The Law of Tax-Exempt Healthcare Organizations, + website 2019 Cumulative Supplement

Get up to date on 2019 healthcare law and newly relevant issues

The Law of Tax-Exempt Healthcare Organizations 2019 Supplement provides complete and comprehensive practitioner updates and analysis in a single volume. Tackling complex legal issues with plain-English explanations and the appropriate citations, this guide is a must-have resource for organizations and their advisors. The companion website provides extensive appendices for further reference, as well as helpful downloadable tables that facilitate a more efficient approach to practice.

Healthcare law is a complex field, and keeping up with the frequent changes to federal law is itself a full time job. This book eliminates the need for extended research time by collecting all of the newest and relevant guidelines into one place.

• Get up to date on the latest IRS forms, guidance, and procedures
• Interpret complex legal issues correctly and appropriately
• Reference relevant federal guidelines quickly and easily
• Access extensive appendices and tables to streamline application

As the field evolves and new issues arise, practitioners need a working knowledge of the legal implications behind organizational activities, structure, practices, and more. This most recent annual supplement to The Law of Tax-Exempt Healthcare Organizations is a must-have resource for anyone in the field.

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 ransition, 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.

Bruce R. Hopkins is the principal in the law firm Bruce R. Hopkins Law Firm, LLC, in Kansas City, Missouri. He concentrates on 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.

Preface ix

About the Authors xi

Book Citations xv

1 Tax-Exempt Healthcare Organizations: An Overview 1

1.2 Defining Tax-Exempt Organizations 1

1.5 Charitable Healthcare Organizations 1

1.8 Promotion of Health 2

1.10 ABLE Programs 2

3 Public Charities and Private Foundations (New) 5

3.3 Commerciality Doctrine 5

4 Private Inurement, Private Benefit, and Excess Benefit Transactions 9

4.4 Private Inurement—Scope and Types 9

4.6 Essence of Private Benefit 10

4.9 Excess Benefit Transactions 12

5 Public Charities and Private Foundations 13

5.1 Public Institutions 13

5.6 Recognition of Change in Public Charity Status 13

7 Lobbying and Political Activities 15

7.1 Legislative Activities Limitation 15

7.4 Political Activities Limitation 16

7.5 Business Expense Deduction Rules and Political Activities 18

7.7 Public Policy Advocacy Activities 19

7.8 Political Activities of Social Welfare Organizations 19

8 Hospitals 21

8.3 Public Hospitals 21

9 Managed Care Organizations 23

9.3 Commercial-Type Insurance Providers 23

9.5 Recent Developments 23

13 Other Provider and Supplier Organizations 27

13.3 Qualified Nonprofit Health Insurance Issuers 27

13.5 Accountable Care Organizations 28

16 For-Profit Subsidiaries 33

16.3 Attribution of Subsidiary’s Activities to Exempt Parent 33

17 Exempt and Nonexempt Cooperatives 35

17.1 Cooperative Hospital Service Organizations 35

18 Business Leagues 37

18.1 Business Leagues in General 37

18.2 Healthcare Trade Associations 38

19 Other Health-Related Organizations 39

19.4 Hospital Management Services Organizations 39

19.5 Regional Health Information Organizations 40

20 Healthcare Provider Reorganizations 41

20.1 Some Basics about Reorganizations 41

21 Mergers and Conversions 43

21.4 Conversion from Nonexempt to Exempt Status 43

22 Partnerships and Joint Ventures (New) 45

22.9 Whole-Hospital Joint Ventures 45

24 Tax Treatment of Unrelated Business Activities 47

24.2 Definition of Trade or Business 47

24.3 Definition of Regularly Carried On 49

24.5 Application of Substantially Related Test to Healthcare Organizations 50

24.11 Pharmacy, Medical Supplies, and Service Sales 51

24.12 Laboratory Testing Services 51

24.13 Medical Research 52

24.18 Other Exceptions to Unrelated Income Taxation 53

24.20 Revenue from Controlled Organizations 55

24.21 Unrelated Debt-Financed Income 55

24.23 Computation of Unrelated Business Taxable Income 55

25 Physician Recruitment and Retention 61

25.5 Specific Recruitment and Retention Techniques 61

26 Charity Care 63

26.6 Definitional and Reporting Issues 63

26.9 Charity Care and National Health Reform 64

26.10 Additional Statutory Requirements for Hospitals 64

26.12 Provider Taxes (New) 82

27 Worker Classification and Employment Taxes 85

27.7 Medical Residents and the Student Exception 85

28 Compensation and Employee Benefits 87

28.3 Executive Compensation 87

28.5 Overview of Employee Benefits Law 87

28.6 Deferred Compensation in General 88

28.7 Excessive Executive Compensation (New) 91

30 Tax-Exempt Bond Financing 95

30.3 Disqualification of Tax-Exempt Bonds 95

31 Fundraising Regulation 105

31.2 Federal Law Regulation 105

33 Governance 107

33.4A IRS Ruling Policy 107

34 Exemption and Public Charity Recognition Processes 111

34.1 Exemption Recognition Process 111

34.5 Public Charity Status 121

34.6 Group Exemption 121

34.7A Notice Requirements for Social Welfare Organizations (New) 122

34.8 Procedure Where Determination Is Adverse 123

34.9 Constitutional Law Aspects of Process 125

35 Maintenance of Tax-Exempt Status and Avoidance of Penalties 127

35.1 Material Changes 127

35.2A Modification of Tax Exemption (New) 129

35.4 Redesigned Annual Information Return 129

35.5 Disclosure Requirements 130

35.6 IRS Disclosure to State Officials 131

36 IRS Audits of Healthcare Organizations 133

36.2 Audit Procedures 133

Cumulative Table of Cases 139

Cumulative Table of IRS Revenue Rulings 149

Cumulative Table of IRS Revenue Procedures 153

Cumulative Table of IRS Private Letter Rulings 155

Cumulative Table of IRS Technical Advice Memoranda 161

Table of Chief Counsel Advice Memoranda 163

Cumulative Table of IRS General Counsel Memoranda 165

Table of Tax Reform Legislation 167

Cumulative Index 173

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