Court Opinion

ID: 9845756
Source: CourtListenerOpinion
Date Created: 2023-09-24 03:27:31.73337+00
Date Added: 2024-06-11T09:16:21.204703
License: Public Domain

*33TRAGER, District Judge,
concurring in part and dissenting in part:
Although I agree that payments made to residents cannot qualify as scholarships, I respectfully dissent from the panel’s construction of the student exception from FICA taxes. My colleagues find that the text of 26 U.S.C. § 3121(b)(10) unambiguously adopts a case-by-case approach for determining whether a medical resident qualifies for the student exception. Unlike my colleagues, I find the statutory text ambiguous and resort to legislative history appropriate. And here Congress unambiguously expressed its intent that residents are categorically ineligible for the student exception when it repealed the related FICA tax exception for interns in 1965 (the “intern exception” and the “1965 amendment”).1 Indeed, between the 1965 amendment and the Eighth Circuit’s decision in Minnesota v. Apfel, 151 F.3d 742 (8th Cir.1998), a period of almost 33 years, Congress’s intent to make residents categorically ineligible for the student exception appears to have been clearly understood by all relevant parties.
26 U.S.C. § 3121(b)(10)-which defines the student exception-uses extremely general language. The relevant portion exempts from FICA taxation any remuneration for a “service performed in the employ of ... a school, college, or university ... if such service is performed by a student who is enrolled and regularly attending classes at such school, college, or university. ...” 26 U.S.C. § 3121(b)(10). The text is ambiguous in that it does not clearly define either the term “student” or the term “school, college, or university.” The fact that the statute uses terms that are plain and simple at first glance does not make it unambiguous. Instead, we must focus on the specific question before the court and determine whether the text, standing alone, allows for more than one reasonable interpretation. Whether a statute is ambiguous depends on whether it has an “unambiguous meaning with regard to the particular dispute in the case.” Robinson v. Shell Oil Co., 519 U.S. 337, 340, 117 S.Ct. 843, 136 L.Ed.2d 808 (1997). To be unambiguous, a statute must supply “rule of decision fine-grained enough so that it controls the ‘precise question’ at issue.... ” General Elec. Co. v. Comm’r of Internal Revenue, 245 F.3d 149, 154 (2d Cir.2001) (quoting Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 843 n. 9, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984)).
The question directly posed by the parties is whether medical residents are categorically ineligible for the student exception or whether eligibility should be judged on a case-by-case basis. This question requires us to determine not merely how the statute treats residents but also at *34what level of generality eligibility for the exception is decided. Conceptually, at least, the statute could judge putative students (1) categorically, such that all residents are treated alike; (2) by program, such that all residents in a particular program are treated alike; or (3) as individuals, such that two individuals in the same program might receive different treatment depending on their individual circumstances.
The bare text of the statute does not unambiguously resolve the matter. The text itself says little about at what level of generality eligibility should be determined. It is so spare that it does not even enumerate the criteria to use in determining whether a person is a “student” or what institutions can be called a “school, college, or university,” let alone specify at what level of generality this decision is to be made. See 26 U.S.C. § 3121(b)(10). As the majority notes, the statute does provide some guidance in that it specifies that only students who are “regularly attending classes” may qualify and that they must work for a “school, college, or university....” Maj. Op. at 28. But the fact that the statute provides some limited guidance as to who qualifies is not the same thing as specifying at what level of generality the definition is to be applied.
Nor does logic provide an obvious gloss on the language that eliminates the ambiguity. Considering the case of residents, on the one hand, a case-by-case resolution make sense as residency programs likely vary in their nature. On the other hand, categorically resolving the matter in favor of ineligibility might also make sense because all residents have earned their medical degrees before commencing their residencies and all have patient care responsibilities that are substantial, to say the least. Moreover, a categorical resolution would ensure equity among residents. As noted above, to qualify for the student exception, an individual must work for a “school, college, or university.... ” 26 U.S.C. § 3121(b)(10). A case-by-case resolution might therefore grant an exception to a resident who happened to work for a hospital that is part of a university or medical school but deny it to one who happened to work for a standalone hospital-despite the fact that the two programs were similar in all other relevant respects. A categorical resolution, however, would treat them equally.
Policy considerations also don’t furnish a clear answer. On the one hand, a case-by-case approach might maximize fairness in particular situations. On the other hand, a categorical approach might reduce administrative costs and provide certainty. See United States of America v. Mount Sinai Medical Center of Florida, 353 F.Supp.2d 1217, 1229-30 (S.D.Fla.2005) (arguing that it would be a waste of resources to litigate student exception claims by residents because of the huge volume of cases and their highly repetitive facts), rev’d, 486 F.3d 1248 (11th Cir.2007). Given the presence of plausible arguments for different interpretations, the text could reasonably be interpreted in more than one fashion. Because of the ambiguity of the bare text, resort to legislative history is proper to determine Congress’s intent. Cohen v. JP Morgan Chase & Co., 498 F.3d 111, 116 (2d Cir.2007).
Here, legislative history eliminates any ambiguity left by the bare text, making it clear beyond any “reasonable doubt” that Congress intended that residents would be subject to FICA taxation. Cohen, 498 F.3d at 122 (quotation omitted). By “legislative history,” I do not mean merely committee reports and floor statements. As has often been noted, these are not always an ideal guide to congressional intent. See, e.g., Wisconsin Pub. Intervenor v. Mortier, 501 U.S. 597, 620-22, 111 S.Ct. 2476, 115 L.Ed.2d 532 (1991) (Scalia, J., *35concurring). Rather, my view is based principally on the contextual history of laws that Congress passed regarding FICA tax exemptions. This sequence of laws so clearly revealed Congress’s purpose that, for more than three decades after the 1965 amendment, all the relevant parties appear to have understood that residents were categorically ineligible for the student exception. See Albany Medical Center, 2007 WL 119415, at *1 n. 1.
Stated more specifically, the legislative history directly indicates that interns are subject to FICA taxation and the coverage of residents under the FICA tax regime follows inexorably from the coverage of interns. In 1939, Congress passed two relevant exemptions to FICA taxation: the original version of the student exception and the intern exception. Social Security Act Amendments of 1939, Pub.L. No. 76-379, ch. 666, 53 Stat. 1385 (1939). In the years leading up to 1964, a growing number of medical residents claimed that they should be exempt from FICA taxation under the intern exception because the functional distinctions between interns and residents had eroded. The Sixth Circuit rejected this argument, holding that any expansion of the intern exception was for Congress, not the courts to create. St. Luke’s Hosp. Assoc. v. United States, 1 Ohio Misc. 89, 333 F.2d 157, 164 (6th Cir.1964). In 1965-rather than expand the intern exception to cover residents — Congress instead chose to eliminate the intern exception entirely. Social Security Act Amendments of 1965, Pub.L. No. 89-97 § 311, 79 Stat. 380-81 (1965).
The House and Senate reports, though not essential to determining congressional intent, are nonetheless worth reviewing. The House Report for the 1965 amendment repealing the intern exception indicated that:
Coverage would also be extended to services performed by medical ... interns. The coverage of services as an intern would give young doctors an earlier start in building up social security protection and would help many of them to become insured under the program at a time when they need the family survivor and disability protection it provides. This protection is important for doctors of medicine who, like members of other professions, in the early years of their practice, may not otherwise have the means to provide adequate survivorship and disability protection for themselves and their families
Social Security Amendments of 1965, H.R.Rep. No. 89-213, 89th Cong. 1st Sess. 95, reprinted in 1965-2 C.B. 733, 735 (1965). Similarly, the Senate report for the bill repealing the intern exception noted that “[cjoverage would also be extended to services performed by medical ... interns.” Social Security Amendments of 1965, S.Rep. No. 89-404 (1965), reprinted in 1965-2 C.B. 758, 759 (1965).
Taken together, the contextual history and legislative purpose establish Congress’s clear intent to cover residents under the FICA regime. See Albany Medical Center v. United States, No. 1:04-CV-1399 (FJS/RFT), 2007 WL 119415, at *2-5 (N.D.N.Y. Jan.10, 2007) (discussing the legislative history of the student exception somewhat more fully). The fact that Congress passed both the intern exception and the student exception at the same time suggests that Congress did not intend interns to fall under the student exception. Moreover, the fact that Congress repealed the exception for interns in 1965 indicates that Congress intended for interns to be subject to FICA taxes. The repeal of the intern exception is sufficient on its own to demonstrate this intent to secure coverage and the House and Senate reports indicating that interns are covered adds further confirmation.
*36If Congress intended to include interns in the FICA tax regime in 1965, that same intent extends to the coverage of residents. The distinction between interns and residents which the St Luke’s opinion found blurred in 1964 has further eroded since the 1965 amendment; but residents are at least as far removed from medical school as those known as interns in 1965.2 Therefore, if interns categorically are not covered, neither are residents. At a more general level, Congress’s objective in repealing the intern exception in 1965 is clear: to secure social insurance coverage for doctors who are early in their careers. The repeal of the intern exception in 1965 cannot have meant anything else and the language of the House Report noting Congress’s objective to ensure coverage for “young doctors” underscores this point. See Social Security Amendments of 1965, H.R.Rep. No. 89-213, 89th Cong. 1st Sess. 95, reprinted in 1965-2 C.B. 733, 735 (1965). Allowing residents to apply for the student exception would thwart Congress’s clear objective of ensuring that young doctors receive the social insurance coverage funded by FICA. Indeed, to ignore this historical context is to say that Congress engaged in a fruitless act when it repealed the exemptions for medical interns in 1965, although no one appears to have thought so until inventive lawyering discovered § 3121(b)(10) some thirty years later.3
Nor should we be concerned that Congress’s intent might be different today from what it was in 1965 in light of the evolving development of resident programs. This is a matter on which Congress should speak if it wishes to alter its previously stated and unequivocal goal of providing coverage for young doctors and their families. Moreover, in these difficult times, while one can appreciate the financial pressures hospitals face and their desire to reduce costs, there are substantial policy issues of equity among residents and between and among hospitals that Congress is the body to consider before courts adopt a case-by-case approach as urged by appellants here. I am aware that other circuit courts have reached a different conclusion and I do not take their decisions lightly. However, Congress has spoken directly to the issue at hand.
The majority alternatively relies on regulations which the Treasury Department issued regarding the application of the student exception. This argument must be addressed under the under the framework of Chevron. See McNamee v. Dep’t. of the Treasury, 488 F.3d 100, 105 (2d Cir.2007) (applying Chevron to a treasury regulation and provisions of the Internal Revenue Code).4 The result would be the same. The Chevron framework has two steps. “First, always, is the question whether Congress has directly spoken to the precise question at issue. If the intent of *37Congress is clear, that is the end of the matter....” Chevron, 467 U.S. at 842, 104 S.Ct. 2778. Second, “[i]f ... the court determines Congress has not directly addressed the precise question at issue, .... the question for the court is whether the agency’s answer is based on a permissible construction of the statute.” Id. at 843, 104 S.Ct. 2778.
At step one of the Chevron framework, the court must initially focus on the language of the statute to determine whether Congress has directly spoken to the question at issue. Cohen, 498 F.3d at 116. A court may consider the context of the statute as a whole in determining whether a given provision is ambiguous. FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 132-33, 120 S.Ct. 1291, 146 L.Ed.2d 121 (2000). If the text of the statute is unambiguous with respect to that issue, then the matter is settled. Cohen, 498 F.3d at 116. Should the text prove to be ambiguous, the preponderance of authority indicates that legislative history may be considered at step one of the Chevron framework — before turning to the regulations. The Second Circuit did precisely this in Cohen. Id. at 122-25, 120 S.Ct. 1291. Indeed, the language of Chevron implies an inquiry at step one that reaches beyond the bare text of the statute. It describes the purpose of step one as being to determine “the intent of Congress----” Chevron, 467 U.S. at 842, 104 S.Ct. 2778 (emphasis added). It is therefore unsurprising that the Supreme Court has recently and frequently considered legislative history at step one of Chevron. See Gen. Dynamics Land Sys. v. Cline, 540 U.S. 581, 587-90, 600, 124 S.Ct. 1236, 157 L.Ed.2d 1094 (2004); Brown, 529 U.S. at 133, 147-48, 150, 154-57; Pension Ben. Guar. Corp. v. LTV Corp., 496 U.S. 633, 649-50, 110 S.Ct. 2668, 110 L.Ed.2d 579 (1990).5 Accordingly, if, as I believe, the bare text is ambiguous and the legislative history is conclusive, consideration of the relevant regulations is unnecessary and step two of the Chevron framework is never reached, cf. Chevron, 467 U.S. at 842-*3843, 104 S.Ct. 2778; Cohen, 498 F.3d at 116, although the regulations in effect at the time would but have added only another layer of ambiguity.6
For the foregoing reasons, I respectfully concur in part and dissent in part.

. Moreover, even accepting the claim that the statutory language was unambiguous, the chronology or contextual history of the repeal of the intern exception and its relationship to the student exception, apart from any other sources of legislative history, would be decisive for me. However, I find it unnecessary to rely on this principle in view of its unresolved and contested status. Compare Cohen, 498 F.3d at 116 ("if [the statutory text] is unambiguous, no further inquiry is necessary.”) with United States v. Turkette, 452 U.S. 576, 580, 101 S.Ct. 2524, 69 L.Ed.2d 246 (1981) ("If the statutory language is unambiguous, in the absence of a clearly expressed legislative intent to the contrary, that language must ordinarily be regarded as conclusive.”) (emphasis added, quotation omitted) and United Steelworkers of America v. Weber, 443 U.S. 193, 201, 99 S.Ct. 2721, 61 L.Ed.2d 480 (1979) ("In this context respondent's reliance upon a literal construction ... is misplaced. It is a familiar rule that a thing may be within the letter of the statute and yet not within the statute, because not within its spirit nor within the intention of its makers.”) (quotation omitted).

. See the discussion in Albany Medical Center, 2007 WL 119415, at *3 n. 2.

. The current wave of litigation regarding residents’ exemption was apparently touched off by the Eighth Circuit's decision in Apfel. See Albany Medical Center, 2007 WL 119415, at *1 n. 1.

. There is some controversy over whether Treasury Regulations are analyzed under Chevron deference or under the standard elucidated by the Supreme Court in National Muffler Dealers Ass'n, Inc. v. United States, 440 U.S. 472, 477, 99 S.Ct. 1304, 59 L.Ed.2d 519 (1979). See Swallows Holding, Ltd. v. Comm’r of Internal Revenue., 515 F.3d 162, 167 (3d Cir.2008). The better view is that Treasury Regulations are analyzed under Chevron. See McNamee, 488 F.3d at 105 (applying Chevron); Cinema 84 v. Comm’r of Internal Revenue, 294 F.3d 432, 439 (2002) (applying Chevron); see also Swallows, 515 F.3d at 168 n. 6 (discussing McNamee). Despite this, the Second Circuit has expressed uncertainty over the question of which standard governs as recently as 2001. General *37Elec. Co. v. Comm’r of Internal Revenue, 245 F.3d 149, 154 n. 8 (2d Cir.2001). Moreover, McNamee cites — but does not apply — both National Muffler and Cottage Sav. Ass'n v. Comm’r of Internal Revenue, 499 U.S. 554, 560, 111 S.Ct. 1503, 113 L.Ed.2d 589 (1991), a tax case that relies on National Muffler. See McNamee, 488 F.3d at 106.
It is worth noting, however, that the result would be the same whether Chevron or National Muffler is applied. National Muffler does not explicitly have the same two step structure as Chevron; rather National Muffler dictates deference when the regulation "implement[s] the congressional mandate in some reasonable manner” and focuses on a list of specific factors. National Muffler, 440 U.S. 472, 476-77, 99 S.Ct. 1304, 59 L.Ed.2d 519 (1979) (quotation omitted). Unsurprisingly, therefore, analysis under National Muffler is also sensitive to legislative history. See Allen Oil Co., Inc. v. Comm’r of Internal Revenue, 614 F.2d 336, 339, 340-41 (2d Cir.1980). In view of the clear inference from the chronology and purpose of the student exception, no regulation allowing residents to apply for the student exception could stand under National Muffler. Moreover, as discussed more fully below, the relevant regulation does not even clearly allow such applications. See 26 C.F.R. § 31.3121(b)(10)-2 (2003).

. In Gen. Dynamics, the Court extensively considered legislative history before concluding that the Age Discrimination Employment Act clearly did not prohibit discrimination in favor of older workers. 450 U.S. at 587-90, 600, 101 S.Ct. 1266. The Court held that, even if the agency's interpretation would otherwise have been eligible for deference under Chevron, the clarity of the statute meant that such deference did not apply. Id. at 600, 101 S.Ct. 1266. In Brown & Williamson, the Court considered whether the Food, Drug and Cosmetic Act ("FDCA”) allowed the Food and Drug Administration to regulate cigarettes. At Chevron step one, the Court considered acts passed subsequent to the FDCA, proposed legislation that was not passed and statements made by agencies, officials and legislators at the time that relevant legislation was being considered. Brown & Williamson, *38529 U.S. at 133-57, 120 S.Ct. 1291. In so doing, the Court blended a consideration of the statutory scheme as a whole with a consideration of legislative history. See id. In LTV Corp., the Court considered legislative history at Chevron step one but found that it did not clearly indicate congressional intent. LTV Corp., 496 U.S. at 649-50, 110 S.Ct. 2668. To be sure, the Supreme Court has not always considered legislative history at Chevron step one-though it does not appear that the Court has ever explicitly ruled out such consideration. See, e.g., National Cable & Telecommunications Ass'n v. Brand X Internet Services, 545 U.S. 967, 986, 125 S.Ct. 2688, 162 L.Ed.2d 820 (2005); National R.R. Passenger Corp. v. Boston & Maine Corp., 503 U.S. 407, 417-18, 112 S.Ct. 1394, 118 L.Ed.2d 52 (1992); but see K Mart Corp. v. Cartier, Inc., 486 U.S. 281, 293 n. 4, 108 S.Ct. 1811, 100 L.Ed.2d 313 (1988) (opinion of Kennedy, J.) (writing only for himself and Justice White and stating that, for purposes of resolving a statutory textual ambiguity prior to turning to agency regulations, "any reference to legislative history, is in the first instance irrelevant.”).
The Second Circuit considered legislative history at Chevron step one in Cohen, 498 F.3d at 122-24. However, there are some Second Circuit cases predating Cohen which express uncertainty regarding whether legislative history may be considered at step one. See, e.g., Sash v. Zenk, 428 F.3d 132, 137-38 (2d Cir.2005); Coke v. Long Island Care At Home, Ltd., 376 F.3d 118, 127 & n. 3 (2d Cir.2004), rev’d on other grounds 551 U.S. 158, 127 S.Ct. 2339, 2347-49, 168 L.Ed.2d 54 (2007); see also United States v. Geiser, 527 F.3d 288, 292 (3d Cir.2008) (holding that legislative history may not be considered at Chevron step one). Nonetheless, in view of the Second Circuit’s recent decision in Cohen and the Supreme Court’s practice in Gen. Dynamics, Brown & Williamson and LTV Corp., such consideration seems proper in this case, particularly because the legislative history clearly establishes that Congress spoke the issue at hand for the reasons discussed above.

. The significant portions of the relevant regulations are closely patterned on the statutory text. See 26 C.F.R. § 31.3121(b)(10)-2 (2003). Though the regulation contains additional language, it does not resolve the issue presented here. For example, the regulation notes that ”[t]he term ‘school, college, or university’ ... is to be taken in its commonly or generally accepted sense.” 26 C.F.R. § 31.3121(b)(10)-2(d) (2003). Thus, the regulation's language adds little to the discussion. In addition the regulation notes that, to determine whether an individual is a student, one must examine the "basis of the relationship of such employee with the [school]” and that an individual is considered a student when they "perform[ ] services ... as an incident to and for the purpose of pursuing a course of study....” 26 C.F.R. § 31.3121(b)(10)-2(c) (2003). These elements defining the term "student” could as easily be applied on a categorical basis, a program-by-program basis or an individual basis. None of these three interpretations would be unreasonable and therefore the regulation does not resolve the ambiguity.
Even if the regulation were clear, the historical context discussed above would, in my view, lead to the same result. Given the clarity of Congress’s intent, no regulation allowing residents to apply for FICA coverage would qualify as a permissible interpretation of the statute. See Texas v. United States, 497 F.3d 491, 506 (5th Cir.2007) (finding, in the alternative, that even if a regulation could survive Chevron step one, it was unreasonable in light of congressional intent).