Estates, Gifts, And Trusts (EGT)

Nonprofit Healthcare Organizations: Federal Income Tax Issues (Portfolio 486)

  • This Portfolio describes the federal income tax treatment of healthcare organizations that are exempt from tax under §501(a) of the Internal Revenue Code.


The Bloomberg Tax Portfolio, Nonprofit Healthcare Organizations: Federal Income Tax Issues, No. 486, describes the federal income tax treatment of healthcare organizations that are exempt from tax under §501(a) of the Internal Revenue Code. Since many nonprofit healthcare organizations qualify for exemption under §501(c)(3), the Portfolio begins with a discussion of how a healthcare organization may qualify as a charity, emphasizing the evolution of the current requirement that the organization be organized and operated for the promotion of health. The Portfolio describes the types of healthcare organizations that may qualify under §501(c)(3) and tells how they may achieve public charity status, either as a per se public organization, a publicly supported organization, or a supporting organization.

The Portfolio also details the federal anti-kickback and anti-referral statutes, with which healthcare organizations must comply to maintain their tax-exempt status. The Portfolio discusses this important body of nontax law which has significant tax implications for all healthcare organizations participating in the Medicare and Medicaid programs.

The Portfolio analyzes a number of other issues that have become significant in the healthcare field in recent years. These include transactions with hospital staff physicians; deferred compensation and profit-sharing arrangements with physicians and staff; healthcare partnerships and joint ventures; the status of managed care organizations, including health maintenance organizations; integrated delivery systems and the purchase of physician practices; the unrelated business income tax; the creation and use of for-profit subsidiaries; tax-exempt financing; employment tax issues; IRS healthcare audits; tax and reporting requirements related to fund-raising; and general compliance, filing, and disclosure issues.

The Worksheets contain selected IRS publications and determination letters related to current tax issues in the healthcare area. They also include the relevant Medicare and Medicaid statutes.

Some issues relating to tax-exempt organizations are covered in greater detail in other Portfolios, to which reference has been made where appropriate. For additional relevant Bloomberg Tax Portfolios, check the Estates, Gifts and Trusts “Portfolio Classification Guide.”

This Portfolio may be cited as Washlick, 486 T.M., Nonprofit Healthcare Organizations: Federal Income Tax Issues.

Table of Contents

I. Introduction
II. Qualification for Tax-Exempt Status Under § 501(c)(3)
III. Public Charity Status
IV. Federal Anti-Referral and Anti-Kickback Statutes
V. Transactions with Hospital-Based Physicians
VI. Deferred Compensation and Profit-Sharing Arrangements
VII. Partnerships and Joint Ventures
VIII. Managed Care Organizations
IX. Integrated Delivery Systems and Hospital Acquisition of Physician Practices
X. Unrelated Business Income Tax
XI. For-Profit Subsidiaries
XII. Tax-Exempt Financing: § 501(c)(3) Bonds
XIII. Employment Tax and Employment Status Issues
XIV. Hospital Audits and the Coordinated Examination Program
XV. Fund-Raising Activities
XVI. Filing and Disclosure Rules

John Washlick
Buchanan Ingersoll & Rooney, PC
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