation which we think is the appropriate you know elaboration of what the word student means but not in have a regulation on the books that was promulgated through notice and comment and then you have social security ruling an informal ruling seventy three and the acquiescence for all we think for several reasons the acquiescence ruling and the at seventy three would not control here first i think whatever flavor of difference you might be inclined to apply no difference doctrine allows an agency to take an internment informal interpretation that is contrary to the plain language of the regulation that's on the book constrain agreement and you can join agreement around the in line surrounding circumstances and surrounding circumstances when you all did your second your amendment was the social security's announced position that outside of the eighth circuit we think residents are not students as well that was the course of performance for eight ten years something like that a number of years so the two things that we would look at which is the surrounding circumstances and this course of performance cut against was executed the longstanding store security regulation and you also had the surface decision after which said these contrary informal interpretations that say sort of in a conclusory fashion that residents are not students can't control and there there it could in conflict with the plain language  regulation and the plain language controls so i think when you when you're looking at what texas would have understood when it was signed this agreement you had you had absolute on the books in the plain language on the books and then as to course of performance there's not i would disagree that it's eight to ten years the the argument that texas is making with respect to the state employee exemption based on the student amendment would not have been available until the agreement was amended in one thousand nine hundred nine that amendment didn't take effect it wasn't in effect until june of two thousand and the legal landscape with respect to how strong texas claim would be we think changed significantly for the treasury department amended its regulation how long were you doing that withholding consistent with the united states is now  initial i think from june two thousand and two the beginning of two thousand and five in this case the five years or the half maybe and this case involves just to second three quarters of two thousand and five which were the first quarter's that u t could claim this  once the new treasury regulation was in effect so there were no quarters that u t was not making this claim once the legal landscape is as it is now which we think again that the plain language of the source occurred a regulation which has been in effect consistently these are security regs administration has not amended it in sixteen years since axel and you have not only that circuit but for other courts of appeals who looked at that regulation or looked at text that was very similar in the old treasury regulation and said this is a case by case standard it's the same case where the court seemed to make a categorical determination that residents were stupid that seemed to be getting is that what i want i think i think i think that's correct at least at the university of minnesota that's right and so what the district court did here was to make a categorical statement categorical conclusion without any facts about the residency programs at the university of texas so when you say case by case you're not suggesting that we go re apartheid was the concession that u t agrees that these residents worked more than forty hours a week what determination would you recommend the record make in that connection as regards university tech well you know and its affiliates so as the case comes to this court we have no record about what these different program is your client what do you think what are these what are these programs how do they differ on how are they similar to university of minnesota so we'll know short so i think at a minimum you have the fact these residency programs are all accredited by the national body that sets pacific requirements and i think it's important to note that even though residents in our programs work more than forty hours a week that was the case with respect to all the cases that taxpayers won before the treasury amended its regulation so if you have an instinctive skepticism maybe about whether residents are truly students i would refer you to how those other cases came out when it was a similar case by case stanford let me come at it this way you're asking for a refund of all of the withholding for all of the residents in all of the different programs specialties and whatever so for the relevant corners or whatever you t has sought to respond with respect to specific residence and there's actually spreadsheets in the record on appeal ok so it's not all right so how are you making that determination what what it is i think that was judge wieners question what's the distinction there i think so for one we are not claiming refunds for residents who didn't participate in a qualified with the retirement system which is a separate statutory requirement that's not at issue because it just report didn't it but we think this is that we think that your residency programs look a lot like the resin super grams for which taxpayers received refunds under a case by case standard there are credited there are specific requirements in terms of residents have to do rounds grand rounds they have  relationship with the supervising faculty they have to you know they progress through the program in the first year of their residency and this is something the district where i think god got wrong has said that that the residents are licensed doctors here in texas and under texas law the first year resident it's essentially a provisional license can only practice medicine under the supervision of the faculty members in the residency program so it's like a learner's permit and i think even under the district courts if you sort of shows the difficulty of making this judgment as a matter of floor without the full factual record you know the courts that actually had a full record and looked at these programs were were able to conclude that residents were student i mean the reality is these residents can go around and make rounds and they don't have to have the supervising doctor walking around with them a guy somewhere in the hospital with a pager i must tell you how it works i mean i've seen it so you know i was young and not at u t a but i this is how i've seen i in texas thankfully it wasn't me in the hospital but it was a loved one and this was they were residents our nose and ears but there were no anybody else so my point is that it seems like it's not as if this person is likely watching over the person directly and again we don't have a represent comes to this court but i take the question of maybe i'll refer you to the ma foundation case two eighty two f s up to the nine nine seven they had a record and a resident testified he said look when you're practicing as a resident and you're trying to prescribe medication or whatever it's very different because the doctors are always looking over your shoulder and you're doing this but know that it's really the faculty member but once you're done with your residency you're out on your own well then that's a different story and let your child about looking at a chart or whatever they're not literally following you around right you know again we don't have a record and the cases that got tried on a case by case standard you actually had testimony from residents and from program directors and the documents in the this from to this court on a motion for partial summary judgment the parties are engaged in some discovery and then put that on hold to to do with this legal question but you know the parties exchange documents with you to produce to the government documents and there are specific program guys for each of the roles of roads residents he said let me ask you this if we sent this back and so we're going to do this case by case you're going to show up with this program that has all this stuff about how the there's going to be all the supervision do you get to do they get to try that actually there's not all the supervision in fact the guys just somewhere with a pager somewhere in the building isn't really looking over the charts or whatever i would think so ok so then that becomes very convoluted maybe there is in the o b gin department that guy is very diligent about looking over the charts were is over in the gastroenterology that guy's always on the golf course with his pager hoping nothing goes wrong and then years they want to say they're treated differently for withholding purposes even though there are other was the saying there was working eighty hours and up right so i mean i agree that there might be a differentiation between the residents and the different programs but that seems only to emphasize the inappropriate decision of treating  them you know excluding them without any without any mail the supreme court said if you need to draw lines and i mean what i'm saying is your argument really makes this whole thing very chaotic and difficult to draw lines because we can't even rely on the program or hospital's residency program and look at all part and come to the conclusion these people are here primarily to earn a living or they're living they're paid home a little bit of a living wage but they are here to continue their education beyond that school beyond internships to get a specialty or a subspecialty would that be bucket by bucket basis it's not an individual you can do it as a program as a whole and that i mean that's the kind of evidence that we exchange and discovery these are program guides about the about the private programs as a whole and you may even be able to do it you know university by university so i guess i would say to the extent that you're concerned as a policy matter that the case by case standard is not the appropriate one you know that the social security administration has somewhat conspicuously not amend it its regulation i would say that that policy choice is really for the agency and they have looked at that in the eighth circuit for now sixteen years and hasn't had not really shown any indication that they're going to you know amend the rule and create national uniformity it's a very odd circumstance that this national program is being that mr than different and way depending on what state you're in so you know one benefit of applying the rule that's on the books is that if it's the government like this court and the supreme court has often held is bound by the text of its own regulation and is held to that that may provide additional incentive for the for the agency to actually amend rules ok but when you contract it with a social security administration you knew that they thought that outside of a circuit in texas is outside the eighth circuit a student a resident is not a student and when you know that the other side has a belief about want to word means then you have to either affirmatively tell them that that's not the case or you're going to be bound by that me so again that's contract that's what i'm trying to get a contract principle because i don't know that i have to decide the world here today i can just look at this contract and i might disagree that texas would have known i mean on the books was a regulation the agencies formal considered position the most formal and most of the binding  at that rule said residents can be students which is all we are trying to establish here is that there's the possibility we have an opportunity ok are you saying the social security's position about will follow apple in the eighth circuit and nowhere else was hidden was not known th published ok so it was known and that's what i'm saying is when you know your opponent thinks a word means something it's one of these kind of unilateral belief with knowledge by the other side situations in a contract you have to either say let's define student a different way or residence our students write her something and there's none of that here again except that you have a formal regulation on the books which have been interpreted by apple and you know i think parties are entitled to rely on the first thing is the amendment number one thirty modification number one thirty the section two eighteen agreement entered into between the secretary of h h s and u did these groups of employees were brought into the social security system voluntarily but in modification one thirty the state and h h  appropriate to have the federal insurance contributions fact apply specifically they agreed that the state would pay the secretary of the treasury amounts equivalent to the taxes well in ninety seven those equivalent amounts became actual taxes amounts equivalent to the taxes that would be imposed by section fourteen hundred fourteen and fourteen ten of the internal revenue code if the services of the employees covered by the agreement constitute employment as defined in section fourteen twenty six of the of such code and quote that was the code the numbering of the internal revenue code of section nine hundred thirty nine the provisions to finding employment you know and also e contained in section fourteen twenty six of the one nine hundred thirty nine code are now found in section thirty one twenty one b of the internal revenue code so that is why no one c ability of the employment governed by what is the provisions now found in section thirty one twenty one he gave that wouldn't be possible to come up with residents being taxed because they would meet the employment definition even bloom in fact and case by case and all of the evidence shows that they are primarily there to continue their medical education because they are getting a salary and they're working forty hours or whatever that rig go and when you have that conflict well we submit that the supreme court in the ma always predominates overstudy if you're working forty hours a week or more so that bright line rule you know  first and foremost continuing their medical ridge well the supreme court has spoken so and the support the supreme court upheld the bright line rule so no no trial would be necessary and i would like to address the other provision in the section two eighteen agreement that has potential application to this case in one thousand nine hundred ninety eight after the social security administration lost the minnesota v case involving social security coverage of the residence employed by the university of minnesota a state agency that had a section to eighteen agreement congress created an opportunity for those state agencies that had treated students as covered employees voluntarily to opt out with respect to those normally if a state voluntarily agrees to cover students they may not opt out of that but this special opportunity was created for the state for states to amend their section to eighteen agreements so in one nine hundred ninety nine the section two eighteen agreement was amended in modification fourteen ninety six to take advantage of the opportunity created by that law and so that made students potentially you know if they qualified for the student exclusion in fica or the social security act to be exempt from coverage or taxation as the case may be and as you t d would construe this agreement or this modification it's medical residents would have to fail to satisfy the s s a student exclusion in order to then be subject to fica and the treasury's full time employee rule but section four ten a ten section four hundred four eight ten what it does is it preparer phrases the statutory language that is found in both the internal revenue code student exclusion and the a student's exclusions regarding the performance of services by a student enroll regularly obtaining regularly attending classes at the school college or university so that modification did nothing to change the initial agreement in modification one thirty that the federal insurance contributions act would apply in determining what is employment for taxability purposes  so and as a matter of contract interpretation it makes no sense to have coverage under the social security yakked act as a hurdle to get through before you actually have to pay fica tax what the what the section two eighteen agreement did was the state and the secretary agreed not just that the social would apply but internal revenue code definition of employment would apply and so that's why i think that the district court was correct when it apply the treasury regulation embodying the full time employee will and so going to the fica section thirty one twenty one includes in taxable employee all remunerative services except those that are specifically excepted and state employment is ordinarily exempt but there are several ways to be swept in there as there are several subsections to section thirty one twenty one p seven and here since you dropped its refund claims as to those medical residents who were not covered by a qualifying state retirement system and you know would have been swept into social security that way the the way that your t s medical residents are potentially  come into fica is that their employer was under section two eighteen agreement and i think i just demonstrated that that the state and h h s agreed that fica would apply to the definition of employment so although the district court heard we think that the district court did the right thing in applying the treasury regulation and the full time employee  but we do want to point out that although the district court said that it saw no controlling authority for applying the treasury regulation we think that the supreme court's in the ma case made it crystal clear that if service for a state full with then an exception to the general exclusion of services performed by a state then the treasury regulation applies and although subsections of section thirty one twenty one b seven are phrased in the disjunctive they're connected by or so if employment for a state comes with the statute for any of those reasons then the employment is subject to fica now in mayo the university of minnesota was a party to that case in both the eighth circuit pena and before the supreme court and the reason even though section of the university of minnesota had a two eighteen agreement later on they admitted that their their medical residents were not covered a qualifying state retirement system so they came in that way but the supreme court applied fica to determine and the full time employee rule to determine the taxability of the stina versity of minnesota's residents so then i would also like to go on to the point that although tease medical residents are not accepted as students under the s s a student exclusion and to begin with the student exception was intended to cover part time intermittent point employment for nominal wages that was a nuisance to have to take care of and that resulted in only an incident in consequential loss of benefits and medical residents are working full time and they're making a living doing so and if they aren't covered for several years after graduation from medical school then they won't they  risk losing the chance to get benefits and you know in case they in case of an untimely death or something like that then the supreme court and they all recognize that breadth of coverage is a very important goal of the a both parts of the both components of the social security system and that the statute has to be construed with that goal in mind and but there are several other reasons indicating that medical residents are not students first the student exception was inactive the same time as an ex an exception for in turns the first year after medical school working in a hospital if medical residents really were students then there would have been no reason for congress to have been active the interne exception you know to exclude the first year residency the six circuit said no we don't think that that's appropriate in the congressional response the very next year nine hundred sixty five decided not only did not extend the interim exception to residence but repealed the interim exception entirely and as part of the same legislation and actually the legislative history discusses how important it is to cover medical residents so that they don't lose their benefits government from a list of other trainees working at those same hospitals all of whom were exempt from certain other federal pay and benefits laws and congress took the trouble to accept medical dental interns and residents from an exclusion under section thirty one twenty one b six b and thirty one twenty one b seven c two little  demonstrate that their study prevailed over making a living that the existence of that this legislation making sure the federal residents and interns would still be covered up cast doubt on any claim that residents would have been sued per floor as if medical residents were already considered to be students so and that in addition there was there were a series of cases under the old treasury regulation where the treasury argued for a bright line rule under its own regulations and the courts didn't feel comfortable denying the residency the medical residents in metal in residency a decision months and i case was tried after the eleventh circuit refused to apply a bright line rule into the old treasure peculation and there was proof on a hospital by hospital program by program you know discipline internal medicine surgery and so on and so there was there was a lot of proof and the supreme court emphasized that sometimes it's permissible to draw a bright line to eliminate uncertainty and to to avoid the waste of resources going into this kind of case by case determination so the court in mayo really expressed the rejected the proposition that the treasury has to engage in such a case by case employee and it's in fact said that the hours worked you know the full time employee role forty hours or more and you're not a student was a perfectly sensible way page one thirty one supreme court page seventy seven fifteen of separating students from others so anyway the supreme court also just described if you work too many hours then you're not studying it said the treasury wasn't distinguishing between education that took place in a clinical setting and classroom learning but it's just the fact that you're working so many hours is inconsistent with students it has to be in a classroom know that and they said that they point out that the treasury get that the treasury in this regulation wasn't making that distinction wasn't saying that the education had to be absolutely clinical and that had to be actually classroom alone it's a forty hour work even if it's learning is going to trip well the regulation says that the fact that the once you get to forty hours the fact that you might still have some learning you know in in the work content doesn't take precedence and the supreme court upheld that i'm hearing every day absolutely gone so i see that my time is almost up but we think that the decision at mayo just revitalize all the elements of the social security rolling which isn't in it's also interpretation of these s s a zone regulation and it's therefore entitle to deference thank you thank you very much the eighth circuit under the case by case standard a resident might be determined not to get benefits but under the government's application of the treasury regulation they would be forced to pay the taxes so that that we think is a troublesome consequence as to the regulations as being sufficient and an alternative so i think that the state employee exemption have to cure without any benefits or with different different benefits this i mean this provision the state employee exemption allows states to tailor these kinds of benefits to local circumstances and the supreme court in bowen explained reasons why they might want to do that might be more cost effective you might be able to tailor the package and make it more attractive you might be concerned about you know other aspects of the federal system as to mayo mayo certainly establishes that the treasury department could establish a bright line rule but the so security administration has not promulgated that bright line rule and even the district court i think rejected the government's view that mayo controls here on the treasury in it doesn't answer the predicate question the question we're looking at is of whether the employees are opted in that we think is is different so  and with respect to the idea that congress one of the students emption to only applies for part time work or nominal wages in the current treasury regulation specifically says the amount of money you make does not matter it's immaterial so even the government doesn't believe that and obviously applying these case by case standards courts before the treasury regulation was amended we had no trouble concluding that presidents were students and we think the case by case analysis could well be done on an institution by institution basis it's the facts support it and so i don't think it's particularly good to get particularly on manageable and you know the government talks about sort of wasteful litigation you know this program that  participate in a qualifying state program and texas has several state programs one called the optional retirement program one called the teachers the current system that provides the same kind of benefits provide retirement benefits and then there are all optional i believe that's  term under app called be across the board but you had other cases also tried out as a case by case standard where the court was you know able to make us a sensible determination so i think there are common features about beauty residency program such as that credit isn't by what we're doing when they could figure it out i'm sorry if you were ordered to be done only case by case basis the parties could figure it out i think that's great i think that's what