The Law of Tax-Exempt Healthcare Organizations + Website

Overview

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 ...

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Overview

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.

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Editorial Reviews

Booknews
After introductory overview chapters on tax-exempt healthcare organizations, this guide covers fundamental exempt organization principles applied to healthcare organizations, tax status of healthcare provider and supplier organizations, tax status of health- related organizations, organizational issues, operational issues, and obtaining and maintaining exempt status for healthcare organizations. Organizations examined encompass hospitals, home health agencies, managed care organizations, and rural healthcare organizations. Includes a table of cases, and tables of IRS rulings, procedures, and memoranda. This second edition is current through January 2001, and reflects the IRS' focus during the past six years on defining and maintaining the fine line between charitable endeavor and commercial enterprise. Hyatt is a lawyer focusing on corporate and tax-exempt organization issues for healthcare providers. Hopkins is a lawyer specializing in the representation of nonprofit organizations. Annotation c. Book News, Inc., Portland, OR (booknews.com)
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Product Details

  • ISBN-13: 9781118532850
  • Publisher: Wiley
  • Publication date: 6/24/2013
  • Series: Wiley Nonprofit Authority Series , #250
  • Edition description: 4th Edition + WS
  • Edition number: 4
  • Pages: 1088
  • Product dimensions: 7.00 (w) x 10.10 (h) x 1.70 (d)

Meet the Author

THOMAS K. HYATT is a Partnerand the Chair of Dentons US LLP's Health Care practice. He focuses on corporate and tax-exempt organization issues for health care providers. He represents organizations including public and private hospitals, multi-hospital 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. Tom is the Chair Emeritus and serves on the faculty of the annual Tax Issues for Healthcare Organizations seminar sponsored by the American Health Lawyers Association (AHLA), and past chair of AHLA's Tax and Finance practice group.

BRUCE R. HOPKINS is a senior partner with the firm Polsinelli PC and an adjunct professor at the University of Kansas School of Law. He is also the author of more than twenty-eight books, including The Law of Tax-Exempt Organizations, Tenth Edition; Tax-Exempt Organizations and Constitutional Law: Nonprofit Law as Shaped by the U.S. Supreme Court; Nonprofit Law Made Easy; and Private Foundations: Tax Law and Compliance, Fourth Edition, as well as the monthly newsletter Bruce R. Hopkins' Nonprofit Counsel, all published by Wiley.

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Table of Contents

Preface xv

About the Authors xvii

Book Citations xxi

PART ONE Introduction to The Law of Tax-Exempt Healthcare Organizations

1 Tax-Exempt Healthcare Organizations—An Overview 3

§ 1.1 Constitutional Law Perspective 5

§ 1.2 Defining Tax-Exempt Organizations 6

§ 1.3 Rationales for Tax Exemption 9

§ 1.4 Categories of Tax-Exempt Healthcare Organizations 13

§ 1.5 Charitable Healthcare Organizations 14

§ 1.6 The Law of Charitable Trusts 16

§ 1.7 Relief of Poverty 16

§ 1.8 Promotion of Health 19

§ 1.9 Social Welfare Organizations 20

2 Advantages and Disadvantages of Tax Exemption 23

§ 2.1 Source of Tax Exemption 23

§ 2.2 Advantages of Tax Exemption 27

§ 2.3 Disadvantages of Tax Exemption 30

§ 2.4 Alternatives to Tax-Exempt Status 32

§ 2.5 No Contract, Third-Party Beneficiaries, Right of Action, or Charitable Trust 34

§ 2.6 Small Employer Insurance Tax Credit 37

3 Criticisms of Tax Exemption 39

§ 3.1 Criticisms in General 40

§ 3.2 Criticisms of Tax Exemption for Healthcare Organizations 43

§ 3.3 Commerciality Doctrine 56

PART TWO Fundamental Exempt Organization Principles Applied to Healthcare Organizations

4 Private Inurement, Private Benefit, and Excess Benefit Transactions 71

§ 4.1 Essence of Private Inurement 72

§ 4.2 Requisite Insider 77

§ 4.3 Physicians as Insiders 84

§ 4.4 Private Inurement—Scope and Types 86

§ 4.5 Private Inurement Per Se 104

§ 4.6 Essence of Private Benefit 107

§ 4.7 Private Inurement and Private Benefit Distinguished 113

§ 4.8 A Case Study 113

§ 4.9 Excess Benefit Transactions 116

5 Public Charities and Private Foundations 137

§ 5.1 Public Institutions 138

§ 5.2 Publicly Supported Organizations—Donative Entities 143

§ 5.3 Publicly Supported Organizations—Service Provider Organizations 150

§ 5.4 Comparative Analysis of the Two Categories of Publicly Supported Charities as Applied to Healthcare Organizations 155

§ 5.5 Supporting Organizations 156

§ 5.6 Recognition of Change in Public Charity Status 172

§ 5.7 Relationships Created for Avoidance Purposes 172

§ 5.8 Income Attribution Rules 173

§ 5.9 Reliance by Grantors and Contributors 173

§ 5.10 Private Foundation Rules 175

6 Community Benefit 179

§ 6.1 Community Benefit and Operation for Charitable Purposes 179

§ 6.2 The Traditional Community Benefit Standard 180

§ 6.3 The New Community Benefit Standard 183

7 Lobbying and Political Activities 193

§ 7.1 Legislative Activities Limitation 193

§ 7.2 Business Expense Deduction Rules and Lobbying 205

§ 7.3 Federal Disclosure of Lobbying 206

§ 7.4 Political Activities Limitation 209

§ 7.5 Business Expense Deduction Rules and Political Activities 218

§ 7.6 Internet Activities 219

§ 7.7 Public Policy Advocacy Activities 222

§ 7.8 Political Activities of Social Welfare Organizations 223

§ 7.9 Constitutional Law Considerations 225

PART THREE Tax Status of Healthcare Provider and Supplier Organizations

8 Hospitals 229

§ 8.1 Federal Tax Law Definition of Hospital 229

§ 8.2 Private Charitable Hospitals 234

§ 8.3 Public Hospitals 238

§ 8.4 Religious Hospitals 238

§ 8.5 Proprietary Hospitals 240

9 Managed Care Organizations 243

§ 9.1 Introduction 243

§ 9.2 Health Maintenance Organizations 245

§ 9.3 Commercial-Type Insurance Providers 279

§ 9.4 Preferred Provider Organizations 287

§ 9.5 Recent Developments 289

10 Home Health Agencies 293

§ 10.1 Freestanding Home Health Agencies 293

§ 10.2 Hospital-Based Home Health Agencies 299

§ 10.3 Private Duty Nursing Companies 300

11 Homes for the Aged 303

§ 11.1 Introduction 303

§ 11.2 Overview of Tax Exemption for Homes for the Aged 303

§ 11.3 Specific Types of Healthcare Facilities for the Aged 307

§ 11.4 Other Considerations 310

12 Tax-Exempt Physician Organizations 313

§ 12.1 Tax-Exempt Clinics 313

§ 12.2 Teaching Hospital Faculty Organizations 319

13 Other Provider and Supplier Organizations 325

§ 13.1 Blue Cross and Blue Shield Associations 325

§ 13.2 High-Risk Individuals Healthcare Coverage Organizations 335

§ 13.3 Qualified Health Insurance Issuers 336

§ 13.4 Health Insurance Exchanges 337

§ 13.5 Accountable Care Organizations 339

PART FOUR Tax Status of Health-Related Organizations

14 Development Foundations 355

§ 14.1 Basic Concepts 355

§ 14.2 Other Considerations 361

§ 14.3 Case Study 362

§ 14.4 A Potential Alternative 363

15 Title-Holding Companies 365

§ 15.1 Single-Parent Title-Holding Companies 366

§ 15.2 Multi-Parent Title-Holding Companies 369

§ 15.3 Unrelated Business Considerations 371

16 For-Profit Subsidiaries 373

§ 16.1 Establishing a Subsidiary 374

§ 16.2 Financial Considerations 378

§ 16.3 Attribution of Subsidiary’s Activities to Exempt Parent 383

§ 16.4 Asset Accumulations 387

§ 16.5 Effect of For-Profit Subsidiaries on Public Charity Status 388

§ 16.6 Subsidiaries in Partnerships 390

17 Exempt and Nonexempt Cooperatives 393

§ 17.1 Cooperative Hospital Service Organizations 393

§ 17.2 Subchapter T Cooperatives 403

18 Business Leagues 405

§ 18.1 Business Leagues in General 405

§ 18.2 Healthcare Trade Associations 412

§ 18.3 Certification Organizations and Peer Review Boards 413

§ 18.4 Legislative Activities of Business Leagues 417

19 Other Health-Related Organizations 431

§ 19.1 Physician Referral Services 431

§ 19.2 Nurse Registries 432

§ 19.3 Charitable Risk Pools 435

§ 19.4 Hospital Management Services Organizations 436

§ 19.5 Regional Health Information Organizations 442

PART FIVE Organizational Issues

20 Healthcare Provider Reorganizations 447

§ 20.1 Some Basics about Reorganizations 447

§ 20.2 Parent Holding Corporations 449

21 Mergers and Conversions 457

§ 21.1 Mergers and Consolidations between Exempt Healthcare Organizations 457

§ 21.2 Mergers and Consolidations between Exempt and Nonexempt Healthcare Organizations 460

§ 21.3 Conversion from Exempt to Nonexempt Status 461

§ 21.4 Conversion from Nonexempt to Exempt Status 472

§ 21.5 Joint Operating Agreements 476

22 Partnerships and Joint Ventures 485

§ 22.1 Tax Law Fundamentals 485

§ 22.2 Tax-Exempt Healthcare Entities in Partnerships 490

§ 22.3 Partnerships and Tax Exemption 493

§ 22.4 Limited Liability Companies as Exempt Organizations 496

§ 22.5 Information Reporting 499

§ 22.6 Joint Ventures 500

§ 22.7 Partnerships, Joint Ventures, and Private Inurement 503

§ 22.8 Partnerships, Joint Ventures, and Per Se Private Inurement 504

§ 22.9 Whole-Hospital Joint Ventures 505

§ 22.10 Provider-Sponsored Organization Joint Ventures 524

§ 22.11 Ancillary Services Joint Ventures 524

§ 22.12 Single-Member Limited Liability Companies 543

23 Integrated Delivery Systems 547

§ 23.1 Introduction 547

§ 23.2 Tax Status of IDS Organizations 548

§ 23.3 Physician Practice Acquisitions 570

PART SIX Operational Issues

24 Tax Treatment of Unrelated Business Activities 575

§ 24.1 Introduction 577

§ 24.2 Definition of Trade or Business 579

§ 24.3 Definition of Regularly Carried On 588

§ 24.4 Definition of Substantially Related 592

§ 24.5 Application of Substantially Related Test to Healthcare Organizations 599

§ 24.6 Definition of Patient 604

§ 24.7 Gift Shops, Cafeterias, and Coffee Shops 606

§ 24.8 Fitness Centers 608

§ 24.9 Parking Facilities 609

§ 24.10 Temporary Residential Facilities 610

§ 24.11 Pharmacy, Medical Supplies, and Services Sales 611

§ 24.12 Laboratory Testing Services 614

§ 24.13 Medical Research 617

§ 24.14 Medical Office Buildings 622

§ 24.15 Transactions between Related Organizations 623

§ 24.16 Services for Small Hospitals 626

§ 24.17 Corporate Sponsorships 627

§ 24.18 Other Exceptions to Unrelated Income Taxation 630

§ 24.19 Internet Activities 641

§ 24.20 Revenue from Controlled Organizations 644

§ 24.21 Unrelated Debt-Financed Income 648

§ 24.22 Specific Deduction 652

§ 24.23 Computation of Unrelated Business Taxable Income 653

§ 24.24 The Commerciality Doctrine 655

25 Physician Recruitment and Retention 657

§ 25.1 Introduction 657

§ 25.2 The IRS Position 660

§ 25.3 The OIG Position 661

§ 25.4 Guidelines for Analyzing Recruitment and Retention Techniques 662

§ 25.5 Specific Recruitment and Retention Techniques 663

§ 25.6 Hermann Hospital Closing Agreement 679

§ 25.7 Physician Recruitment Revenue Ruling 692

26 Charity Care 711

§ 26.1 Introduction 712

§ 26.2 The Financial Ability Standard 712

§ 26.3 The Community Benefit Standard 713

§ 26.4 The Emergency Room Exception 716

§ 26.5 Legal Challenges to Hospital Charity Care Practices 717

§ 26.6 Definitional and Reporting Issues 719

§ 26.7 IRS Compliance Check and Form 990 Redesign 725

§ 26.8 Federal Legislative Initiatives 727

§ 26.9 Charity Care and National Health Reform 731

§ 26.10 Additional Statutory Requirements for Hospitals 732

§ 26.11 The Constitutionality of the Affordable Care Act 749

27 Worker Classification and Employment Taxes 757

§ 27.1 Federal Employment Taxes 758

§ 27.2 Employees and Independent Contractors Distinguished 759

§ 27.3 The Common-Law Factors 761

§ 27.4 Safe Harbors 762

§ 27.5 Classification of Healthcare Workers 764

§ 27.6 Coordinated Issue Papers 768

§ 27.7 Medical Residents and the Student Exception 774

28 Compensation and Employee Benefits 777

§ 28.1 The Reasonable Compensation Standard 778

§ 28.2 Hospital–Physician Compensation Arrangements 781

§ 28.3 Executive Compensation 784

§ 28.4 Board Compensation 791

§ 28.5 Overview of Employee Benefits Law 792

§ 28.6 Deferred Compensation in General 796

29 Medicare and Medicaid Fraud and Abuse and Its Effect on Exemption 803

§ 29.1 The Conflict and Confluence of Tax Policy and Health Policy 803

§ 29.2 Fraud and Abuse Violations as a Basis for Revocation of Exemption 808

§ 29.3 Hospital Incentives to Physicians 811

30 Tax-Exempt Bond Financing 813

§ 30.1 Overview of Qualified 501(c)(3) Bonds 814

§ 30.2 Overview of the Qualified 501(c)(3) Bond Issuance Process 824

§ 30.3 Disqualification of Tax-Exempt Bonds 826

§ 30.4 Internal Revenue Service Developments 831

31 Fundraising Regulation 835

§ 31.1 State Law Regulation 836

§ 31.2 Federal Law Regulation 848

32 Rural Healthcare Organizations 873

§ 32.1 Introduction 873

§ 32.2 Application of the Substantial Private Benefit Prohibition 874

§ 32.3 Application of Unrelated Business Income Rules 874

§ 32.4 Physician Recruitment and Retention in Rural Areas 877

33 Governance 879

§ 33.1 Introduction 880

§ 33.2 Overview of Common Law and Statutory Duties of Officers and Directors 880

§ 33.3 Good Governance Practices 891

§ 33.4 Conflicts of Interest 897

§ 33.5 Board Oversight of Executive Compensation 900

§ 33.6 Government Oversight of Executive Compensation 901

§ 33.7 Federal Legislative Initiatives 906

§ 33.8 State Regulatory Enforcement of Corporate Responsibility Obligations 907

PART SEVEN Obtaining and Maintaining Exempt Status for Healthcare Organizations

34 Exemption and Public Charity Recognition Processes 913

§ 34.1 Exemption Recognition Process 916

§ 34.2 Application Disclosure Requirements 928

§ 34.3 Special Requirements for Charitable Healthcare Organizations 930

§ 34.4 Special Requirements for Health Insurance Issuers 937

§ 34.5 Public Charity Status 937

§ 34.6 Group Exemption 939

§ 34.7 Integral Part Doctrine 944

§ 34.8 Procedure Where Determination Is Adverse 949

35 Maintenance of Tax-Exempt Status and Avoidance of Penalties 953

§ 35.1 Material Changes 954

§ 35.2 Changes in Form 956

§ 35.3 Annual Reporting Requirements 958

§ 35.4 Redesigned Annual Information Return 965

§ 35.5 Disclosure Requirements 979

§ 35.6 IRS Disclosure to State Officials 986

§ 35.7 Form 990 and Community Benefit 988

§ 35.8 Reporting of Noncash Gifts in General 988

36 IRS Audits of Healthcare Organizations 1003

§ 36.1 IRS Audits in General 1003

§ 36.2 Audit Procedures 1007

§ 36.3 Hospital Audit Guidelines 1011

§ 36.4 IRS Compliance Check Projects 1022

§ 36.5 Revocation of Exemption and Closing Agreements 1037

About the Companion Website 1043

Index 1045

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