Mayo Clinic v. United States

Background

Mayo Clinic brought refund claims after the Government assessed unrelated business income tax based on the conclusion that Mayo was not a qualified educational organization. Mayo paid the assessed amounts, filed refund claims with the Internal Revenue Service, and sued after the IRS denied those claims.

Following a bench trial, the court entered judgment against the Government for $11,501,621 “together with statutory interest.” Mayo later moved under Federal Rule of Civil Procedure 60(a) to clarify the judgment by specifying the amount of interest. Rule 60(a) permits a court to correct a clerical mistake or an omission so that the judgment accurately reflects the decision the court made.

Interest calculation

The court held that Mayo had a statutory right to interest on its tax overpayments under 26 U.S.C. § 6611. It found that Mayo’s interest calculations properly applied the rules governing when interest begins, the interest rates for corporate overpayments, and daily compounding.

For $11,331,486 in payments made in 2014 and 2015, the court accepted the payment dates as the dates interest began accruing. For the remaining $170,135, which involved advance payments, credits, and carryovers, Mayo used the applicable tax-return due dates. The court noted some uncertainty about whether an earlier date might apply to certain advance payments, but accepted Mayo’s calculations because Mayo had selected the later of two possible dates.

The court found that Mayo was owed $1,583,378.48 in statutory interest through December 31, 2022. It also accepted Mayo’s requested additional-interest rate of $1,617.36 per day beginning January 1, 2023, noting that the requested rate would result in slightly less interest than Mayo might otherwise receive through daily compounding.

The Government argued that possible future credits or offsets against unrelated debts could affect the amount owed and therefore that interest should not yet be specified. The court rejected that argument because it was hypothetical: the Government did not claim that Mayo owed any debts or that Mayo was likely to become a debtor before payment. The court also declined to add language addressing alleged future credits or offsets.

Order

Judge Eric C. Tostrud granted Mayo’s motion to clarify the judgment. The amended judgment was directed to state that judgment was entered in Mayo’s favor, with prejudice and on the merits, on its claims that it did not owe taxes on certain debt-financed income received in tax years 2003, 2005–2007, and 2010–2012 because it was an “educational organization” under 26 U.S.C. § 170(b)(1)(A)(ii).

The United States was ordered to pay Mayo $11,501,620.83 in principal plus $1,583,378.48 in interest, for a total of $13,084,999.31. Additional interest was to accrue at $1,617.36 per day beginning January 1, 2023, through at least June 30, 2023, or the date of payment, whichever was earlier.

The court also ordered the following dispositions: the Government’s motion to exclude Melvin Hurley as an expert witness was denied; its motion to exclude evidence of IRS procedures, analyses, and conclusions was denied to the extent the evidence was admitted at trial and relied upon in the findings of fact and conclusions of law; its motion to prevent Mayo from presenting testimony from an undisclosed records custodian was denied as moot; and its objection to Mayo’s designation of deposition testimony from its Rule 30(b)(6) designee Christie Lohkamp was denied to the extent that testimony was considered or relied upon in the findings of fact and conclusions of law.