IRS Nonprofit Rule’s Durability Is in Doubt After Chevron’s End

Tax lawyers for nonprofits are facing an uncertain landscape after a recent Fifth Circuit decision brushing aside an IRS tax exemption rule.

The US Court of Appeals for the Fifth Circuit ruled that Memorial Hermann Accountable Care Organization isn’t entitled to a tax exemption meant for social welfare groups because it didn’t show its operations exclusively were intended to help the public.

In its decision, the court made clear it wouldn’t automatically respect an IRS rule interpreting Section 501(c)(4), which governs how groups qualify for that type of nonprofit status. Memorial Hermann pointed to the rule in its defense. ...