[SFCC/UND]

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(Preamble to the 1997 Part 61 revision Final Rule - Federal Register: April 4, 1997 (Volume 62, Number 65), Page 16220-16269 at Page 16242):

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With respect to the holding of medical certificates by a flight instructor, the FAA has determined that the compensation a certificated flight instructor receives for flight instruction is not compensation for piloting the aircraft, but rather is compensation for the instruction. A certificated flight instructor who is acting as pilot in command or as a required flight crewmember and is receiving compensation for his or her flight instruction is only exercising the privileges of a private pilot. A certificated flight instructor who is acting as pilot in command or as a required flight crewmember and receiving compensation for his or her flight instruction is not carrying passengers or property for compensation or hire, nor is he or she, for compensation or hire, acting as pilot in command of an aircraft. Therefore, because a certificated flight instructor who is acting as pilot in command or as a required flight crewmember and is receiving compensation for his or her flight instruction is exercising the privileges of a private pilot, he or she only needs to hold a third-class medical certificate. In this same regard, the FAA has determined that a certificated flight instructor on board an aircraft for the purpose of providing flight instruction, who does not act as pilot in command or function as a required flight crewmember, is not performing or exercising pilot privileges that would require him or her to possess a valid medical certificate under the FARs.