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exempt status, such as an HMO, must demonstrate that it provides
a community benefit.
Community Benefit Test
In Sound Health Association v. Commissioner, supra, we first
considered whether an HMO may qualify as an organization
described in section 501(c)(3). The Commissioner determined that
Sound Health Association did not qualify for tax-exempt status
pursuant to section 501(c)(3) on the ground that the organization
served the private interests of its members as opposed to the
interests of the community.
In Sound Health Association v. Commissioner, supra at 182-
183, we utilized the same factors deemed significant by the
Commissioner in granting tax-exempt status to one of two
hospitals under review in Rev. Rul. 69-545, 1969-2 C.B. 117, and
referred to the factors cited favorably in that ruling as the
community benefit test. In Sound Health Association, we
concluded that the subject organization shared several
characteristics with the hospital deemed exempt in Rev. Rul. 69-
545, supra. In particular, like the hospital in the revenue
ruling, Sound Health Association operated a medical clinic and
employed physicians and nurses to provide medical services, and
opened its emergency room to all persons requiring emergency care
whether they were members or not and regardless of whether they
were financially able to pay. Sound Health Association also
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