Mayo Clinic’s $11.5 Million Suit Will Test Tax Exemption’s Scope

The Eighth Circuit on Wednesday will hear arguments on whether Mayo Clinic qualifies as a tax-exempt educational organization, which has the potential to tee up future battles between the IRS and other nonprofits seeking the same status.

The US appealed after Mayo convinced a Minnesota federal court that the academic medical center is owed an $11.5 million tax refund. Mayo’s status as a tax-exempt educational organization excludes its debt-financed property income from unrelated business income tax, or UBIT, the district court said.

The US says Mayo can’t qualify as a tax-exempt educational institution because it doesn’t operate exclusively for educational ...