IRS Requires Division Counsel Consultation for Some Public Charity Status Claims in Wake of Mayo Clinic Decision

The IRS has issued a memorandum providing "Interim Guidance on Processing a Request for Public Charity Classification under IRC Sections 509(a)(1) and 170(b)(1)(A)(ii) when Applicant’s Primary Function is not the Presentation of Formal Instruction". The guidance comes in the wake of the Eighth Circuit's Mayo Clinic decision relating to the definition of "educational organization". As provided in the memo:

Because of ongoing litigation in the Eighth Circuit Court of Appeals regarding Treasury Regulation Section 1.170A-9(c)(1), the specialist must coordinate with TEGE Division Counsel when:

1. An applicant is seeking classification or reclassification of public charity status as an educational organization under IRC Sections 509(a)(1) and 170(b)(1)(A)(ii), and
   
   
2. The applicant’s primary function is not the presentation of formal instruction.

Of course the most interesting but unanswered question is to what extent the IRS will choose to follow that appellate court decision in making these determinations, including outside of the Eighth Circuit.

Hat tip: EO Tax Journal

Lloyd Mayer