The Supreme Court ruled unanimously to uphold the regulation as within the Treasury Department's statutory authority to issue and as a reasonable construction of FICA.
Applying Chevron, the Court first found that Congress had left the matter to the agency, because the statute was silent on the definition of "student" and on its applicability to medical residents specifically.
Second, the Court found, that the regulation was a reasonable interpretation of the statute, and that its clear line helped distinguish workers who study and students who work, simplified enforcement and furthered the broad coverage of Social Security.
All states require, that an individual pass Step 3 of the USMLE or COMLEX exams and complete at least one year of residency training to obtain an unrestricted medical license.
They also argued that residency training involves not only supervised work, but also an educational curriculum, conferences, and lectures, much like clinical years of medical school.
[23] In response, Assistant to the Solicitor General Matthew D. Roberts argued on behalf of the United States[24] that patient care and not educational curricula occupies the vast majority of residents' time.
[22] Associate Justice Elena Kagan recused herself from participating in the case, as she had signed the government's brief during her tenure as Solicitor General of the United States.
[21] Chevron, a landmark case regarding deference to government agencies, instituted a two-part test: The job of the reviewing court is to first establish whether Congress has unambiguously spoken about the matter.
The Court had in fact cited both cases in opinions since 1984, but agreed with the Government's position, stating that it would not be wise to "carve out an approach to administrative review good for tax law only".
[27] Despite the Mayo Foundation's arguments otherwise, the Court ruled that "student" was a sufficiently ambiguous term to state that Congress has specifically addressed the issue.
[21] In writing for the Court, Roberts stated that "The [Treasury] department certainly did not act irrationally in concluding that these doctors – 'who work long hours, serve as high [sic] skilled professionals, and typically share some or all of the terms of employment of career employees' – are the kind of workers that Congress intended to both contribute and benefit from the Social Security system".
[28] In March 2010, while the case was pending before the Supreme Court, the Treasury announced that it would not contest refund claims for taxes paid prior to the April 2005 regulation.
[28] An article in the New England Journal of Medicine noted that "[r]esidents could find additional support in the Court's unambiguous holding for efforts to enforce other workplace rights, such as unemployment benefits (e.g., after hospital closure) or protection under the Family Medical Leave Act.