Mayo Clinic takes on IRS over status as a school

The $11.5 million question at the core of Mayo Clinic's lawsuit against the United States is whether the nonprofit operation is primarily a school or a medical center.

Mayo Clinic's position is that it is an "educational organization," which "makes patient care available as a necessary and integral part of its educational activities."

The Internal Revenue Service disagrees and considers Mayo Clinic to be "a parent company of health-care system as its primary purpose and function." That means more of the Mayo Clinic's investment income is taxable, if it is not a school.

In 2009, the IRS audited Mayo Clinic and issued a notice of "adjustment" for the years 2005 and 2006. Those recalculations later expanded to include a total of seven years of Mayo Clinic tax returns — 2003, 2005 to 2007 and 2010 to 2012. The years of 2004, 2008 and 2009 were not included, because no income of that type was reported.

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