Sister Mary K. Samson v. The United States. Religious institutes and the IRS: the Samson Case's impact

A federal appeals court recently ruled that a member of a Catholic religious institute assigned by her superiors to serve with a county hospital was subject to Social Security withholding on earnings from that service. Consequently, Catholic institute members will have Social Security taxes withheld whenever they serve with an entity not associated with the Church, that is, any entity not listed in the Official Catholic Directory. The ruling hinges on the contention that the sister could not have been "required" by her superiors to serve with the county hospital, since the hospital had final authority to determine who its employees would be, and that she thereby failed to qualify for the exception to Social Security withholding in Internal Revenue Code section 3121(b)(8)(A) for members of religious institutes performing service "'required" by their superiors. Because virtually all employers have this final authority, however, the appeals court's ruling leaves in doubt the perimeters of the exception to Social Security withholding in section 3121(b)(8)(A).