IHC Group, Inc. - Page 28




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          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 1220.10                                                     
          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, supra 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            



          10   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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