Title Details

Note to the Reader: Sections not in the main bound volume are indicated by "(New)" after the title. Material new to or modified in this supplement is indicated by an asterisk (*) in the left margin in the contents and throughout this supplement.

Preface xvii

PART ONE Introduction to the Law of Tax-Exempt Healthcare Organizations 1

Chapter One: Rationale for Tax-Exempt Healthcare Organizations 3

§ 1.3 Categories of Tax-Exempt Healthcare Organizations 4

§ 1.8 Social Welfare Organizations 4

Chapter Two: Advantages and Disadvantages of Tax Exemption 5

*§ 2.4 Alternatives to Tax-Exempt Status 5

§ 2.6 Small Employer Insurance Tax Credit (New) 5

Chapter Three: Criticisms of Tax Exemption 9

§ 3.1 Criticisms in General 9

§ 3.2 Criticisms of Tax Exemption for Healthcare Organizations 9

*§ 3.3 The Commerciality Doctrine 10

PART TWO Fundamental Exempt Organization Principles Applied to Healthcare Organizations 15

Chapter Four: Private Inurement, Private Benefit, and Excess Benefit Transactions 17

§ 4.1 Essence of Private Inurement 17

§ 4.4 Private Inurement—Scope and Types 18

§ 4.6 Essence of Private Benefit 19

§ 4.9 Excess Benefit Transactions 20

Chapter Five: Public Charities and Private Foundations 23

*§5.1 Public Institutions 23

§ 5.2 Publicly Supported Organizations—Donative Entities 25

§ 5.3 Publicly Supported Organizations—Service Provider Organizations 25

*§ 5.5 Supporting Organizations 25

§ 5.5A Recognition of Change in Public Charity Status (New) 27

Chapter Seven: Lobbying and Political Activities 29

§ 7.1 Legislative Activities Limitation 29

§ 7.4 The Political Activities Limitation 29

§ 7.6 Internet Activities 30

§ 7.8 Political Activities of Social Welfare Organizations 30

PART THREE Tax Status of Healthcare Provider and Supplier Organizations 31

Chapter Thirteen: Other Provider and Supplier Organizations 33

§ 13.1 Blue Cross and Blue Shield Associations 33

§ 13.3 Qualified Health Insurance Issuers (New) 34

§ 13.4 Health Insurance Exchanges (New) 35

*§ 13.5 Accountable Care Organizations (New) 38

PART FOUR Tax Status of Health-Related Organizations 51

Chapter Fourteen: Development Foundations 53

§ 14.1 Basic Concepts 53

Chapter Sixteen: For-Profit Subsidiaries 55

§ 16.1 Establishing a Subsidiary 55

§ 16.2 Financial Considerations 56

*§ 16.3 Attribution of Subsidiary's Activities to Exempt Parent 56

Chapter Eighteen: Business Leagues 59

*§ 18.1 Business Leagues in General 59

Chapter Nineteen: Other Health-Related Organizations 61

*§ 19.4 Hospital Management Services Organizations 61

§ 19.5 Regional Health Information Organizations (New) 62

PART FIVE Organizational Issues 65

Chapter Twenty: Healthcare Provider Reorganizations 67

*§ 20.1 Some Basics about Reorganizations 67

Chapter Twenty-One: Mergers and Conversions 69

*§ 21.3 Conversion from Exempt to Nonexempt Status 69

Chapter Twenty-Two: Partnerships and Joint Ventures 71

§ 22.11 Ancillary Services Joint Ventures 71

§ 22.12 Single-Member Limited Liability Companies 71

Chapter Twenty-Three: Integrated Delivery Systems 73

*§ 23.2 Tax Status of IDS Organizations 73

PART SIX Operational Issues 75

Chapter Twenty-Four: Tax Treatment of Unrelated Business Activities 77

*§ 24.3 Definition of Regularly Carried On 77

*§ 24.5 Application of Substantially Related Test to Healthcare Organizations 78

*§ 24.7A Fitness Centers (New) 78

§ 24.10 Pharmacy, Medical Supplies, and Services Sales 79

§ 24.12 Medical Research 79

§ 24.17 Other Exceptions to Unrelated Income Taxation 81

§ 24.19 Revenue from Controlled Organizations 81

§ 24.20 Unrelated Debt-Financed Income 81

Chapter Twenty-Six: Charity Care 83

*§ 26.10 Additional Statutory Requirements for Hospitals (New) 84

Chapter Twenty-Seven: Worker Classification and Employment Taxes 101

§ 27.7 Medical Residents and the Student Exception (New) 101

Chapter Twenty-Eight: Compensation and Employee Benefits 105

§ 28.1 The Reasonable Compensation Standard 105

§ 28.3 Executive Compensation 105

§ 28.6 Deferred Compensation in General 106

Chapter Thirty: Tax-Exempt Bond Financing 109

§ 30.1 Overview of Qualified 501(c)(3) Bonds 109

§ 30.2 Overview of the Qualified 501(c)(3) Bond Issuance Process 112

§ 30.4 Internal Revenue Service Developments 112

Chapter Thirty-One: Fundraising Regulation 113

§ 31.2 Federal Law Regulation 113

Chapter Thirty-Three: Governance 123

*§ 33.2 Overview of Common Law and Statutory Duties of Officers and Directors 123

*§ 33.3 Good Governance Practices 130

*§ 33.5A Government Oversight of Executive Compensation (New) 130

PART SEVEN Obtaining and Maintaining Exempt Status for Healthcare Organizations 135

Chapter Thirty-Four: Exemption Recognition Process 137

§ 34.1 Exemption Recognition Process 137

§ 34.3 Special Requirements for Charitable Healthcare Organizations 139

§ 34.4 Non-Private-Foundation Status 139

Chapter Thirty-Five: Maintenance of Tax-Exempt Status and Avoidance of Penalties 141

§ 35.3 Annual Reporting Requirements 142

*§ 35.4 Redesigned Annual Information Return 142

§ 35.5A IRS Disclosure to State Officials (New) 152

§ 35.6 Form 990 and Community Benefit 153

§ 35.7 Reporting of Noncash Gifts in General (New) 153

Chapter Thirty-Six: IRS Audits of Healthcare Organizations 169

§ 36.3 IRS Implementing Guidelines 169

§ 36.5 IRS Compliance Check Projects 170

PART EIGHT Appendix Material 173

Appendix T: IRS Governance Check Sheet (New) 175

Appendix U: IRS Fact Sheet 2011-11 Tax-Exempt Organizations Participating in the Medicare Shared Savings Program through Accountable Care Organizations (New) 179

PART NINE Tables & Index 189

Cumulative Table of Cases 191

Cumulative Table of IRS Revenue Rulings 201

Cumulative Table of IRS Revenue Procedures 205

Cumulative Table of IRS Private Letter Rulings 207

Cumulative Table of IRS Technical Advice Memoranda 213

Cumulative Index 215