(2015) (where the court concluded that, for tax exemption purposes, an organization was not formed).16 79.1 The court concluded that “[i]f it is true that all non‐profit hospitals operate like the Hospital in this case … then for purposes of the property tax exemption, modern non‐profit hospitals are essentially legal fictions. Clearly, the operation and function of modern non‐profit hospitals do not meet the current criteria for property tax exemption under [New Jersey law.]” AHS Hospital Corp., d/b/a Morristown Memorial Hospital v. Town of Morristown, 2015 BL 206190 (N.J. Tax Ct. 2015).
17 118.1 Priv. Ltr. Rul. 201835012.
18 137 IRC § 529. See Tax‐Exempt Organizations § 19.19(a).
19 138 IRC § 529A(a); Reg. §§ 1.529A‐1(a), 1.511‐2(e), 1.529A‐2. This acronym is in reference to the Achieving a Better Life Experience Act of 2014, Pub. L. 113‐295, div. B, 128 Stat. 4056.
20 139 IRC § 529A(b)(1)(A).
21 139.1 IRC § 529A(e)(6).
22 140 IRC § 529A(b)(1)(B).
23 141 IRC § 529A(b)(1)(C).
24 142 IRC § 529A(b)(5).
25 143 IRC § 529A(e)(2).
26 144 IRC § 529A(e)(1).
27 145 IRC § 529A(e)(3).
28 146 IRC § 529A(e)(5).
29 147 IRC § 529A(b)(2)(A).
30 148 IRC § 529A(b)(2)(B). That exclusion amount currently is $14,000 (IRC § 2503(b)(2)). See Charitable Giving § 8.2(h).
31 149 IRC § 529A(b)(3).
32 150 IRC § 529A(b)(4).
33 151 IRC § 529A(c)(1)(B)(i); Reg § 1.529A‐3.
34 152 IRC § 529A(d)(1); Reg. § 1.529A‐3.
35 153 IRC § 529A(d)(2).
CHAPTER THREE Criticisms of Tax Exemption
§ 3.3 Commerciality Doctrine (c) Contemporary View *(d) Commerciality Doctrine and Healthcare Organizations
§ 3.3 COMMERCIALITY DOCTRINE
(c) Contemporary View
p. 65. Insert as third complete paragraph:
The IRS summed up its view as to the “factors indicative of commercial operations,” which include “regular and ongoing … sales [to the public], competition with other [organizations], common retail pricing structures, marketing and advertising, and the reliance on sales and fees versus contributions.”107.1 Earlier, the IRS asserted that the provision of Wi‐Fi, maintenance of a website, and making power outlets available for patrons’ use is additional evidence of commerciality.107.2
(d) Commerciality Doctrine and Healthcare Organizations
p. 66, second paragraph, fifth line. Delete and.
p. 66, second paragraph, last line. Delete period and insert comma; insert following footnote number:
and that a nonprofit pharmacy was not entitled to tax exemption as a charitable entity because it is operating a business, selling pharmaceutical products to the public in a manner indistinguishable from a commercial pharmacy.109.1
*p. 67. Insert as second complete paragraph:
In another ruling, a nonprofit corporation was organized to provide affordable healthcare through education and voluntary employees’ beneficiary association (VEBA) participation. It simultaneously applied for recognition of exemption from federal income tax both as a charitable organization and as a VEBA. The IRS determined that establishing participation in a VEBA is not an enumerated charitable purpose under the Internal Revenue Code and therefore the organization was not organized exclusively for charitable purposes. Further, the fact that the organization was managing a trust that enables employers to establish separate VEBA sub‐accounts for its employees was evidence that more than an insubstantial part of its activities was not in furtherance of an exempt purpose. Finally, the types of services being provided to its members demonstrated that the organization is operating in a commercial manner.111.1
The IRS continues to exert the commerciality doctrine and its tenets in denying or revoking exemption as a charitable organization. In one ruling, the IRS determined that the activity of developing, promoting, and supporting free medical software for physicians primarily benefits those physicians and their medical practices and serves private rather than public purposes. As a result, the organization engaged in these activities failed to qualify for exemption as a charitable organization.111.2
The nonprofit organization was formed to support an open source software project. The software permits a physician to schedule patient appointments, remind patients of their appointments, record the history and physical examination of each patient visit, record and transmit orders for pharmaceutical drugs and diagnostic studies, bill responsible parties for services rendered, record the remittances,
