IHC Health Plans, Inc. - Page 32

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          102 T.C. 558 (1994), affd. per curiam 37 F.3d 216 (5th Cir.                 
          1994); sec. 1.501(c)(3)-1(d)(2), Income Tax Regs.                           
          Charitable Purpose                                                          
               The Supreme Court has stated that “Charitable exemptions are           
          justified on the basis that the exempt entity confers a public              
          benefit-–a benefit which the society or the community may not               
          itself choose or be able to provide, or which supplements and               
          advances the work of public institutions already supported by tax           
          revenues.”  Bob Jones Univ. v. United States, 461 U.S. at 591.              
          Although neither the furnishing of medical care nor the operation           
          of an HMO is listed as a qualifying exempt activity under section           
          501(c)(3), it is now well settled that the promotion of health              
          for the benefit of the community is a charitable purpose.  See              
          Redlands Surgical Servs. v. Commissioner, supra at 73; Sound                
          Health Association v. Commissioner, 71 T.C. 158, 177-181 (1978).            
          As discussed in detail below, a health-care provider seeking tax-           
          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           

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