Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 78-17

1978-1 C.B. 306

IRS Headnote

Students employed by university; excepted services. Services performed by a graduate student registered for two courses totaling 6 hours of credit out of a maximum of 18 and employed full time by a university that has waived its exemption from FICA is not excepted from employment under section 3121(b)(10) of the Code. However, the services of a graduate student employed 15 hours a week and registered for four courses totaling 12 credits, and the services of a graduate student employed 6 hours a week while working on a dissertation following completion of required course work and registered at the university for dissertation advisement, are excepted.

Full Text

Rev. Rul. 78-17

Advice has been requested whether the services performed for a university in the situations described below are excepted from "employment" under section 3121(b)(10) of the Federal Insurance Contributions Act (chapter 21, subtitle C, Internal Revenue Code of 1954).

The university is exempt from Federal income tax under section 501(a) of the Code as an organization described in section 501(c)(3). Although services for the university are excepted from "employment" under section 3121(b)(8)(B) of the Federal Insurance Contributions Act and thus are not subject to taxes under the Act, the university has, pursuant to section 3121(k) of the Act, filed with the Internal Revenue Service an effective Form SS-15, Certificate Waiving Exemption from Taxes Under the Federal Insurance Contributions Act, accompanied by a list of employees who concur in the filing, Form SS-15a. Therefore, the services of its employees are "employment" unless excepted under another Code section.

Situation 1. A is enrolled in a Master of Education program at the university. During the current academic term A is registered for four courses totaling 12 points of credit. The maximum course load in all programs is 18 points of credit. A is also employed 15 hours per week by the university.

Situation 2. B is enrolled in a Master of Education program at the university. During the current academic term B is registered for two courses totaling 6 points of credit. B is also employed 40 hours per week by the university. Situation 3. C is enrolled in a Doctor of Education program at the university and has completed the requisite course work. C's dissertation topic has been approved and C is currently conducting the research and experimentation needed for the dissertation. During the current academic term C is registered at the university for dissertation advisement under the supervision of a committee of faculty members. C is also employed 6 hours per week by the university.

Section 3121(b)(10)(A) of the Act excepts from the definition of "employment" service performed in the employ of a school, college, or university if such service is performed by a student who is enrolled and is regularly attending classes at such school, college, or university.

The purpose of excepting such employment by students is explained in the Congressional committee report that discusses the limitations on coverage provided under the Social Security Act:

* * *

The intent of the amendment is to exclude those persons and those organizations in which the employment is part-time or intermittent and the total amount of earnings is only nominal and the payment of the tax is inconsequential and a nuisance. * * * [S. Rep. No. 734, 76th Cong., 1st Sess. 19 (1939), 1939-2 C.B. 565, 570.]

Section 31.3121(b)(10)-2(b) of the Employment Tax Regulations provides that, for purposes of the exception in section 3121(b)(10)(A) of the Act, the amount of the remuneration for services performed by the employee, the type of services performed, and the place where the services are performed are immaterial. The regulation provides that the employee must be in the status of a student enrolled and regularly attending classes at the school, college or university by which he is employed.

Section 31.3121(b)(10)-2(c) of the regulations provides that the status of the employee as a student performing the services shall be determined on the basis of the relationship of such employee to the organization for which the services are performed. An employee who performs services in the employ of a school, college, or university as an incident to and for the purpose of pursuing a course of study at such school, college, or university has the status of a student in the performance of such services.

In Situation 1, A is enrolled and is regularly attending classes. Furthermore, A is employed only on a part-time basis and is taking a substantial course load (12 points out of a maximum 18 points of credit). Thus A's services are incident to and for the purpose of pursuing a course of study. Accordingly, A's services are excepted from employment under section 3121(b)(10)(A) of the Federal Insurance Contributions Act.

In Situation 2, B is enrolled and is regularly attending classes. However, B is employed on a full-time basis and is taking only two courses worth 6 points of credit. Thus B's employment is not incident to and for the purpose of pursuing a course of study as required by the regulations. Accordingly, B's services are not excepted from employment under section 3121(b)(10)(A) of the Act.

In Situation 3, C is enrolled and is registered for dissertation advisement. It is recognized that a certain amount of nonclassroom study may be necessary to obtain an academic degree. Thus C's pursuance of a regular course of study necessary to receive the desired degree, in accordance with the requirements of the school, satisfies the requirement of regularly attending classes. C's employment on a part-time basis is 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)(A) of the Act.

A student working on a dissertation or thesis must be actually enrolled at the university for such independent study during the academic term in question. See Rev. Rul. 74-109, 1974-1 C.B. 288, in which independent study and research conducted by graduate students and research assistants during the summer vacation months was not excepted from employment under section 3121(b)(10)(A) of the Federal Insurance Contributions Act, because the individuals were not enrolled and regularly attending classes.