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"any trade or business the conduct of which is not
substantially related (aside from the need of such
organization for income or funds or the use it makes of
the profits derived) to the exercise or performance by
such organization of * * * [the] purpose or function
constituting the basis for its exemption." * * * [Id.
at 405.]
Because Geisinger HMO enrollees received medical services
from hospitals outside of the Geisinger system, and because the
administrative record lacked evidence as to whether such services
were substantial, we were unable to conclude that Geisinger HMO’s
activities were substantially related to the activities of its
tax-exempt affiliates. Id. at 405-406.
In Geisinger IV, the Court of Appeals affirmed our holding
in Geisinger III, albeit on slightly different grounds.
Geisinger Health Plan v. Commissioner, 30 F.3d at 501. The Court
of Appeals held that an organization may qualify for tax-exempt
status as an integral part of its tax-exempt parent if: (1) The
organization is not carrying on a trade or business which would
be an unrelated trade or business if regularly carried on by its
tax-exempt parent; and (2) the organization’s relationship with
its tax-exempt parent somehow enhances or “boosts” its own tax-
exempt character to the point that the organization would qualify
for tax-exempt status. Id. at 501. Focusing solely on the
latter issue, the Court of Appeals concluded that Geisinger HMO
was not entitled to tax-exempt status because it did not receive
the necessary boost from its relationship with exempt Geisinger
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