The Law of Tax-Exempt Healthcare Organizations E-Book

Thomas K. Hyatt

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Serie: Wiley Nonprofit Authority
• Sprache: Englisch
• Veröffentlichungsjahr: 2013

Seitenzahl: 2288

Beschreibung

A completely revised and expanded one-volume legal resource for tax-exempt healthcare organizations A complete and up-to-date legal resource for tax-exempt healthcare organizations and their advisors, this Fourth Edition, equips you with a comprehensive, one-volume source of detailed information on federal law covering tax-exempt healthcare organizations. The Fourth Edition of this practical, down-to-earth book tackles complex legal issues by providing you with plain-English explanations and the appropriate legal citations for further research. * Revised with new discussions on healthcare reform, the Affordable Care Act, IRS initiatives, executive compensation, commercial activity by tax-exempt organizations, political campaign activity, charitable reforms, governance, restrictions on supporting organizations, intermediate sanctions, and much more * Provides detailed documentation and citations, including references to regulations, rulings, cases, and tax literature * Includes an exhaustive index allowing for quick and easy reference * Offers annual supplements to keep readers apprised of the latest developments affecting tax-exempt healthcare organizations Written by leading experts in the fields of healthcare and nonprofit law, this comprehensive and vital resource has been completely revised and updated to present a clear view of complicated legal and tax issues.

Leseprobe

Contents

Cover

Don't Miss Out on Must-Have and Timely New Information!

Title Page

Copyright

Dedication

Preface

About the Authors

Book Citations

Part One: Introduction to The Law of Tax-Exempt Healthcare Organizations

Chapter 1: Tax-Exempt Healthcare Organizations–An Overview

§ 1.1 Constitutional Law Perspective

§ 1.2 Defining Tax-Exempt Organizations

§ 1.3 Rationales for Tax Exemption

§ 1.4 Categories of Tax-Exempt Healthcare Organizations

§ 1.5 Charitable Healthcare Organizations

§ 1.6 The Law of Charitable Trusts

§ 1.7 Relief of Poverty

§ 1.8 Promotion of Health

§ 1.9 Social Welfare Organizations

Chapter 2: Advantages and Disadvantages of Tax Exemption

§ 2.1 Source of Tax Exemption

§ 2.2 Advantages of Tax Exemption

§ 2.3 Disadvantages of Tax Exemption

§ 2.4 Alternatives to Tax-Exempt Status

§ 2.5 No Contract, Third-Party Beneficiaries, Right of Action, or Charitable Trust

§ 2.6 Small Employer Insurance Tax Credit

Chapter 3: Criticisms of Tax Exemption

§ 3.1 Criticisms in General

§ 3.2 Criticisms of Tax Exemption for Healthcare Organizations

§ 3.3 Commerciality Doctrine

Part Two: Fundamental Exempt Organization Principles Applied to Healthcare Organizations

Chapter 4: Private Inurement, Private Benefit, and Excess Benefit Transactions

§ 4.1 Essence of Private Inurement

§ 4.2 Requisite Insider

§ 4.3 Physicians as Insiders

§ 4.4 Private Inurement—Scope and Types

§ 4.5 Private Inurement Per Se

§ 4.6 Essence of Private Benefit

§ 4.7 Private Inurement and Private Benefit Distinguished

§ 4.8 A Case Study

§ 4.9 Excess Benefit Transactions

Chapter 5: Public Charities and Private Foundations

§ 5.1 Public Institutions

§ 5.2 Publicly Supported Organizations—Donative Entities

§ 5.3 Publicly Supported Organizations—Service Provider Organizations

§ 5.4 Comparative Analysis of the Two Categories of Publicly Supported Charities as Applied to Healthcare Organizations

§ 5.5 Supporting Organizations

§ 5.6 Recognition of Change in Public Charity Status

§ 5.7 Relationships Created for Avoidance Purposes

§ 5.8 Income Attribution Rules

§ 5.9 Reliance by Grantors and Contributors

§ 5.10 Private Foundation Rules

Chapter 6: Community Benefit

§ 6.1 Community Benefit and Operation for Charitable Purposes

§ 6.2 The Traditional Community Benefit Standard

§ 6.3 The New Community Benefit Standard

Chapter 7: Lobbying and Political Activities

§ 7.1 Legislative Activities Limitation

§ 7.2 Business Expense Deduction Rules and Lobbying

§ 7.3 Federal Disclosure of Lobbying

§ 7.4 Political Activities Limitation

§ 7.5 Business Expense Deduction Rules and Political Activities

§ 7.6 Internet Activities

§ 7.7 Public Policy Advocacy Activities

§ 7.8 Political Activities of Social Welfare Organizations

§ 7.9 Constitutional Law Considerations

Part Three: Tax Status of Healthcare Provider and Supplier Organizations

Chapter 8: Hospitals

§ 8.1 Federal Tax Law Definition of Hospital

§ 8.2 Private Charitable Hospitals

§ 8.3 Public Hospitals

§ 8.4 Religious Hospitals

§ 8.5 Proprietary Hospitals

Chapter 9: Managed Care Organizations

§ 9.1 Introduction

§ 9.2 Health Maintenance Organizations

§ 9.3 Commercial-Type Insurance Providers

§ 9.4 Preferred Provider Organizations

§ 9.5 Recent Developments

Chapter 10: Home Health Agencies

§ 10.1 Freestanding Home Health Agencies

§ 10.2 Hospital-Based Home Health Agencies

§ 10.3 Private Duty Nursing Companies

Chapter 11: Homes for the Aged

§ 11.1 Introduction

§ 11.2 Overview of Tax Exemption for Homes for the Aged

§ 11.3 Specific Types of Healthcare Facilities for the Aged

§ 11.4 Other Considerations

Chapter 12: Tax-Exempt Physician Organizations

§ 12.1 Tax-Exempt Clinics

§ 12.2 Teaching Hospital Faculty Organizations

Chapter 13: Other Provider and Supplier Organizations

§ 13.1 Blue Cross and Blue Shield Associations

§ 13.2 High-Risk Individuals Healthcare Coverage Organizations

§ 13.3 Qualified Health Insurance Issuers

§ 13.4 Health Insurance Exchanges

§ 13.5 Accountable Care Organizations

Part Four: Tax Status of Health-Related Organizations

Chapter 14: Development Foundations

§ 14.1 Basic Concepts

§ 14.2 Other Considerations

§ 14.3 Case Study

§ 14.4 A Potential Alternative

Chapter 15: Title-Holding Companies

§ 15.1 Single-Parent Title-Holding Companies

§ 15.2 Multi-Parent Title-Holding Companies

§ 15.3 Unrelated Business Considerations

Chapter 16: For-Profit Subsidiaries

§ 16.1 Establishing a Subsidiary

§ 16.2 Financial Considerations

§ 16.3 Attribution of Subsidiary's Activities to Exempt Parent

§ 16.4 Asset Accumulations

§ 16.5 Effect of For-Profit Subsidiaries on Public Charity Status

§ 16.6 Subsidiaries in Partnerships

Chapter 17: Exempt and Nonexempt Cooperatives

§ 17.1 Cooperative Hospital Service Organizations

§ 17.2 Subchapter T Cooperatives

Chapter 18: Business Leagues

§ 18.1 Business Leagues in General

§ 18.2 Healthcare Trade Associations

§ 18.3 Certification Organizations and Peer Review Boards

§ 18.4 Legislative Activities of Business Leagues

Chapter 19: Other Health-Related Organizations

§ 19.1 Physician Referral Services

§ 19.2 Nurse Registries

§ 19.3 Charitable Risk Pools

§ 19.4 Hospital Management Services Organizations

§ 19.5 Regional Health Information Organizations

Part Five: Organizational Issues

Chapter 20: Healthcare Provider Reorganizations

§ 20.1 Some Basics about Reorganizations

§ 20.2 Parent Holding Corporations

Chapter 21: Mergers and Conversions

§ 21.1 Mergers and Consolidations Between Exempt Healthcare Organizations

§ 21.2 Mergers and Consolidations Between Exempt and Nonexempt Healthcare Organizations

§ 21.3 Conversion from Exempt to Nonexempt Status

§ 21.4 Conversion from Nonexempt to Exempt Status

§ 21.5 Joint Operating Agreements

Chapter 22: Partnerships and Joint Ventures

§ 22.1 Tax Law Fundamentals

§ 22.2 Tax-Exempt Healthcare Entities in Partnerships

§ 22.3 Partnerships and Tax Exemption

§ 22.4 Limited Liability Companies as Exempt Organizations

§ 22.5 Information Reporting

§ 22.6 Joint Ventures

§ 22.7 Partnerships, Joint Ventures, and Private Inurement

§ 22.8 Partnerships, Joint Ventures, and Per Se Private Inurement

§ 22.9 Whole-Hospital Joint Ventures

§ 22.10 Provider-Sponsored Organization Joint Ventures

§ 22.11 Ancillary Services Joint Ventures

§ 22.12 Single-Member Limited Liability Companies

Chapter 23: Integrated Delivery Systems

§ 23.1 Introduction

§ 23.2 Tax Status of IDS Organizations

§ 23.3 Physician Practice Acquisitions

Part Six: Operational Issues

Chapter 24: Tax Treatment of Unrelated Business Activities

§ 24.1 Introduction

§ 24.2 Definition of Trade or Business

§ 24.3 Definition of Regularly Carried On

§ 24.4 Definition of Substantially Related

§ 24.5 Application of Substantially Related Test to Healthcare Organizations

§ 24.6 Definition of Patient

§ 24.7 Gift Shops, Cafeterias, and Coffee Shops

§ 24.8 Fitness Centers

§ 24.9 Parking Facilities

§ 24.10 Temporary Residential Facilities

§ 24.11 Pharmacy, Medical Supplies, and Services Sales

§ 24.12 Laboratory Testing Services

§ 24.13 Medical Research

§ 24.14 Medical Office Buildings

§ 24.15 Transactions between Related Organizations

§ 24.16 Services for Small Hospitals

§ 24.17 Corporate Sponsorships

§ 24.18 Other Exceptions to Unrelated Income Taxation

§ 24.19 Internet Activities

§ 24.20 Revenue from Controlled Organizations

§ 24.21 Unrelated Debt-Financed Income

§ 24.22 Specific Deduction

§ 24.23 Computation of Unrelated Business Taxable Income

§ 24.24 The Commerciality Doctrine

Chapter 25: Physician Recruitment and Retention

§ 25.1 Introduction

§ 25.2 The IRS Position

§ 25.3 The OIG Position

§ 25.4 Guidelines for Analyzing Recruitment and Retention Techniques

§ 25.5 Specific Recruitment and Retention Techniques

§ 25.6 Hermann Hospital Closing Agreement

§ 25.7 Physician Recruitment Revenue Ruling

Chapter 26: Charity Care

§ 26.1 Introduction

§ 26.2 The Financial Ability Standard

§ 26.3 The Community Benefit Standard

§ 26.4 The Emergency Room Exception

§ 26.5 Legal Challenges to Hospital Charity Care Practices

§ 26.6 Definitional and Reporting Issues

§ 26.7 IRS Compliance Check and Form 990 Redesign

§ 26.8 Federal Legislative Initiatives

§ 26.9 Charity Care and National Health Reform

§ 26.10 Additional Statutory Requirements for Hospitals

§ 26.11 The Constitutionality of the Affordable Care Act

Chapter 27: Worker Classification and Employment Taxes

§ 27.1 Federal Employment Taxes

§ 27.2 Employees and Independent Contractors Distinguished

§ 27.3 The Common-Law Factors

§ 27.4 Safe Harbors

§ 27.5 Classification of Healthcare Workers

§ 27.6 Coordinated Issue Papers

§ 27.7 Medical Residents and the Student Exception

Chapter 28: Compensation and Employee Benefits

§ 28.1 The Reasonable Compensation Standard

§ 28.2 Hospital–Physician Compensation Arrangements

§ 28.3 Executive Compensation

§ 28.4 Board Compensation

§ 28.5 Overview of Employee Benefits Law

§ 28.6 Deferred Compensation in General

Chapter 29: Medicare and Medicaid Fraud and Abuse and Its Effect on Exemption

§ 29.1 The Conflict and Confluence of Tax Policy and Health Policy

§ 29.2 Fraud and Abuse Violations as a Basis for Revocation of Exemption

§ 29.3 Hospital Incentives to Physicians

Chapter 30: Tax-Exempt Bond Financing∗

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

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

§ 30.3 Disqualification of Tax-Exempt Bonds

§ 30.4 Internal Revenue Service Developments

Chapter 31: Fundraising Regulation

§ 31.1 State Law Regulation

§ 31.2 Federal Law Regulation

Chapter 32: Rural Healthcare Organizations

§ 32.1 Introduction

§ 32.2 Application of the Substantial Private Benefit Prohibition

§ 32.3 Application of Unrelated Business Income Rules

§ 32.4 Physician Recruitment and Retention in Rural Areas

Chapter 33: Governance

§ 33.1 Introduction

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

§ 33.3 Good Governance Practices

§ 33.4 Conflicts of Interest

§ 33.5 Board Oversight of Executive Compensation

§ 33.6 Government Oversight of Executive Compensation

§ 33.7 Federal Legislative Initiatives

§ 33.8 State Regulatory Enforcement of Corporate Responsibility Obligations

Part Seven: Obtaining and Maintaining Exempt Status for Healthcare Organizations

Chapter 34: Exemption and Public Charity Recognition Processes

§ 34.1 Exemption Recognition Process

§ 34.2 Application Disclosure Requirements

§ 34.3 Special Requirements for Charitable Healthcare Organizations

§ 34.4 Special Requirements for Health Insurance Issuers

§ 34.5 Public Charity Status

§ 34.6 Group Exemption

§ 34.7 Integral Part Doctrine

§ 34.8 Procedure Where Determination Is Adverse

Chapter 35: Maintenance of Tax-Exempt Status and Avoidance of Penalties

§ 35.1 Material Changes

§ 35.2 Changes in Form

§ 35.3 Annual Reporting Requirements

§ 35.4 Redesigned Annual Information Return

§ 35.5 Disclosure Requirements

§ 35.6 IRS Disclosure to State Officials

§ 35.7 Form 990 and Community Benefit

§ 35.8 Reporting of Noncash Gifts in General

Chapter 36: IRS Audits of Healthcare Organizations

§ 36.1 IRS Audits in General

§ 36.2 Audit Procedures

§ 36.3 Hospital Audit Guidelines

§ 36.4 IRS Compliance Check Projects

§ 36.5 Revocation of Exemption and Closing Agreements

About the Companion Website

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Copyright © 2013 by John Wiley & Sons, Inc. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

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Library of Congress Cataloging-in-Publication Data:

Hyatt, Thomas K.

The law of tax-exempt healthcare organizations/Thomas K. Hyatt, Bruce R. Hopkins. -- Fourth Edition.

pages cm -- (Wiley nonprofit authority)

Includes index.

ISBN 978-1-118–53285-0 (cloth/website); ISBN 978-1-118–53288-1 (ebk); ISBN 978-1-118–53286-7 (ebk); ISBN 978-1-118–53287-4 (ebk)

1. Health facilities--Taxation--Law and legislation--United States. 2. Hospitals--Taxation--Law and legislation--United States. 3. Tax exemption--Law and legislation--United States. I. Hopkins, Bruce R. II. Title.

KF6495.H4H93 2013

343.7306′6--dc23

2013001313

To my boys, Sean and Conor, and my mother Anne, the English teacher

—TKH

To my colleagues in the Health Care Practice Group at Polsinelli PC

—BRH

Preface

This is the fourth edition of The Law of Tax-Exempt Healthcare Organizations. The first edition was published in 1995 and featured a mere 680 pages. In this edition, we will be approaching twice that content. This seems a good opportunity to pause and reflect on what has transpired in the nonprofit healthcare sector over these past 17 years.

In our original edition, tax-exempt healthcare organizations and the IRS were focused on joint ventures with taxable entities; the creation of integrated delivery systems; the proper tax status for managed care organizations; and the appropriateness of providing benefits for the recruitment and retention of physicians. It is telling that the chapters describing these scenarios were among the least in need of revision for this edition.

At present, there are new developments occupying the attention of healthcare organizations and the IRS. These include health reform; the governance of healthcare organizations; the compensation of executives; the continued refinement of Form 990; and a host of new acronyms for their shared alphabet soup, including ACOs (accountable care organizations), RHIOs (regional health information organizations), and QNHIIs (qualified nonprofit health insurance issuers).

Certainly the most dramatic development in the field of healthcare in 2012 was the U.S. Supreme Court's decision in National Federation of Independent Business v. Sebelius upholding most of the Affordable Care Act as constitutional. The Affordable Care Act has done much to impact the law of tax-exempt healthcare organizations. It established new requirements for qualification as a charitable hospital that are proactively focused on outreach, service, and billing and collection practices. On a broader level, by providing for insurance coverage for millions of Americans who previously had none and relied on charity, the Affordable Care Act brought into question for some the need to continue to provide tax exemption for nonprofit hospitals that will be providing less charity care. The Act also calls on the Internal Revenue Service to assist in the implementation of many of its provisions, a development sure to further drain the already limited resources of this agency.

In recent years, the IRS has renewed its efforts to oversee, monitor, make more transparent, and understand the nonprofit tax-exempt sector. This is evidenced in compliance check investigations, focused audit activity, Form 990 expansion, field guidance, and continuing education and outreach. The Service has taken a particular interest in nonprofit governance (and state attorneys general have converted that shared interest into action). As the IRS has stated many times, in its view a well-governed organization is a compliant organization. Much of its effort is on display in the Form 990, and its requests for governance information, under the mantra of transparency, often include the proviso that the form “requests information about policies not required by the Internal Revenue Code.” Still, as the Advisory Committee on Tax-Exempt and Government Entities (ACT) so aptly noted, the IRS can “drive behavior merely by asking about specific governance practices.”

There has clearly been a change during this period in the type of guidance used by the IRS for educational purposes in the tax-exempt healthcare sector. Lost to the dustbin of history are general counsel memoranda and continuing professional education texts. These forms of guidance were the primary means of communicating the IRS's analytical and policy positions throughout the 70s, 80s, and 90s. In the 2010s, they are virtually unheard of. Instead, the IRS uses its new tools of check sheets, staff memos, fact sheets, extensive substantive instructions for the Form 990, and website educational pieces.

An excellent example of the adage that everything old is new again is found in the Affordable Care Act and its accompanying guidance and proposed regulations. A central piece of the Clinton administration health reform proposal in 1994 for charitable hospitals involved the requirement of outreach into the community to determine health needs and devising a plan for meeting those needs. The Clinton health reform plan did not become law. Now, under the Affordable Care Act, charitable hospitals are required to undertake just such a community health needs assessment in order to continue to qualify as charitable tax-exempt organizations. It's déjà vu all over again.

This is also something of a turning point for our book. Over the course of three editions, the book has grown to exceed 1100 pages in length. In order to avoid the need to install wheels on the book in the fourth edition to ensure its continued portability, we have elected to move the tables and appendices of the book into our new companion website. (One of the authors was a bit slow to warm to the idea of moving content to the website instead of continuing to have it in the book. It was the younger of us; go figure. He has since come around and joined the twenty-first century.) The website will be an invaluable addition to the book and will also permit more recent developments to be brought to your attention in between editions and supplements. Meanwhile, the appearance of the book has changed, too. Our publisher, Wiley, has made a major commitment to the development of content for the growing nonprofit sector. The book is now part of the new Wiley Nonprofit Authority series and has been modernized. We hope you like it.

As always, we offer our sincere appreciation to Jennifer MacDonald, Claire New, and Susan McDermott at Wiley for their support, guidance, and patience, and our assistants Sharlaine Anapu and Cynthia Gurrola and our colleagues at Dentons and Polsinelli Shughart for their assistance and their wisdom.

Thomas K. HyattBruce R. HopkinsApril 2013

About the Authors

Thomas K. Hyatt is a partner in the law firm Dentons US LLP, resident in the Washington, DC office. His practice is focused on corporate and tax-exempt organization issues for nonprofit organizations. He has particular expertise in legal issues affecting tax-exempt healthcare providers and in governance and public policy issues affecting tax-exempt higher education institutions. Mr. Hyatt has represented organizations including public and private hospitals, multihospital systems, integrated delivery systems, academic medical centers, home health agencies, health maintenance organizations, continuing care retirement communities, provider associations, physician clinics, faculty practice plans, physician-hospital organizations, and shared services organizations in such matters. He also frequently works with nonprofit governing boards and board committees to address such issues as regulatory compliance, fiduciary duty, conflicts of interest, bylaws development and revision, senior management compensation and benefits, chief executive contracts and transition, fundraising, lobbying and political campaign activity, board development, policy development, adoption of best governance practices, membership matters, corporate restructuring, mergers, and joint ventures. He is admitted to practice in the District of Columbia and Pennsylvania.

Mr. Hyatt is a member of the American Health Lawyers Association (AHLA), the American Bar Association, and the District of Columbia Bar. He served as a member of AHLA's Board of Directors from 1992 to 1998. Mr. Hyatt is one of the inaugural Fellows of AHLA. He is the Chair Emeritus and on the faculty of the annual Tax Issues in Healthcare Organizations seminar sponsored by AHLA, and is also the past chair of AHLA's Tax and Finance Practice Group. In 2004, Mr. Hyatt received AHLA's David J. Greenburg Service Award. He also serves as Senior Fellow for Public Policy with the Association of Governing Boards of Universities and Colleges. He is listed in the 2005–2013 editions of Best Lawyers in America and as a DC Super Lawyer. He has also been listed in Chambers USA Healthcare, District of Columbia since 2012. Mr. Hyatt is a licensed consultant for the Standards for Excellence Institute. He frequently lectures on business and tax planning issues for nonprofit organizations and has written numerous articles for publication on tax-exempt-organization topics. In addition to The Law of Tax-Exempt Healthcare Organizations, Fourth Edition, he is the author of a chapter, entitled “Tax Exemption Issues for Healthcare Organizations,” in the Health Law Practice Guide (New York: Thomson/West).

Mr. Hyatt is a 1979 cum laude graduate of Boston College, and received his law degree in 1982 from the University of Pittsburgh, where he served as editor-in-chief of the Journal of Law and Commerce.

Bruce R. Hopkins is a senior partner in the law firm Polsinelli PC, practicing in the firm's Kansas City, Missouri, and Washington, DC, offices. He specializes in the representation of tax-exempt organizations, including healthcare organizations. His practice ranges over the entirety of law matters involving exempt organizations, with emphasis on the formation of nonprofit organizations, acquisition of recognition of tax-exempt status for them, governance and the law, the private inurement and private benefit doctrines, the intermediate sanctions rules, legislative and political campaign activities issues, public charity and private foundation rules, unrelated business planning, use of exempt and for-profit subsidiaries, joint venture planning, tax shelter involvement, review of annual information returns, Internet communications developments, the law of charitable giving (including planned giving), and fundraising law issues.

Mr. Hopkins served as Chair of the Committee on Exempt Organizations, Tax Section, American Bar Association; Chair, Section of Taxation, National Association of College and University Attorneys; and President, Planned Giving Study Group of Greater Washington, DC.

Mr. Hopkins is the series editor of Wiley's Nonprofit Law, Finance, and Management Series. In addition to coauthoring The Law of Tax-Exempt Healthcare Organizations, Fourth Edition, he is the author of The Law of Tax-Exempt Organizations, Tenth Edition; Planning Guide for the Law of Tax-Exempt Organizations: Strategies and Commentaries; Tax-Exempt Organizations and Constitutional Law: Nonprofit Law as Shaped by the U.S. Supreme Court; IRS Audits of Tax-Exempt Organizations: Policies, Practices, and Procedures; The Tax Law of Charitable Giving, Fourth Edition; The Law of Fundraising, Fourth Edition; The Tax Law of Associations; The Tax Law of Unrelated Business for Nonprofit Organizations; The Nonprofits' Guide to Internet Communications Law; The Law of Intermediate Sanctions: A Guide for Nonprofits; Starting and Managing a Nonprofit Organization: A Legal Guide, Sixth Edition; Nonprofit Law Made Easy; Charitable Giving Law Made Easy; Private Foundation Law Made Easy; Fundraising Law Made Easy; 650 Essential Nonprofit Law Questions Answered; The First Legal Answer Book for Fund-Raisers; The Second Legal Answer Book for Fund-Raisers; The Legal Answer Book for Nonprofit Organizations; The Second Legal Answer Book for Nonprofit Organizations; and The Nonprofit Law Dictionary; and is the coauthor, with Jody Blazek, of Private Foundations: Tax Law and Compliance, Third Edition; also with Ms. Blazek, of The Legal Answer Book for Private Foundations; with David O. Middlebrook, of Nonprofit Law for Religious Organizations: Essential Questions and Answers; with Douglas K. Anning, Virginia C. Gross, and Thomas J. Schenkelberg, of The New Form 990: Law, Policy, and Preparation; with Ms. Gross, of Nonprofit Governance: Law, Practices & Trends; and with Ms. Gross and Mr. Schenkelberg, of Nonprofit Law for Colleges and Universities: Essential Questions and Answers for Officers, Directors, and Advisors. He also writes Bruce R. Hopkins' Nonprofit Counsel, a monthly newsletter published by John Wiley & Sons.

Mr. Hopkins maintains a website providing information about the law of tax-exempt organizations, at www.nonprofitlawcenter.com. Material posted on this site includes current developments outlines concerning this aspect of the law, summaries of court opinions, discussions of his books, various indexes for his newsletter, and a “What's New” listing of recent developments in exempt organizations law.

Mr. Hopkins received the 2007 Outstanding Nonprofit Lawyer Award (Vanguard Lifetime Achievement Award) from the American Bar Association, Section of Business Law, Committee on Nonprofit Corporations. He is listed in The Best Lawyers in America, Nonprofit Organizations/Charities Law, 2007–2013.

Mr. Hopkins earned his JD and LLM degrees at the George Washington University National Law Center and his BA at the University of Michigan. He is a member of the bars of the District of Columbia and the state of Missouri.

Book Citations

Throughout this book, 10 books by Bruce R. Hopkins (in some cases as co-author), all published by John Wiley & Sons, Inc., are referenced in this way:

BookCited As1.IRS Audits of Tax-Exempt Organizations: Policies, Practices, and Procedures (2008)Irs Audits2.The Law of Fundraising, Fourth Edition (2009)Fundraising3.The Law of Tax-Exempt Organizations, Tenth Edition (2011)Tax-Exempt Organizations4.The Law of Intermediate Sanctions: A Guide for Nonprofits (2003)Intermediate Sanctions5.Planning Guide for The Law of Tax-Exempt Organizations: Strategies and Commentaries (2004)Planning Guide6.Private Foundations: Tax Law and Compliance, Third Edition (2008)Private Foundations7.Starting and Managing a Nonprofit Organization: A Legal Guide, Sixth Edition (2013)Starting and Managing8.The Tax Law of Charitable Giving, Fourth Edition (2010)Charitable Giving9.The Tax Law of Unrelated Business for Nonprofit Organizations (2005)Unrelated Business10.Tax-Exempt Organizations and Constitutional Law: Nonprofit Law as Shaped by the Supreme Court (2012)Constitutional Law

The second, third, sixth, and eighth of these books are annually supplemented. Also, updates on all of the foregoing subjects (plus The Law of Tax-Exempt Healthcare Organizations) are available in Bruce R. Hopkins' Nonprofit Counsel, a monthly newsletter, also published by Wiley.

Part One

Introduction to The Law of Tax-Exempt Healthcare Organizations

Chapter One

Tax-Exempt Healthcare Organizations–An Overview

§ 1.1 Constitutional Law Perspective

§ 1.2 Defining Tax-Exempt Organizations

§ 1.3 Rationales for Tax Exemption

§ 1.4 Categories of Tax-Exempt Healthcare Organizations

§ 1.5 Charitable Healthcare Organizations

§ 1.6 The Law of Charitable Trusts

§ 1.7 Relief of Poverty

§ 1.8 Promotion of Health

§ 1.9 Social Welfare Organizations

The waxing and waning of tax policy, at the federal and state levels, has pushed nonprofit healthcare organizations to the fore in terms of scrutiny and into the heart of the debate over eligibility for tax-exempt status. No category of exempt organization has its tax exemption in greater jeopardy than hospitals, health maintenance organizations (HMOs), and other healthcare providers. Few other types of exempt organizations are raising as many unrelated income issues as these entities. Moreover, when it comes to the creation of new organizations and the triggering of new tax questions, no group of nonprofit organizations can top nonprofit healthcare organizations.

This high-profile position and the resulting predicament for healthcare entities are explicable on a very fundamental basis: government regulators, legislators, and the public are finding it increasingly difficult to differentiate the practice of healthcare by nonprofit organizations from that by for-profit organizations. Part of this confusion is attributable to the evolving forms of healthcare vehicles and the dramatic changes in the places where medicine is practiced and healthcare otherwise delivered. Other elements of the confusion are traceable to the alterations in the way healthcare is funded: the enactment of the Medicare and Medicaid programs greatly expanded the universe of individuals who could, directly or indirectly, “pay” for healthcare services; the injection of healthcare services into the realm of employment benefits forced greater funding of healthcare services by employers and shifted a large part of healthcare funding to commercial insurance companies.

Much of health law evolved from the regulatory frameworks built up around government-financed healthcare benefits and the ways in which the insurance companies set about to reduce the amounts paid out to, or for the care of, benefits claimants. As these bodies of regulation grew (typified by anti-abuse and patient dumping rules) and inequitable insurance practices (highlighted by denials of coverage because of “preexisting conditions” and changes of employers) became more commonplace, the nation's healthcare system became troubled.

Consumers became first perplexed and then angered by the rapidly evolving and shifting healthcare system's institutional look. The role of freestanding hospitals declined, and massive systems took their place. The intricacies of HMOs had to be parsed, traditional private practices gave way to mysterious combinations of physicians with their ever-more-focused subspecialties, and the modern patient saw his or her illness treated through something called an “integrated delivery system.”