Tax

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Recently signed tax legislation includes several beneficial changes to Achieving a Better Life Experience (ABLE) accounts, a potentially useful and tax-efficient savings tool available through state-run programs for individuals with disabilities. We previously posted an overview of ABLE accounts. Below is a summary of four beneficial changes to ABLE accounts…

On July 25, 2025, the U.S. Court of Appeals for the Eighth Circuit affirmed the District Court decision holding that the Mayo Clinic is entitled to an $11.5 million refund of certain unrelated business income taxes imposed on it due to it being an “educational organization” under section 170(b)(1)(A)(ii).[1]…

According to a National Disability Institute report (available here), adults living with disabilities need 28% more income on average to achieve the same standard of living as those without disabilities. There are some tools designed to address this disparity, including Achieving a Better Life Experience (“ABLE”) accounts, a potentially…

Introduction

Tax-exempt organizations, while not generally subject to tax, are subject to tax on their “unrelated business taxable income” (“UBTI”).  One category of UBTI is debt-financed income; that is, a tax-exempt organization that borrows money directly or through a partnership and uses that money to make an investment is generally subject to tax on a portion of the income or gain from that investment.[1]  However, under section 514(c)(9),[2] “educational organizations” are not subject to tax on their debt-financed income from certain real estate investments.

The Mayo Clinic in Minnesota is one of the country’s leading hospitals.  Between 2003 and 2012, the Mayo Clinic was a partner in a partnership that borrowed money to make real estate investments.[3]

On November 22, 2022, U.S. District Court for the district of Minnesota held that the Mayo Clinic qualified as an educational organization within the meaning of section 514(c)(9) and, therefore, was not subject to tax on the debt-financed income from the partnership.[4]

Proskauer’s 26th Annual Trick or Treat Seminar was held virtually on Friday, October 29th and discussed timely topics and best practices specifically tailored to the not-for-profit community.

The seminar discussed:

  • Workplace challenges: Mandatory vaccinations, HERO act and other considerations
  • Tax proposals impacting nonprofit organizations
  • Employee benefits update

Amanda Nussbaum welcomed everyone and introduced the presenters.