insurance exchange under the Affordable Care Act. It was an arranger and administrator of healthcare services through its plans, providing prepaid healthcare services primarily to its subscribers. It also undertook social welfare activities, including providing financial assistance to individuals and families who were unable to afford the plan premiums, making grants for health research and capital improvement projects, hosting mammography screening events, and providing access to clinically based education materials. It also shared health information with a data warehousing initiative formed by its affiliate.
The IRS concluded that the organization was not operated primarily for the promotion of social welfare, since the overwhelming majority of its activities related to providing healthcare plans to its paying subscribers. The number of its subscribers who were low‐income and qualified for subsidies was minor in relation to its subscriber populations as a whole. In addition, its social welfare activities represented a minor component of its overall activities. The IRS stated that to qualify for tax exemption as a social welfare organization, an organization's activities must primarily benefit the community rather than its own members.
The IRS also determined that the organization did not qualify for tax exemption as an integral part of its affiliated medical school. Even though the medical school controlled its operations, and its administrative functions were intermingled with it, the HMO did not provide any necessary or indispensable services exclusively to the medical school. In addition, the organization continued to arrange for healthcare services to be delivered by providers and facilities outside of its health system, and thereby failed to qualify as an integral part of the medical school.
In another ruling, the IRS considered an application for recognition of tax exemption as a charitable organization from an entity formed for the purpose of providing health insurance for every resident of a state for a fee and opening an affordable healthcare facility, also for a fee. The IRS denied recognition of exemption, concluding that the organization was not operated exclusively for charitable purposes, but rather was providing commercial‐type insurance and medical services on a fee‐for‐service basis. In addition, the IRS determined that the organization's provision of commercial‐type insurance was substantial, thereby disqualifying it for recognition of exemption as a charitable organization under the Code.153
The IRS easily concluded that the entity was providing commercial‐type insurance because its articles of incorporation and its description of activities indicated that its purpose was to provide healthcare insurance for a fee. The entity did not meet any of the exceptions to commercial‐type insurance described in the Code and it did not provide insurance substantially below cost or limit the insurance to a class of charitable recipients. With regard to the question of substantiality, the IRS noted that the entity planned to devote 100 percent of its efforts toward establishing and marketing its insurance program in its first year of operations, and would spend 50 percent of its total activities on its insurance program in the second through fourth years of operation. Even after it was established, the entity planned to spend 30 percent of its total activities on its insurance program. Based on applicable case law, the IRS concluded that these amounts are substantial. Furthermore, 94 percent of the entity's revenue was slated to come from insurance sales and 94 percent of its expenses were planned for payments for the healthcare expenses of its insureds. Accordingly, the provision of commercial‐type insurance was deemed substantial, which precluded the entity from securing exemption as a charitable organization.
NOTES
1 145.1 EO Update, October 13, 2017.
2 145.2 “Audit Technique Guide—Other 501(c)(3) Organizations,” https://www.irs.gov/pub/irs-tege/atg_hmo.pdf.
3 149 Priv. Ltr. Rul. 201538027.
4 150 See § 24.24.
5 151 See IRC § 501(c)(29).
6 152 Priv. Ltr. Rul. 201451033.
7 153 Priv. Ltr. Rul. 202015035.
Конец ознакомительного фрагмента.
Текст предоставлен ООО «ЛитРес».
Прочитайте эту книгу целиком, купив полную легальную версию на ЛитРес.
Безопасно оплатить книгу можно банковской картой Visa, MasterCard, Maestro, со счета мобильного телефона, с платежного терминала, в салоне МТС или Связной, через PayPal, WebMoney, Яндекс.Деньги, QIWI Кошелек, бонусными картами или другим удобным Вам способом.
