76404 Federal Register / Vol. 69, No. 244 / Tuesday, December 21, 2004 / Rules and Regulations 

TABLE 1.—ESTIMATED ANNUAL REPORTING BURDEN1

21 CFR Section 

No. of

Respondents

Annual Frequency

per Response

Total Annual

Responses

Hours

per Response Total Hours 

Total Operating 

and Maintenance 

Costs 

179.21(a)(5), 

(b)(1)(iv), and 

(b)(2)(v) 11111 $100

1There are no capital costs associated with this collection of information.

Estimated Annualized Cost for the 

Burden Hours

The operating and maintenance cost 

associated with this collection is $100 

for preparation of labels.

The information collection 

requirements in this final rule have been 

approved under OMB control number 

0910–0549. This approval expires 

January 31, 2005. An agency may not 

conduct or sponsor, and a person is not 

required to respond to, a collection of 

information unless it displays a 

currently valid OMB control number.

VII. Objections

Any person who will be adversely 

affected by this regulation may file with 

the Division of Dockets Management 

(see ADDRESSES) written or electronic 

objections. Each objection shall be 

separately numbered, and each 

numbered objection shall specify with 

particularity the provisions of the 

regulation to which objection is made 

and the grounds for the objection. Each 

numbered objection on which a hearing 

is requested shall specifically so state. 

Failure to request a hearing for any 

particular objection shall constitute a 

waiver of the right to a hearing on that 

objection. Each numbered objection for 

which a hearing is requested shall 

include a detailed description and 

analysis of the specific factual 

information intended to be presented in 

support of the objection in the event 

that a hearing is held. Failure to include 

such a description and analysis for any 

particular objection shall constitute a 

waiver of the right to a hearing on the 

objection. Three copies of all documents 

are to be submitted and are to be 

identified with the docket number 

found in brackets in the heading of this 

document. Any objections received in 

response to the regulation may be seen 

in the Division of Dockets Management 

between 9 a.m. and 4 p.m., Monday 

through Friday.

VIII. References

The following references have been placed 

on display in the Division of Dockets 

Management and may be seen by interested 

persons between 9 a.m. and 4 p.m., Monday 

through Friday.

1. Findlay, D. J. S., R. A. Forrest, and G. 

M. Smith, ‘‘Neutron-Induced Activation of 

Food,’’ (Harwell Report), AEA-InTec–1051, 

1992.

2. Ryge, P., I. Bar-Nir, M. Simic, ‘‘Food 

Safety Effects of Inspection by SAIC Pulsed 

Fast Neutron Analysis Explosive Detection 

System,’’ SAIC, 1992.

3. Easterly, C. E., K. F. Eckerman, R. H. 

Ross, D. M. Opresko, ‘‘Assessment of Petition 

to Use Pulsed Fast Neutron Analysis (PFNA) 

in Inspection of Shipping Containers 

Containing Foods,’’ Oak Ridge National 

Laboratory, Life Sciences Division, 2003.

List of Subjects in 21 CFR Part 179

Food additives, Food labeling, Food 

packaging, Radiation protection, 

Reporting and recordkeeping 

requirements, Signs and symbols.

■ Therefore, under the Federal Food, 

Drug, and Cosmetic Act and under 

authority delegated to the Commissioner 

of Food and Drugs and redelegated to the 

Director, Center for Food Safety and 

Applied Nutrition, 21 CFR part 179 is 

amended as follows:

PART 179—IRRADIATION IN THE 

PRODUCTION, PROCESSING AND 

HANDLING OF FOOD

■ 1. The authority citation for 21 CFR 

part 179 continues to read as follows:

Authority: 21 U.S.C. 321, 342, 343, 348, 

373, 374.

■ 2. Section 179.21 is amended by 

adding paragraphs (a)(5), (b)(1)(iv), and 

(b)(2)(v) to read as follows:

§ 179.21 Sources of radiation used for 

inspection of food, for inspection of 

packaged food, and for controlling food 

processing.

* * * * *

(a) * * *

(5) Monoenergetic neutron sources 

producing neutrons at energies not less 

than 1 MeV but no greater than 14 MeV.

(b) * * *

(1) * * *

(iv) The minimum and maximum 

energy of radiation emitted by neutron 

source.

(2) * * *

(v) A statement that no food shall be 

exposed to a radiation source listed in 

paragraph (a)(5) of this section so as to 

receive a dose in excess of 0.01 gray 

(Gy).

Dated: December 14, 2004.

Leslye M. Fraser,

Director, Office of Regulations and Policy, 

Center for Food Safety and Applied Nutrition.

[FR Doc. 04–27868 Filed 12–20–04; 8:45 am]

BILLING CODE 4160–01–S

DEPARTMENT OF THE TREASURY

Internal Revenue Service 

26 CFR Part 31

[TD 9167] 

RIN 1545–BC81

Student FICA Exception

AGENCY: Internal Revenue Service (IRS), 

Treasury.

ACTION: Final regulation.

SUMMARY: This document contains final 

regulations providing guidance 

regarding the employment tax 

exceptions for student services. These 

regulations affect schools, colleges, and 

universities and their employees.

DATES: Effective date: December 21, 

2004. 

Applicability date: These regulations 

are applicable for services performed on 

or after April 1, 2005.

FOR FURTHER INFORMATION CONTACT: John 

Richards of the Office of Associate Chief 

Counsel (Tax Exempt and Government 

Entities), (202) 622–6040 (not a toll-free 

number).

SUPPLEMENTARY INFORMATION: 

Background 

This document contains amendments 

to 26 CFR part 31 under sections 

3121(b)(10) and 3306(c)(10)(B) of the 

Internal Revenue Code (Code). These 

sections except from ‘‘employment’’ for 

Federal Insurance Contributions Act 

(FICA) and Federal Unemployment Tax 

Act (FUTA) purposes, respectively, 

service performed in the employ of a 

school, college, or university by a 

student who is enrolled and regularly 

attending classes at such school, college, 

or university. In addition, this 

document contains amendments to 26 

CFR part 31 under section 3121(b)(2). 

Federal Register / Vol. 69, No. 244 / Tuesday, December 21, 2004 / Rules and Regulations 76405

This section excepts from employment 

for FICA purposes domestic service 

performed in a local college club, or 

local chapter of a college fraternity or 

sorority, by a student who is enrolled 

and is regularly attending cases at a 

school, college, or university. 

Proposed regulations under sections 

3121(b)(2), 3121(b)(10), and 

3306(c)(10)(B) were published in the 

Federal Register on February 25, 2004 

(69 FR 8604, 2004–10 I.R.B. 571). 

Written and electronic comments 

responding to the notice of proposed 

rulemaking were received. A public 

hearing was held on June 16, 2004. After 

consideration of all the comments, the 

proposed regulations are adopted as 

amended by this Treasury decision. The 

revisions are discussed below. 

Explanation of Provisions and 

Summary of Comments 

The final regulations provide rules for 

determining whether an organization is 

a school, college, or university (SCU) 

and whether an employee is a student 

for purposes of sections 3121(b)(10), 

3121(b)(2), and 3306(c)(10)(B) of the 

Code. Many comments were received on 

the proposed regulations and several 

witnesses testified at the hearing which 

was held June 16, 2004. After 

consideration of the comments and 

testimony, the Treasury department and 

the IRS decided to make several 

significant changes described below. 

1. School, College, or University

The exceptions from employment for 

student services apply only if the 

employee is a student enrolled and 

regularly attending classes at a SCU. 

Under the proposed regulations, 

whether an organization is a SCU is 

determined with reference to the 

organization’s primary function. An 

organization whose primary function is 

to carry on educational activities 

qualifies as a SCU for purposes of the 

student exceptions from employment. 

A few commentators suggested that an 

organization, such as a teaching 

hospital, that has embedded within it a 

division or function that carries on 

educational activities should be treated 

as a SCU for purposes of the student 

exceptions from employment. 

The final regulations retain the 

primary function standard as described 

in the proposed regulations. As 

discussed in the preamble to the 

proposed regulations, the primary 

function standard is based upon the 

existing statutory and regulatory 

language under section 3121(b)(10), as 

well as the legislative history relating to 

the student exception from employment 

under section 3121(b)(10). 

2. Enrolled and Regularly Attending 

Classes 

The exceptions from employment for 

student services require that an 

employee be ‘‘enrolled and regularly 

attending classes’’ in order to have the 

status of a student. Under the proposed 

regulations, ‘‘a class is an instructional 

activity led by a knowledgeable faculty 

member for identified students 

following an established curriculum.’’

Commentators requested clarification 

regarding whether an instructional 

activity must be led by a regular faculty 

member in order to be considered a 

class, or whether an activity led by an 

adjunct faculty member, graduate 

teaching assistant, or other qualified 

individual hired to lead the activity 

could be considered a class. 

The final regulations clarify that a 

class is an instructional activity led by 

a faculty member ‘‘or other qualified 

individual’’ following an established 

curriculum. Thus, an instructional 

activity led by an adjunct faculty 

member, graduate assistant, or other 

qualified individual can qualify as a 

class for purposes of the student 

exceptions from employment. 

3. Student Status 

The existing student FICA regulations 

provide that an employee whose 

services are incident to and for the 

purpose of pursuing a course of study 

has the status of a student. 

§ 31.3121(b)(10)–2(c). The proposed 

regulations provide that in order for an 

employee’s services to be considered 

incident to and for the purpose of 

pursuing a course of study, the 

educational aspect of the relationship 

between the employee and the 

employer, as compared to the service 

aspect, must be predominant. Under the 

proposed regulations, if an employee is 

a ‘‘career employee,’’ then the service 

aspect of the employee’s relationship 

with the employer is considered 

predominant, and thus the employee’s 

services are not considered incident to 

and for the purpose of pursuing a course 

of study. The proposed regulations 

provide that the following employees 

are considered career employees: (1) 

Employees who regularly perform 

services 40 hours or more per week; (2) 

professional employees; (3) employees 

who receive certain employment 

benefits; and (4) employees required to 

be licensed to work in the field in which 

the employees are performing services. 

The IRS requested comments on the 

criteria used to identify employees 

having the status of a career employee.

Commentators expressed concern 

about using these criteria to make 

certain employees automatically 

ineligible for the student FICA 

exception. Rather, according to 

commentators, whether an employee’s 

services are incident to and for the 

purpose of pursuing a course of study 

should be based upon all the relevant 

facts and circumstances. 

The final regulations provide that the 

educational and service aspects of an 

employee’s relationship with the 

employer are generally evaluated for an 

academic term based upon all the 

relevant facts and circumstances. 

Similar criteria to those identified in the 

proposed regulations are described in 

the final regulations as relevant factors, 

not dispositive criteria, in determining 

whether the educational or service 

aspect of an employee’s relationship 

with the employer is predominant. 

Nevertheless, under the final 

regulations, if an employee is a ‘‘fulltime employee,’’ then the employee’s 

services are not incident to and for the 

purpose of pursuing a course of study. 

In addition, based upon comments 

received, the criteria identified in the 

proposed regulations have been 

modified as described below. 

A. Full-Time Employee and Hours 

Worked 

The proposed regulations provide that 

an employee who ‘‘regularly performs 

services 40 hours or more per week’’ is 

a career employee, and is thus ineligible 

for the student exception from 

employment. Commentators expressed 

concern that the 40 hour criterion 

would be administratively impracticable 

because it would be difficult to monitor 

an employee’s actual hours worked 

during an academic term. In addition, 

commentators expressed concern that 

the meaning of ‘‘regularly’’ is unclear, 

making it difficult to assess the effect of 

changes in hours worked from week to 

week. Commentators also requested 

clarification on whether an employee’s 

number of hours worked during 

academic breaks is considered in 

determining whether the employee is 

eligible for the student FICA exception. 

The final regulations modify the 

hours worked criterion. The final 

regulations provide that the services of 

a ‘‘full-time employee’’ are not incident 

to and for the purpose of pursuing a 

course of study. Under the final 

regulations, a full-time employee is an 

employee who is considered a full-time 

employee based upon the employer’s 

standards and practices, except that an 

employee whose ‘‘normal work 

schedule is 40 hours or more per week’’

is considered a full-time employee. This 

standard is intended to improve 

administrability for employers. Whether 

76406 Federal Register / Vol. 69, No. 244 / Tuesday, December 21, 2004 / Rules and Regulations 

an employee is a full-time employee 

based upon the employer’s standards 

and practices, or based upon the 

employee’s normal work schedule, 

should be determinable by employers at 

the start of an academic term, thus 

reducing instances where an employee’s 

status shifts from student to non-student 

during an academic term. An 

employee’s normal work schedule does 

not change, for example, based upon 

changes in work demands that are 

unforeseen at the start of an academic 

term causing the employee to work 

additional hours beyond his normal 

work schedule. In addition, time spent 

performing services that have an 

educational or instructional aspect is 

considered in determining an 

employee’s normal work schedule. 

Finally, the final regulations provide 

that an employee’s work schedule 

during an academic break is not 

considered in determining whether the 

employee’s normal work schedule is 40 

hours or more per week. 

The final regulations provide that if 

an employee does not have the status of 

a full-time employee, then the 

employee’s normal work schedule and 

actual number of hours worked per 

week are relevant factors in determining 

whether the service aspect or 

educational aspect of the employee’s 

relationship with the employer is 

predominant. Thus, if an employee is 

normally scheduled to work 20 hours 

per week, but consistently works more 

than 40 hours per week, the amount of 

time actually worked is taken into 

account in determining whether or not 

the employee qualifies as a student. 

B. Professional Employee and Licensure 

1. Professional Employee 

The proposed regulations provide that 

a ‘‘professional employee’’ is a career 

employee, and is thus ineligible for the 

student exception from employment. 

Under the proposed regulations, a 

professional employee is an employee 

who performs work: (1) Requiring 

knowledge of an advanced type in a 

field of science or learning, (2) requiring 

the consistent exercise of discretion and 

judgment, and (3) that is predominantly 

intellectual and varied in character. 

Commentators expressed concern that 

the professional employee criterion 

would inappropriately disqualify the 

services of many graduate research and 

teaching assistants from eligibility for 

the student exceptions from 

employment. Commentators maintained 

that graduate research and teaching 

assistants are primarily students, and 

thus their services should not 

automatically be ineligible for the 

student exceptions based upon the 

professional employee criterion. 

The final regulations provide that 

whether an employee is a professional 

employee is a relevant factor, not a 

dispositive criterion, in evaluating the 

service aspect of the employee’s 

relationship with the employer. Under 

the final regulations, if an employee has 

the status of a professional employee, 

then that suggests the service aspect of 

the employee’s relationship with the 

employer is predominant. Whether a 

professional employee is a student will 

depend upon all the facts and 

circumstances. Thus, under the final 

regulations, those graduate assistants 

and other employees whose work is 

described under the professional 

employee standard are not 

automatically ineligible for the student 

exception. 

2. Licensure 

The proposed regulations provide that 

an employee who is required to be 

licensed under state or local law to work 

in the field in which the employee 

performs services is a career employee, 

and is thus ineligible for the student 

exception. The preamble to the 

proposed regulations requested 

comments on the licensure criterion and 

whether this criterion should be further 

refined or clarified. 

Commentators expressed concern that 

the licensure criterion under the 

proposed regulations is overly broad 

because it would cause employees 

licensed for health and safety reasons, 

such as van drivers and life guards, to 

be ineligible for student status. 

Under the final regulations, an 

employee’s licensure status is not a 

dispositive criterion. Instead, the final 

regulations provide if an employee is a 

professional employee, then whether 

the employee is licensed is a relevant 

factor in determining whether the 

service aspect of the employee’s 

relationship with the employer is 

predominant. The final regulations 

provide that if an employee has the 

status of a licensed, professional 

employee, then that fact further suggests 

that the service aspect of the employee’s 

relationship with the employer is 

predominant. However, a worker who is 

a licensed, professional employee could 

be considered a student based upon all 

the relevant facts and circumstances. 

C. Employment Benefits 

The proposed regulations provide that 

an employee who is eligible to receive 

certain employment benefits is 

considered a career employee, and is 

thus ineligible for the student exception. 

Commentators expressed concern that 

eligibility to receive employment 

benefits should not disqualify an 

individual from the student exception. 

Commentators noted that some state 

statutes make student employees 

eligible for retirement and other 

benefits, meaning that student 

employees in those states could not 

qualify as students under the proposed 

regulations. In addition, commentators 

noted that many colleges and 

universities permit student employees 

to make elective contributions to section 

403(b) arrangements. Under the 

proposed regulations, offering this 

benefit would prohibit student 

employees from qualifying as students 

for purposes of the student exceptions 

from employment. 

The final regulations provide that 

eligibility to receive employment 

benefits is a relevant factor, not a 

dispositive criterion, in determining 

whether the service aspect of an 

employee’s relationship with the 

employer is predominant. Thus, an 

employee who is eligible for 

employment benefits can still qualify as 

a student for purposes of the student 

exceptions from employment. In 

addition, the final regulations provide 

that eligibility to receive health 

insurance benefits is not considered in 

determining whether the service aspect 

is predominant, and eligibility for 

benefits mandated by state or local law 

is given less weight in determining 

whether the service aspect is 

predominant.

4. Effective Date 

Commentators objected to the 

proposed effective date of February 25, 

2004, asserting that it would take some 

time to adjust to the new rules set forth 

in the proposed regulations. In response 

to these comments, the final regulations 

are applicable with respect to services 

performed on or after April 1, 2005. 

5. Revenue Procedure Replacing Rev. 

Proc. 98–16

When the IRS issued the proposed 

regulations, it also issued Notice 2004–

12 (2004–10 I.R.B. 556) suspending Rev. 

Proc. 98–16 (1998–1 C.B. 403) and 

proposing to replace it with a revenue 

procedure that is consistent with the 

proposed regulations. The IRS solicited 

comments on the proposed revenue 

procedure. Comments were received 

and considered in conjunction with the 

comments on the proposed regulations. 

The proposed revenue procedure has 

been modified in response to comments, 

and in order to provide guidance that is 

consistent with the final regulations, is 

being issued in final form in Rev. Proc. 

Federal Register / Vol. 69, No. 244 / Tuesday, December 21, 2004 / Rules and Regulations 76407

2005–11 (to be published in I.R.B. 2005–

2) modifying and superseding Rev. Proc. 

98–16. Rev. Proc. 2005–11 is applicable 

with respect to services performed on or 

after April 1, 2005. Taxpayers may rely 

upon Rev. Proc. 98–16 with respect to 

services performed prior to April 1, 

2005. 

Special Analyses 

It has been determined that these final 

regulations are not a significant 

regulatory action as defined in 

Executive Order 12866. Therefore, a 

regulatory assessment is not required. It 

has also been determined that section 

553(b) of the Administrative Procedure 

Act (5 U.S.C. chapter 5) does not apply 

to these regulations. In addition, 

because no collection of information is 

imposed on small entities, the 

provisions of the Regulatory Flexibility 

Act (5 U.S.C. chapter 6) do not apply, 

and, therefore, a Regulatory Flexibility 

Analysis is not required. Pursuant to 

section 7805(f) of the Code, the 

proposed regulations preceding these 

regulations were submitted to the Chief 

Counsel for Advocacy of the Small 

Business Administration for comment 

on the impact on small business. 

Drafting Information 

The principal author of these 

proposed regulations is John Richards of 

the Office of Division Counsel/Associate 

Chief Counsel (Tax Exempt and 

Government Entities). However, other 

personnel from the IRS and Treasury 

Department participated in their 

development.

List of Subjects in 26 CFR Part 31

Employment taxes and collection of 

income tax at source.

Adoption of Amendment to the 

Regulations

■ Accordingly, 26 CFR part 31 is 

amended as follows:

PART 31—EMPLOYMENT TAXES

■ Paragraph 1. The authority citation for 

part 31 continues to read in part, as 

follows:

Authority: 26 U.S.C. 7805 * * *

■ Par. 2. In § 31.3121(b)(2)–1, paragraph 

(d) is revised to read as follows:

§ 31.3121(b)(2)–1 Domestic service 

performed by students for certain college 

organizations.

* * * * *

(d) An organization is a school, 

college, or university within the 

meaning of section 3121(b)(2) if its 

primary function is the presentation of 

formal instruction, it normally 

maintains a regular faculty and 

curriculum, and it normally has a 

regularly enrolled body of students in 

attendance at the place where its 

educational activities are regularly 

carried on. See section 170(b)(1)(A)(ii) 

and the regulations thereunder.

* * * * *

■ Par. 3. Section 31.3121(b)(10)–2 is 

amended by:

■ 1. Revising paragraphs (a), (b), (c) and 

(d).

■ 2. Redesignating paragraph (e) as (g).

■ 3. Adding paragraphs (e) and (f).

The revisions and additions read as 

follows:

§ 31.3121(b)(10)–2 Services performed by 

certain students in the employ of a school, 

college, or university, or of a nonprofit 

organization auxiliary to a school, college, 

or university. 

(a) General rule. (1) Services 

performed in the employ of a school, 

college, or university within the 

meaning of paragraph (c) of this section 

(whether or not the organization is 

exempt from income tax) are excepted 

from employment, if the services are 

performed by a student within the 

meaning of paragraph (d) of this section 

who is enrolled and is regularly 

attending classes at the school, college, 

or university. 

(2) Services performed in the employ 

of an organization which is—

(i) Described in section 509(a)(3) and 

§ 1.509(a)–4;

(ii) Organized, and at all times 

thereafter operated, exclusively for the 

benefit of, to perform the functions of, 

or to carry out the purposes of a school, 

college, or university within the 

meaning of paragraph (c) of this section; 

and 

(iii) Operated, supervised, or 

controlled by or in connection with the 

school, college, or university; are 

excepted from employment, if the 

services are performed by a student who 

is enrolled and regularly attending 

classes within the meaning of paragraph 

(d) of this section at the school, college, 

or university. The preceding sentence 

shall not apply to services performed in 

the employ of a school, college, or 

university of a State or a political 

subdivision thereof by a student referred 

to in section 218(c)(5) of the Social 

Security Act (42 U.S.C. 418(c)(5)) if such 

services are covered under the 

agreement between the Commissioner of 

Social Security and such State entered 

into pursuant to section 218 of such Act. 

For the definitions of ‘‘operated, 

supervised, or controlled by’’, 

‘‘supervised or controlled in connection 

with’’, and ‘‘operated in connection 

with’’, see paragraphs (g), (h), and (i), 

respectively, of § 1.509(a)–4. 

(b) Statutory tests. For purposes of 

this section, if an employee has the 

status of a student within the meaning 

of paragraph (d) of this section, the 

amount of remuneration for services 

performed by the employee, the type of 

services performed by the employee, 

and the place where the services are 

performed are not material. The 

statutory tests are: 

(1) The character of the organization 

in the employ of which the services are 

performed as a school, college, or 

university within the meaning of 

paragraph (c) of this section, or as an 

organization described in paragraph 

(a)(2) of this section, and 

(2) The status of the employee as a 

student enrolled and regularly attending 

classes within the meaning of paragraph 

(d) of this section at the school, college, 

or university within the meaning of 

paragraph (c) of this section by which 

the employee is employed or with 

which the employee’s employer is 

affiliated within the meaning of 

paragraph (a)(2) of this section. 

(c) School, College, or University. An 

organization is a school, college, or 

university within the meaning of section 

3121(b)(10) if its primary function is the 

presentation of formal instruction, it 

normally maintains a regular faculty 

and curriculum, and it normally has a 

regularly enrolled body of students in 

attendance at the place where its 

educational activities are regularly 

carried on. See section 170(b)(1)(A)(ii) 

and the regulations thereunder. 

(d) Student Status—general rule.

Whether an employee has the status of 

a student performing the services shall 

be determined based on the relationship 

of the employee with the organization 

employing the employee. In order to 

have the status of a student, the 

employee must perform services in the 

employ of a school, college, or 

university within the meaning of 

paragraph (c) of this section at which 

the employee is enrolled and regularly 

attending classes in pursuit of a course 

of study within the meaning of 

paragraphs (d)(1) and (2) of this section. 

In addition, the employee’s services 

must be incident to and for the purpose 

of pursuing a course of study within the 

meaning of paragraph (d)(3) of this 

section at such school, college, or 

university. An employee who performs 

services in the employ of an affiliated 

organization within the meaning of 

paragraph (a)(2) of this section must be 

enrolled and regularly attending classes 

at the affiliated school, college, or 

university within the meaning of 

paragraph (c) of this section in pursuit 

76408 Federal Register / Vol. 69, No. 244 / Tuesday, December 21, 2004 / Rules and Regulations 

of a course of study within the meaning 

of paragraphs (d)(1) and (2) of this 

section. In addition, the employee’s 

services must be incident to and for the 

purpose of pursuing a course of study 

within the meaning of paragraph (d)(3) 

of this section at such school, college, or 

university.

(1) Enrolled and regularly attending 

classes. An employee must be enrolled 

and regularly attending classes at a 

school, college, or university within the 

meaning of paragraph (c) of this section 

at which the employee is employed to 

have the status of a student within the 

meaning of section 3121(b)(10). An 

employee is enrolled within the 

meaning of section 3121(b)(10) if the 

employee is registered for a course or 

courses creditable toward an 

educational credential described in 

paragraph (d)(2) of this section. In 

addition, the employee must be 

regularly attending classes to have the 

status of a student. For purposes of this 

paragraph (d)(1), a class is an 

instructional activity led by a faculty 

member or other qualified individual 

hired by the school, college, or 

university within the meaning of 

paragraph (c) of this section for 

identified students following an 

established curriculum. Traditional 

classroom activities are not the sole 

means of satisfying this requirement. 

For example, research activities under 

the supervision of a faculty advisor 

necessary to complete the requirements 

for a Ph.D. degree may constitute classes 

within the meaning of section 

3121(b)(10). The frequency of these and 

similar activities determines whether an 

employee may be considered to be 

regularly attending classes. 

(2) Course of study. An employee 

must be pursuing a course of study in 

order to have the status of a student. A 

course of study is one or more courses 

the completion of which fulfills the 

requirements necessary to receive an 

educational credential granted by a 

school, college, or university within the 

meaning of paragraph (c) of this section. 

For purposes of this paragraph, an 

educational credential is a degree, 

certificate, or other recognized 

educational credential granted by an 

organization described in paragraph (c) 

of this section. A course of study also 

includes one or more courses at a 

school, college or university within the 

meaning of paragraph (c) of this section 

the completion of which fulfills the 

requirements necessary for the 

employee to sit for an examination 

required to receive certification by a 

recognized organization in a field. 

(3) Incident to and for the purpose of 

pursuing a course of study. (i) General 

rule. An employee’s services must be 

incident to and for the purpose of 

pursuing a course of study in order for 

the employee to have the status of a 

student. Whether an employee’s 

services are incident to and for the 

purpose of pursuing a course of study 

shall be determined on the basis of the 

relationship of the employee with the 

organization for which such services are 

performed as an employee. 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 the employee’s 

services to be incident to and for the 

purpose of pursuing a course of study. 

The educational aspect of the 

relationship is evaluated based on all 

the relevant facts and circumstances 

related to the educational aspect of the 

relationship. The service aspect of the 

relationship is evaluated based on all 

the relevant facts and circumstances 

related to the employee’s employment. 

The evaluation of the service aspect of 

the relationship is not affected by the 

fact that the services performed by the 

employee may have an educational, 

instructional, or training aspect. Except 

as provided in paragraph (d)(3)(iii) of 

this section, whether the educational 

aspect or the service aspect of an 

employee’s relationship with the 

employer is predominant is determined 

by considering all the relevant facts and 

circumstances. Relevant factors in 

evaluating the educational and service 

aspects of an employee’s relationship 

with the employer are described in 

paragraphs (d)(3)(iv) and (v) of this 

section respectively. There may be facts 

and circumstances that are relevant in 

evaluating the educational and service 

aspects of the relationship in addition to 

those described in paragraphs (d)(3)(iv) 

and (v) of this section. 

(ii) Student status determined with 

respect to each academic term. Whether 

an employee’s services are incident to 

and for the purpose of pursuing a course 

of study is determined separately with 

respect to each academic term. If the 

relevant facts and circumstances with 

respect to an employee’s relationship 

with the employer change significantly 

during an academic term, whether the 

employee’s services are incident to and 

for the purpose of pursuing a course of 

study is reevaluated with respect to 

services performed during the 

remainder of the academic term. 

(iii) Full-time employee. The services 

of a full-time employee are not incident 

to and for the purpose of pursuing a 

course of study. The determination of 

whether an employee is a full-time 

employee is based on the employer’s 

standards and practices, except 

regardless of the employer’s 

classification of the employee, an 

employee whose normal work schedule 

is 40 hours or more per week is 

considered a full-time employee. An 

employee’s normal work schedule is not 

affected by increases in hours worked 

caused by work demands unforeseen at 

the start of an academic term. However, 

whether an employee is a full-time 

employee is reevaluated for the 

remainder of the academic term if the 

employee changes employment 

positions with the employer. An 

employee’s work schedule during 

academic breaks is not considered in 

determining whether the employee’s 

normal work schedule is 40 hours or 

more per week. The determination of an 

employee’s normal work schedule is not 

affected by the fact that the services 

performed by the employee may have an 

educational, instructional, or training 

aspect. 

(iv) Evaluating educational aspect.

The educational aspect of an employee’s 

relationship with the employer is 

evaluated based on all the relevant facts 

and circumstances related to the 

educational aspect of the relationship. 

The educational aspect of an employee’s 

relationship with the employer is 

generally evaluated based on the 

employee’s course workload. Whether 

an employee’s course workload is 

sufficient in order for the employee’s 

employment to be incident to and for 

the purpose of pursuing a course of 

study depends on the particular facts 

and circumstances. A relevant factor in 

evaluating an employee’s course 

workload is the employee’s course 

workload relative to a full-time course 

workload at the school, college or 

university within the meaning of 

paragraph (c) of this section at which 

the employee is enrolled and regularly 

attending classes. 

(v) Evaluating service aspect. The 

service aspect of an employee’s 

relationship with the employer is 

evaluated based on the facts and 

circumstances related to the employee’s 

employment. Services of an employee 

with the status of a full-time employee 

within the meaning of paragraph 

(d)(3)(iii) of this section are not incident 

to and for the purpose of pursuing a 

course of study. Relevant factors in 

evaluating the service aspect of an 

employee’s relationship with the 

employer are described in paragraphs 

(d)(3)(v)(A), (B), and (C) of this section.

(A) Normal work schedule and hours 

worked. If an employee is not a full-time 

employee within the meaning of 

paragraph (d)(3)(iii) of this section, then 

the employee’s normal work schedule 

Federal Register / Vol. 69, No. 244 / Tuesday, December 21, 2004 / Rules and Regulations 76409

and number of hours worked per week 

are relevant factors in evaluating the 

service aspect of the employee’s 

relationship with the employer. As an 

employee’s normal work schedule or 

actual number of hours worked 

approaches 40 hours per week, it is 

more likely that the service aspect of the 

employee’s relationship with the 

employer is predominant. The 

determination of an employee’s normal 

work schedule and actual number of 

hours worked is not affected by the fact 

that some of the services performed by 

the employee may have an educational, 

instructional, or training aspect. 

(B) Professional employee.

(1) If an employee has the status of a 

professional employee, then that 

suggests the service aspect of the 

employee’s relationship with the 

employer is predominant. A 

professional employee is an employee—

(i) Whose primary duty consists of the 

performance of work requiring 

knowledge of an advanced type in a 

field of science or learning customarily 

acquired by a prolonged course of 

specialized intellectual instruction and 

study, as distinguished from a general 

academic education, from an 

apprenticeship, and from training in the 

performance of routine mental, manual, 

or physical processes; 

(ii) Whose work requires the 

consistent exercise of discretion and 

judgment in its performance; and 

(iii) Whose work is predominantly 

intellectual and varied in character (as 

opposed to routine mental, manual, 

mechanical, or physical work) and is of 

such character that the output produced 

or the result accomplished cannot be 

standardized in relation to a given 

period of time. 

(2) Licensed, professional employee. If 

an employee is a licensed, professional 

employee, then that further suggests the 

service aspect of the employee’s 

relationship with the employer is 

predominant. An employee is a 

licensed, professional employee if the 

employee is required to be licensed 

under state or local law to work in the 

field in which the employee performs 

services and the employee is a 

professional employee within the 

meaning of paragraph (d)(3)(v)(B)(1) of 

this section. 

(C) Employment Benefits. Whether an 

employee is eligible to receive one or 

more employment benefits is a relevant 

factor in evaluating the service aspect of 

an employee’s relationship with the 

employer. For example, eligibility to 

receive vacation, paid holiday, and paid 

sick leave benefits; eligibility to 

participate in a retirement plan or 

arrangement described in sections 

401(a), 403(b), or 457(a); or eligibility to 

receive employment benefits such as 

reduced tuition (other than qualified 

tuition reduction under section 

117(d)(5) provided to a teaching or 

research assistant who is a graduate 

student), or benefits under sections 79 

(life insurance), 127 (qualified 

educational assistance), 129 (dependent 

care assistance programs), or 137 

(adoption assistance) suggest that the 

service aspect of an employee’s 

relationship with the employer is 

predominant. Eligibility to receive 

health insurance employment benefits is 

not considered in determining whether 

the service aspect of an employee’s 

relationship with the employer is 

predominant. The weight to be given the 

fact that an employee is eligible for a 

particular employment benefit may vary 

depending on the type of benefit. For 

example, eligibility to participate in a 

retirement plan is generally more 

significant than eligibility to receive a 

dependent care employment benefit. 

Additional weight is given to the fact 

that an employee is eligible to receive 

an employment benefit if the benefit is 

generally provided by the employer to 

employees in positions generally held 

by non-students. Less weight is given to 

the fact that an employee is eligible to 

receive an employment benefit if 

eligibility for the benefit is mandated by 

state or local law. 

(e) Examples. The following examples 

illustrate the principles of paragraphs 

(a) through (d) of this section:

Example 1. (i) Employee C is employed by 

State University T to provide services as a 

clerk in T’s administrative offices, and is 

enrolled and regularly attending classes at T 

in pursuit of a B.S. degree in biology. C has 

a course workload during the academic term 

which constitutes a full-time course 

workload at T. C is considered a part-time 

employee by T during the academic term, 

and C’s normal work schedule is 20 hours 

per week, but occasionally due to work 

demands unforeseen at the start of the 

academic term C works 40 hours or more 

during a week. C is compensated by hourly 

wages, and receives no other compensation 

or employment benefits. 

(ii) In this example, C is employed by T, 

a school, college, or university within the 

meaning of paragraph (c) of this section. C is 

enrolled and regularly attending classes at T 

in pursuit of a course of study. C is not a fulltime employee based on T’s standards, and 

C’s normal work schedule does not cause C 

to have the status of a full-time employee, 

even though C may occasionally work 40 

hours or more during a week due to 

unforeseen work demands. C’s part-time 

employment relative to C’s full-time course 

workload indicates that the educational 

aspect of C’s relationship with T is 

predominant. Additional facts supporting 

this conclusion are that C is not a 

professional employee, and C does not 

receive any employment benefits. Thus, C’s 

services are incident to and for the purpose 

of pursuing a course of study. Accordingly, 

C’s services are excepted from employment 

under section 3121(b)(10).

Example 2. (i) Employee D is employed in 

the accounting department of University U, 

and is enrolled and regularly attending 

classes at U in pursuit of an M.B.A. degree. 

D has a course workload which constitutes a 

half-time course workload at U. D is 

considered a full-time employee by U under 

U’s standards and practices. 

(ii) In this example, D is employed by U, 

a school, college, or university within the 

meaning of paragraph (c) of this section. In 

addition, D is enrolled and regularly 

attending classes at U in pursuit of a course 

of study. However, because D is considered 

a full-time employee by U under its 

standards and practices, D’s services are not 

incident to and for the purpose of pursuing 

a course of study. Accordingly, D’s services 

are not excepted from employment under 

section 3121(b)(10).

Example 3. (i) The facts are the same as in 

Example 2, except that D is not considered 

a full-time employee by U, and D’s normal 

work schedule is 32 hours per week. In 

addition, D’s work is repetitive in nature and 

does not require the consistent exercise of 

discretion and judgment, and is not 

predominantly intellectual and varied in 

character. However, D receives vacation, sick 

leave, and paid holiday employment benefits, 

and D is eligible to participate in a retirement 

plan maintained by U described in section 

401(a). 

(ii) In this example, D’s half-time course 

workload relative to D’s hours worked and 

eligibility for employment benefits indicates 

that the service aspect of D’s relationship 

with U is predominant, and thus D’s services 

are not incident to and for the purpose of 

pursuing a course of study. Accordingly, D’s 

services are not excepted from employment 

under section 3121(b)(10).

Example 4. (i) Employee E is employed by 

University V to provide patient care services 

at a teaching hospital that is an 

unincorporated division of V. These services 

are performed as part of a medical residency 

program in a medical specialty sponsored by 

V. The residency program in which E 

participates is accredited by the 

Accreditation Counsel for Graduate Medical 

Education. Upon completion of the program, 

E will receive a certificate of completion, and 

be eligible to sit for an examination required 

to be certified by a recognized organization 

in the medical specialty. E’s normal work 

schedule, which includes services having an 

educational, instructional, or training aspect, 

is 40 hours or more per week. 

(ii) In this example, E is employed by V, 

a school, college, or university within the 

meaning of paragraph (c) of this section. 

However, E’s normal work schedule calls for 

E to perform services 40 or more hours per 

week. E is therefore a full-time employee, 

and the fact that some of E’s services have 

an educational, instructional, or training 

aspect does not affect that conclusion. Thus, 

E’s services are not incident to and for the 

purpose of pursuing a course of study. 

76410 Federal Register / Vol. 69, No. 244 / Tuesday, December 21, 2004 / Rules and Regulations 

Accordingly, E’s services are not excepted 

from employment under section 3121(b)(10) 

and there is no need to consider other 

relevant factors, such as whether E is a 

professional employee or whether E is 

eligible for employment benefits.

Example 5. (i) Employee F is employed in 

the facilities management department of 

University W. F has a B.S. degree in 

engineering, and is completing the work 

experience required to sit for an examination 

to become a professional engineer eligible for 

licensure under state or local law. F is not 

attending classes at W. 

(ii) In this example, F is employed by W, 

a school, college, or university within the 

meaning of paragraph (c) of this section. 

However, F is not enrolled and regularly 

attending classes at W in pursuit of a course 

of study. F’s work experience required to sit 

for the examination is not a course of study 

for purposes of paragraph (d)(2) of this 

section. Accordingly, F’s services are not 

excepted from employment under section 

3121(b)(10).

Example 6. (i) Employee G is employed by 

Employer X as an apprentice in a skilled 

trade. X is a subcontractor providing services 

in the field in which G wishes to specialize. 

G is pursuing a certificate in the skilled trade 

from Community College C. G is performing 

services for X pursuant to an internship 

program sponsored by C under which its 

students gain experience, and receive credit 

toward a certificate in the trade. 

(ii) In this example, G is employed by X. 

X is not a school, college or university within 

the meaning of paragraph (c) of this section. 

Thus, the exception from employment under 

section 3121(b)(10) is not available with 

respect to G’s services for X.

Example 7. (i) Employee H is employed by 

a cosmetology school Y at which H is 

enrolled and regularly attending classes in 

pursuit of a certificate of completion. Y’s 

primary function is to carry on educational 

activities to prepare its students to work in 

the field of cosmetology. Prior to issuing a 

certificate, Y requires that its students gain 

experience in cosmetology services by 

performing services for the general public on 

Y’s premises. H is scheduled to work and in 

fact works significantly less than 30 hours 

per week. H’s work does not require 

knowledge of an advanced type in a field of 

science or learning, nor is it predominantly 

intellectual and varied in character. H 

receives remuneration in the form of hourly 

compensation from Y for providing 

cosmetology services to clients of Y, and does 

not receive any other compensation and is 

not eligible for employment benefits 

provided by Y. 

(ii) In this example, H is employed by Y, 

a school, college or university within the 

meaning of paragraph (c) of this section, and 

is enrolled and regularly attending classes at 

Y in pursuit of a course of study. Factors 

indicating the educational aspect of H’s 

relationship with Y is predominant are that 

H’s hours worked are significantly less than 

30 per week, H is not a professional 

employee, and H is not eligible for 

employment benefits. Based on the relevant 

facts and circumstances, the educational 

aspect of H’s relationship with Y is 

predominant. Thus, H’s services are incident 

to and for the purpose of pursuing a course 

of study. Accordingly, H’s services are 

excepted from employment under section 

3121(b)(10).

Example 8. (i) Employee J is a graduate 

teaching assistant at University Z. J is 

enrolled and regularly attending classes at Z 

in pursuit of a graduate degree. J has a course 

workload which constitutes a full-time 

course workload at Z. J’s normal work 

schedule is 20 hours per week, but 

occasionally due to work demands 

unforeseen at the start of the academic term 

J works more than 40 hours during a week. 

J’s duties include grading quizzes and exams 

pursuant to guidelines set forth by the 

professor, providing class and laboratory 

instruction pursuant to a lesson plan 

developed by the professor, and preparing 

laboratory equipment for demonstrations. J 

receives a cash stipend and employment 

benefits in the form of eligibility to make 

elective employee contributions to an 

arrangement described in section 403(b). In 

addition, J receives qualified tuition 

reduction benefits within the meaning of 

section 117(d)(5) with respect to the tuition 

charged for the credits earned for being a 

graduate teaching assistant.

(ii) In this example, J is employed by Z, a 

school, college, or university within the 

meaning of paragraph (c) of this section, and 

is enrolled and regularly attending classes at 

Z in pursuit of a course of study. J’s full-time 

course workload relative to J’s normal work 

schedule of 20 hours per week indicates that 

the educational aspect of J’s relationship with 

Z is predominant. In addition, J is not a 

professional employee because J’s work does 

not require the consistent exercise of 

discretion and judgment in its performance. 

On the other hand, the fact that J receives 

employment benefits in the form of eligibility 

to make elective employee contributions to 

an arrangement described in section 403(b) 

indicates that the employment aspect of J’s 

relationship with Z is predominant. 

Balancing the relevant facts and 

circumstances, the educational aspect of J’s 

relationship with Z is predominant. Thus, J’s 

services are incident to and for the purpose 

of pursuing a course of study. Accordingly, 

J services are excepted from employment 

under section 3121(b)(10).

(f) Effective date. Paragraphs (a), (b), 

(c), (d) and (e) of this section apply to 

services performed on or after April 1, 

2005.

* * * * *

■ Par. 4. In § 31.3306(c)(10)–2:

■ 1. Paragraph (c) is revised.

■ 2. Paragraphs (d) and (e) are added.

The revision and addition read as 

follows:

§ 31.3306(c)(10)–2 Services of student in 

employ of a school, college, or university.

* * * * *

(c) General rule. (1) For purposes of 

this section, the tests are the character 

of the organization in the employ of 

which the services are performed and 

the status of the employee as a student 

enrolled and regularly attending classes 

at the school, college, or university 

described in paragraph (c)(2) of this 

section, in the employ of which the 

employee performs the services. If an 

employee has the status of a student 

within the meaning of paragraph (d) of 

this section, the type of services 

performed by the employee, the place 

where the services are performed, and 

the amount of remuneration for services 

performed by the employee are not 

material. 

(2) School, college, or university. An 

organization is a school, college, or 

university within the meaning of section 

3306(c)(10)(B) if its primary function is 

the presentation of formal instruction, it 

normally maintains a regular faculty 

and curriculum, and it normally has a 

regularly enrolled body of students in 

attendance at the place where its 

educational activities are regularly 

carried on. See section 170(b)(1)(A)(ii) 

and the regulations thereunder. 

(d) Student Status—general rule.

Whether an employee has the status of 

a student within the meaning of section 

3306(c)(10)(B) performing the services 

shall be determined based on the 

relationship of the employee with the 

organization for which the services are 

performed. In order to have the status of 

a student within the meaning of section 

3306(c)(10)(B), the employee must 

perform services in the employ of a 

school, college, or university described 

in paragraph (c)(2) of this section at 

which the employee is enrolled and 

regularly attending classes in pursuit of 

a course of study within the meaning of 

paragraphs (d)(1) and (2) of this section. 

In addition, the employee’s services 

must be incident to and for the purpose 

of pursuing a course of study at such 

school, college, or university within the 

meaning of paragraph (d)(3) of this 

section. 

(1) Enrolled and regularly attending 

classes. An employee must be enrolled 

and regularly attending classes at a 

school, college, or university within the 

meaning of paragraph (c)(2) of this 

section at which the employee is 

employed to have the status of a student 

within the meaning of section 

3306(c)(10)(B). An employee is enrolled 

within the meaning of section 

3306(c)(10)(B) if the employee is 

registered for a course or courses 

creditable toward an educational 

credential described in paragraph (d)(2) 

of this section. In addition, the 

employee must be regularly attending 

classes to have the status of a student. 

For purposes of this paragraph (d)(1), a 

class is an instructional activity led by 

a faculty member or other qualified 

individual hired by the school, college, 

Federal Register / Vol. 69, No. 244 / Tuesday, December 21, 2004 / Rules and Regulations 76411

or university within the meaning of 

paragraph (c)(2) of this section for 

identified students following an 

established curriculum. The frequency 

of these and similar activities 

determines whether an employee may 

be considered to be regularly attending 

classes.

(2) Course of study. An employee 

must be pursuing a course of study in 

order to have the status of a student 

within the meaning of section 

3306(c)(10)(B). A course of study is one 

or more courses the completion of 

which fulfills the requirements 

necessary to receive an educational 

credential granted by a school, college, 

or university within the meaning of 

paragraph (c)(2) of this section. For 

purposes of this paragraph, an 

educational credential is a degree, 

certificate, or other recognized 

educational credential granted by an 

organization described in paragraph 

(c)(2) of this section. In addition, a 

course of study is one or more courses 

at a school, college or university within 

the meaning of paragraph (c)(2) of this 

section the completion of which fulfills 

the requirements necessary for the 

employee to sit for an examination 

required to receive certification by a 

recognized organization in a field. 

(3) Incident to and for the purpose of 

pursuing a course of study. (i) General 

rule. An employee’s services must be 

incident to and for the purpose of 

pursuing a course of study in order for 

the employee to have the status of a 

student. Whether an employee’s 

services are incident to and for the 

purpose of pursuing a course of study 

shall be determined on the basis of the 

relationship of the employee with the 

organization for which such services are 

performed as an employee. 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 the employee’s 

services to be incident to and for the 

purpose of pursuing a course of study. 

The educational aspect of the 

relationship is evaluated based on all 

the relevant facts and circumstances 

related to the educational aspect of the 

relationship. The service aspect of the 

relationship is evaluated based on all 

the relevant facts and circumstances 

related to the employee’s employment. 

The evaluation of the service aspect of 

the relationship is not affected by the 

fact that the services performed by the 

employee may have an educational, 

instructional, or training aspect. Except 

as provided in paragraph (d)(3)(iii) of 

this section, whether the educational 

aspect or the service aspect of an 

employee’s relationship with the 

employer is predominant is determined 

by considering all the relevant facts and 

circumstances. Relevant factors in 

evaluating the educational and service 

aspects of an employee’s relationship 

with the employer are described in 

paragraphs (d)(3)(iv) and (v) of this 

section respectively. There may be facts 

and circumstances that are relevant in 

evaluating the educational and service 

aspects of the relationship in addition to 

those described in paragraphs (d)(3)(iv) 

and (v) of this section. 

(ii) Student status determined with 

respect to each academic term. Whether 

an employee’s services are incident to 

and for the purpose of pursuing a course 

of study is determined separately with 

respect to each academic term. If the 

relevant facts and circumstances with 

respect to an employee’s relationship 

with the employer change significantly 

during an academic term, whether the 

employee’s services are incident to and 

for the purpose of pursuing a course of 

study is reevaluated with respect to 

services performed during the 

remainder of the academic term. 

(iii) Full-time employee. The services 

of a full-time employee are not incident 

to and for the purpose of pursuing a 

course of study. The determination of 

whether an employee is a full-time 

employee is based on the employer’s 

standards and practices, except 

regardless of the employer’s 

classification of the employee, an 

employee whose normal work schedule 

is 40 hours or more per week is 

considered a full-time employee. An 

employee’s normal work schedule is not 

affected by increases in hours worked 

caused by work demands unforeseen at 

the start of an academic term. However, 

whether an employee is a full-time 

employee is reevaluated for the 

remainder of the academic term if the 

employee changes employment 

positions with the employer. An 

employee’s work schedule during 

academic breaks is not considered in 

determining whether the employee’s 

normal work schedule is 40 hours or 

more per week. The determination of 

the employee’s normal work schedule is 

not affected by the fact that the services 

performed by the individual may have 

an educational, instructional, or training 

aspect. 

(iv) Evaluating educational aspect.

The educational aspect of an employee’s 

relationship with the employer is 

evaluated based on all the relevant facts 

and circumstances related to the 

educational aspect of the relationship. 

The educational aspect of an employee’s 

relationship with the employer is 

generally evaluated based on the 

employee’s course workload. Whether 

an employee’s course workload is 

sufficient in order for the employee’s 

employment to be incident to and for 

the purpose of pursuing a course of 

study depends on the particular facts 

and circumstances. A relevant factor in 

evaluating an employee’s course 

workload is the employee’s course 

workload relative to a full-time course 

workload at the school, college or 

university within the meaning of 

paragraph (c)(2) of this section at which 

the employee is enrolled and regularly 

attending classes. 

(v) Evaluating service aspect. The 

service aspect of an employee’s 

relationship with the employer is 

evaluated based on the facts and 

circumstances related to the employee’s 

employment. Services of an employee 

with the status of a full-time employee 

within the meaning of paragraph 

(d)(3)(iii) of this section are not incident 

to and for the purpose of pursuing a 

course of study. Relevant factors in 

evaluating the service aspect of an 

employee’s relationship with the 

employer are described in paragraphs 

(d)(3)(v)(A), (B), and (C) of this section. 

(A) Normal work schedule and hours 

worked. If an employee is not a full-time 

employee within the meaning of 

paragraph (d)(3)(iii) of this section, then 

the employee’s normal work schedule 

and number of hours worked per week 

are relevant factors in evaluating the 

service aspect of the employee’s 

relationship with the employer. As an 

employee’s normal work schedule or 

actual number of hours worked 

approaches 40 hours per week, it is 

more likely that the service aspect of the 

employee’s relationship with the 

employer is predominant. The 

determination of the employee’s normal 

work schedule and actual number of 

hours worked is not affected by the fact 

that some of the services performed by 

the individual may have an educational, 

instructional, or training aspect. 

(B) Professional employee.

(1) If an employee has the status of a 

professional employee, then that 

suggests that the service aspect of the 

employee’s relationship with the 

employer is predominant. A 

professional employee is an employee—

(i) Whose primary duty consists of the 

performance of work requiring 

knowledge of an advanced type in a 

field of science or learning customarily 

acquired by a prolonged course of 

specialized intellectual instruction and 

study, as distinguished from a general 

academic education, from an 

apprenticeship, and from training in the 

performance of routine mental, manual, 

or physical processes; 

76412 Federal Register / Vol. 69, No. 244 / Tuesday, December 21, 2004 / Rules and Regulations 

(ii) Whose work requires the 

consistent exercise of discretion and 

judgment in its performance; and 

(iii) Whose work is predominantly 

intellectual and varied in character (as 

opposed to routine mental, manual, 

mechanical, or physical work) and is of 

such character that the output produced 

or the result accomplished cannot be 

standardized in relation to a given 

period of time. 

(2) Licensed, professional employee. If 

an employee is a licensed, professional 

employee, then that further suggests the 

service aspect of the employee’s 

relationship with the employer is 

predominant. An employee is a 

licensed, professional employee if the 

employee is required to be licensed 

under state or local law to work in the 

field in which the employee performs 

services and the employee is a 

professional employee within the 

meaning of paragraph (d)(3)(v)(B)(1) of 

this section. 

(C) Employment Benefits. Whether an 

employee is eligible to receive 

employment benefits is a relevant factor 

in evaluating the service aspect of an 

employee’s relationship with the 

employer. For example, eligibility to 

receive vacation, paid holiday, and paid 

sick leave benefits; eligibility to 

participate in a retirement plan 

described in section 401(a); or eligibility 

to receive employment benefits such as 

reduced tuition, or benefits under 

section 79 (life insurance), 127 

(qualified educational assistance), 129 

(dependent care assistance programs), or 

137 (adoption assistance) suggest that 

the service aspect of an employee’s 

relationship with the employer is 

predominant. Eligibility to receive 

health insurance employment benefits is 

not considered in determining whether 

the service aspect of an employee’s 

relationship with the employer is 

predominant. The weight to be given the 

fact that an employee is eligible for a 

particular benefit may vary depending 

on the type of employment benefit. For 

example, eligibility to participate in a 

retirement plan is generally more 

significant than eligibility to receive a 

dependent care employment benefit. 

Additional weight is given to the fact 

that an employee is eligible to receive 

an employment benefit if the benefit is 

generally provided by the employer to 

employees in positions generally held 

by non-students. 

(e) Effective date. Paragraphs (c) and 

(d) of this section apply to services 

performed on or after April 1, 2005.

Mark E. Matthews, 

Deputy Commissioner for Services and 

Enforcement. 

Approved: December 15, 2004. 

Gregory F. Jenner, 

Acting Assistant Secretary of the Treasury.

[FR Doc. 04–27919 Filed 12–20–04; 8:45 am] 

BILLING CODE 4830–01–P

DEPARTMENT OF DEFENSE

Department of the Army 

32 CFR Part 503

RIN 0702–AA46

Apprehension and Restraint

AGENCY: Department of the Army, DoD.

ACTION: Final rule, removal.

SUMMARY: This action removes 32 CFR 

part 503 published in the Federal 

Register, March 20, 1963 (28 FR 2732). 

The rule is being removed because it is 

now obsolete.

DATES: Effective December 21, 2004.

ADDRESSES: Headquarters, Department 

of the Army, Office of the Provost 

Marshal General, ATTN: DAPM–MPD–

LE, 2800 Army Pentagon, Washington, 

DC 20310–2800.

FOR FURTHER INFORMATION CONTACT: Mr. 

Nate Evans, (703) 693–2126.

SUPPLEMENTARY INFORMATION: The Office 

of the Provost Marshal General (DAPM–

MPD–LE), is the proponent for 

regulations in 32 CFR part 503, and has 

concluded this regulation is obsolete. 

This regulation has been rescinded. 

Therefore, it would be helpful in 

avoiding confusion with the public if 32 

CFR, part 503, is removed.

List of Subjects in 32 CFR Part 503

Apprehension and restraint.

PART 503—[REMOVED]

■ Accordingly, for reasons stated in the 

preamble, under the authority of Sec. 

3012, 70A Stat. 157; 10 U.S.C. 3012, 32 

CFR part 503, Apprehension and 

Restraint, is removed in its entirety.

Brenda S. Bowen, 

Army Federal Register Liaison Officer.

[FR Doc. 04–22849 Filed 12–20–04; 8:45 am] 

BILLING CODE 3710–08–M

DEPARTMENT OF DEFENSE

Department of the Army 

32 CFR Part 630

RIN 0702–AA47

Absentee Deserter Apprehension 

Program and Surrender of Military 

Personnel to Civilian Authorities

AGENCY: Department of the Army, DoD.

ACTION: Final rule, removal.

SUMMARY: This action removes 32 CFR 

part 630 published in the Federal 

Register July 26, 1996 (61 FR 39073). 

The rule is being removed because it is 

now obsolete and does not affect the 

general public.

DATES: Effective December 21, 2004.

ADDRESSES: Headquarters, Department 

of the Army, Office of the Provost 

Marshal General, ATTN: DAPM–MPD–

LE, 2800 Army Pentagon, Washington, 

DC 20310–2800.

FOR FURTHER INFORMATION CONTACT: Mr. 

Nate Evans, (703) 693–2126.

SUPPLEMENTARY INFORMATION: The Office 

of the Provost Marshal General (DAPM–

MPD–LE), is the proponent for 

regulations in 32 CFR part 630, and has 

concluded this regulation is obsolete. 

This regulation has been extensively 

revised, and the revised regulation does 

not affect the general public. Therefore, 

it would be helpful in avoiding 

confusion with the public if 32 CFR part 

630, is removed.

List of Subjects in 31 CFR Part 630

Absentee deserter apprehension 

program and surrender of military 

personnel to civilian authorities.

PART 630—[REMOVED]

■ Accordingly, for reasons stated in the 

preamble, under the authority of 10 

U.S.C. 801 through 940; Manual for 

Courts-Martial, U.S. 2002 revised 

addition as amended; sec 709, Pub L. 96–

154, Defense Appropriation Act. 93 Stat. 

1153, 32 CFR Part 630, Absentee Deserter 

Apprehension Program and Surrender of 

Military Personnel to Civilian 

Authorities, is removed in its entirety.

Brenda S. Bowen, 

Army Federal Register Liaison Officer.

[FR Doc. 04–27850 Filed 12–20–04; 8:45 am] 

BILLING CODE 3710–08–M