Case: Mayo Clinic Exempt From Unrelated Business Income Tax on Debt-Financed Property (8th Cir.) (IRC §514)

Mayo Clinic qualifies as an educational organization exempt from unrelated business income tax on debt-financed property under I.R.C. §514(c)(9), the U.S. Court of Appeals for the Eighth Circuit held, affirming the district court’s decision. Taxpayer, a nonprofit corporation and tax-exempt organization, sought a refund of substantial unrelated business income tax (UBIT) imposed on acquisition indebtedness of property held to produce income. The IRS had denied the refund on the grounds that Taxpayer did not qualify for the exemption because its primary function was not the “presentation of formal instruction,” as required by Treas. Reg. §1.170A-9(c)(1), and its noneducational activities were ...