- 32 -
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
Page: Previous 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 NextLast modified: May 25, 2011