- 38 -
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 1220.11
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
if its activities are carried out under the supervision or
control of a related tax-exempt entity and the HMO’s activities
would not constitute an unrelated trade or business if conducted
by the related tax-exempt entity. Id. at 402, 404-405. We
looked to section 513(a) which defined an unrelated trade or
business in pertinent part as:
11 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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