- 28 -
Geisinger HMO’s subsidized dues program, stating in pertinent
part:
The mere fact that a person need not pay to belong
does not necessarily mean that GHP, which provides
services only to those who do belong, serves a public
purpose which primarily benefits the community. The
community benefited is, in fact, limited to those who
belong to GHP since the requirement of subscribership
remains a condition precedent to any service. Absent
any additional indicia of a charitable purpose, this
self-imposed precondition suggests that GHP is
primarily benefiting itself (and, perhaps, secondarily
benefiting the community) by promoting subscribership
throughout the areas it serves. [Id. at 1219.]
Although concluding that Geisinger HMO did not qualify for tax-
exempt status on its own, the Court of Appeals remanded the case
to the Court for a determination whether the Geisinger HMO
qualified for exemption as an “integral part” of its tax-exempt
parent. Id. at 1220.9
Integral Part Test
In Geisinger III, we held that the administrative record did
not support Geisinger HMO’s claim that it was entitled to tax-
exempt status as an integral part of the Geisinger system.
Geisinger Health Plan v. Commissioner, 100 T.C. at 404-405. As a
preliminary matter, we concluded that an HMO may qualify for tax-
exempt status as an integral part of a related tax-exempt entity
9 The integral part doctrine is not codified, but its genesis
may be found in sec. 1.502-1(b), Income Tax Regs., which states
that a subsidiary may qualify for tax-exempt status “on the
ground that its activities are an integral part of the exempt
activities of the parent organization”.
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