The Law of Tax-Exempt Healthcare Organizations

The Law of Tax-Exempt Healthcare Organizations
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Bruce R. Hopkins. The Law of Tax-Exempt Healthcare Organizations

the law of tax-exempt healthcare organizations

Table of Contents

Guide

Pages

Preface

About the Authors

Book Citations

CHAPTER ONE Tax‐Exempt Healthcare Organizations: An Overview

§ 1.1 CONSTITUTIONAL LAW PERSPECTIVE

§ 1.2 DEFINING TAX‐EXEMPT ORGANIZATIONS

§ 1.5 CHARITABLE HEALTHCARE ORGANIZATIONS

§ 1.8 PROMOTION OF HEALTH

*§ 1.10 ABLE PROGRAMS (NEW)

NOTES

CHAPTER THREE Criticisms of Tax Exemption

§ 3.3 COMMERCIALITY DOCTRINE (c) Contemporary View

(d) Commerciality Doctrine and Healthcare Organizations

NOTES

CHAPTER FOUR Private Inurement, Private Benefit, and Excess Benefit Transactions

§ 4.4 PRIVATE INUREMENT—SCOPE AND TYPES

(j) Provision of Healthcare Services to One Individual or Family

(k) Business Referral Operations

(l) Still Other Forms of Inurement

§ 4.6 ESSENCE OF PRIVATE BENEFIT

§ 4.9 EXCESS BENEFIT TRANSACTIONS (a) General Rules

NOTES

CHAPTER FIVE Public Charities and Private Foundations

§ 5.1 PUBLIC INSTITUTIONS

§ 5.6 RECOGNITION OF CHANGE IN PUBLIC CHARITY STATUS

NOTES

CHAPTER SEVEN Lobbying and Political Activities

§ 7.1 LEGISLATIVE ACTIVITIES LIMITATION (b) Legislative Activities

§ 7.4 POLITICAL ACTIVITIES LIMITATION (b) Participation or Intervention

(g) IRS's Recent Enforcement Efforts

(h) “Religious Liberty” Executive Order

§ 7.5 BUSINESS EXPENSE DEDUCTION RULES AND POLITICAL ACTIVITIES

§ 7.7 PUBLIC POLICY ADVOCACY ACTIVITIES

§ 7.8 POLITICAL ACTIVITIES OF SOCIAL WELFARE ORGANIZATIONS

NOTES

CHAPTER EIGHT Hospitals

*§ 8.1 FEDERAL TAX LAW DEFINITION OF HOSPITAL

§ 8.3 PUBLIC HOSPITALS

*§ 8.6 PANDEMIC RELIEF (NEW)

Economic Recovery Loans

NOTES

CHAPTER NINE Managed Care Organizations

§ 9.3 COMMERCIAL‐TYPE INSURANCE PROVIDERS

§ 9.5 RECENT DEVELOPMENTS

NOTES

CHAPTER THIRTEEN Other Provider and Supplier Organizations

§ 13.3 QUALIFIED NONPROFIT HEALTH INSURANCE ISSUERS

§ 13.5 ACCOUNTABLE CARE ORGANIZATIONS

*§ 13.6 CANNABIS‐RELATED SERVICES ORGANIZATIONS (NEW)

NOTES

CHAPTER SIXTEEN For‐Profit Subsidiaries

§ 16.3 ATTRIBUTION OF SUBSIDIARY'S ACTIVITIES TO EXEMPT PARENT

NOTES

CHAPTER SEVENTEEN Exempt and Nonexempt Cooperatives

§ 17.1 COOPERATIVE HOSPITAL SERVICE ORGANIZATIONS

Note

CHAPTER EIGHTEEN Business Leagues

§ 18.1 BUSINESS LEAGUES IN GENERAL

§ 18.2 HEALTHCARE TRADE ASSOCIATIONS

§ 18.3 CERTIFICATION ORGANIZATIONS AND PEER REVIEW BOARDS

NOTES

CHAPTER NINETEEN Other Health‐Related Organizations

§ 19.4 HOSPITAL MANAGEMENT SERVICES ORGANIZATIONS

§ 19.5 REGIONAL HEALTH INFORMATION ORGANIZATIONS

NOTES

CHAPTER TWENTY Healthcare Provider Reorganizations

§ 20.1 SOME BASICS ABOUT REORGANIZATIONS

CHAPTER TWENTY‐ONE Mergers and Conversions

§ 21.4 CONVERSION FROM NONEXEMPT TO EXEMPT STATUS (b) Federal Tax Law

§ 21.5 JOINT OPERATING AGREEMENTS

NOTES

CHAPTER TWENTY‐TWO Partnerships and Joint Ventures

§ 22.9 WHOLE‐HOSPITAL JOINT VENTURES

CHAPTER TWENTY‐THREE Integrated Delivery Systems

§ 23.2 TAX STATUS OF IDS ORGANIZATIONS

CHAPTER TWENTY‐FOUR Tax Treatment of Unrelated Business Activities

§ 24.2 DEFINITION OF TRADE OR BUSINESS (a) General Principles

(b)Profit Motivation Requirement

(f)Concept of Investment Plus

§ 24.3 DEFINITION OF REGULARLY CARRIED ON (a) General Principles

(c)Fundraising Activities

§ 24.5 APPLICATION OF SUBSTANTIALLY RELATED TEST TO HEALTHCARE ORGANIZATIONS

§ 24.5A DEEMED UNRELATED BUSINESS INCOME

§ 24.11 PHARMACY, MEDICAL SUPPLIES, AND SERVICE SALES (a) Sales of Other Services

§ 24.12 LABORATORY TESTING SERVICES

§ 24.13 MEDICAL RESEARCH

§ 24.18 OTHER EXCEPTIONS TO UNRELATED INCOME TAXATION (a) Exceptions for Activities

(b)Exceptions for Income

§ 24.20 REVENUE FROM CONTROLLED ORGANIZATIONS (b) Special Rule

§ 24.20A PARTNERSHIP RULES

§ 24.21 UNRELATED DEBT‐FINANCED INCOME (b) Acquisition Indebtedness

§ 24.23 COMPUTATION OF UNRELATED BUSINESS TAXABLE INCOME

(a)General Rules

*(b)Fringe Benefit Rules

*(c)“Bucketing” Rule

*(d)Final Regulations (New)

*(e)Charitable Deduction

*(f)Specific Deduction

*(g)Allocation of Expenses

*(h)Net Operating Losses

*(i)Tax Structure

NOTES

CHAPTER TWENTY‐FIVE Physician Recruitment and Retention

§ 25.5 SPECIFIC RECRUITMENT AND RETENTION TECHNIQUES (b) Income Guarantees

NOTES

CHAPTER TWENTY‐SIX Charity Care

§ 26.6 DEFINITIONAL AND REPORTING ISSUES

§ 26.9 CHARITY CARE AND NATIONAL HEALTH REFORM

§ 26.10 ADDITIONAL STATUTORY REQUIREMENTS FOR HOSPITALS (d) New IRS Notice of Anticipated Regulations

(e)Initial Notice of Proposed Rulemaking—Community Health Needs Assessments, and Related Rulemaking and Notices

*(f)Final Regulations—Community Health Needs Assessments for Charitable Hospitals, Excise Tax Returns, and Time for Filing Return

*(g) GAO Report

*§ 26.12 PROVIDER TAXES (NEW)

NOTES

CHAPTER TWENTY‐SEVEN Worker Classification and Employment Taxes

§ 27.7 MEDICAL RESIDENTS AND THE STUDENT EXCEPTION

CHAPTER TWENTY‐EIGHT Compensation and Employee Benefits

§ 28.3 EXECUTIVE COMPENSATION (d) Loans to Executives

(f) Executive Compensation in Certain Health Insurance Providers

§ 28.5 OVERVIEW OF EMPLOYEE BENEFITS LAW

§ 28.6 DEFERRED COMPENSATION IN GENERAL

(c) New Proposed Rules for 457(f) Plans

*§ 28.7 EXCESS EXECUTIVE COMPENSATION (NEW)

(a) The Statute and Interim Guidance

(b) Proposed Regulations and Final Regulations

NOTES

CHAPTER THIRTY Tax‐Exempt Bond Financing

§ 30.3 DISQUALIFICATION OF TAX‐EXEMPT BONDS

(d) Avoiding Management Contract Problems

NOTES

CHAPTER THIRTY‐ONE Fundraising Regulation

§ 31.2 FEDERAL LAW REGULATION (a) Substantiation Requirements in General

NOTES

CHAPTER THIRTY‐THREE Governance

§ 33.3 GOOD GOVERNANCE PRACTICES (b) Nonprofit Sector Group Best Practice Recommendations

*§ 33.4A IRS RULING POLICY

NOTES

CHAPTER THIRTY‐FOUR Exemption and Public Charity Recognition Processes

§ 34.1 EXEMPTION RECOGNITION PROCESS

(a) General Procedures

(b) The Completed Application

(b‐1) Application Processing Time Line

(d) Application Forms in General

(e) User Fees

(f) Applications Processing Controversy

§ 34.5 PUBLIC CHARITY STATUS (b) Recognition of Public Charity Status

§ 34.6 GROUP EXEMPTION

(a) Existing Law

(b) Proposed Revised Procedures

§ 34.7A NOTICE REQUIREMENTS FOR SOCIAL WELFARE ORGANIZATIONS (NEW)

§ 34.8 PROCEDURE WHERE DETERMINATION IS ADVERSE

§ 34.9 CONSTITUTIONAL LAW ASPECTS OF PROCESS (NEW)

NOTES

CHAPTER THIRTY‐FIVE Maintenance of Tax‐Exempt Status and Avoidance of Penalties

§ 35.1 MATERIAL CHANGES

(a) General Rules

(b) Redomestications

§ 35.2A MODIFICATION OF TAX EXEMPTION (NEW)

§ 35.4 REDESIGNED ANNUAL INFORMATION RETURN

§ 35.5 DISCLOSURE REQUIREMENTS (a) Applications and Annual Information Returns

§ 35.6 IRS DISCLOSURE TO STATE OFFICIALS

NOTES

CHAPTER THIRTY‐SIX IRS Audits of Healthcare Organizations

§ 36.2 AUDIT PROCEDURES *(a) Types of Examinations

(f) Government Accountability Office 2015 Report

(g) IRS Fiscal Year 2016 Work Plan

(h) IRS Fiscal Year 2017 Work Plan

(i) IRS Fiscal Year 2018 Work Plan

*( j) IRS Fiscal Year 2019 Program Letter

*(k) IRS Fiscal Year 2020 Program Letter

*(l) IRS Fiscal Year 2021 Program Letter

(m) Section 501(r) Reviews

*(n) Current Examination Selection Procedures

*(o) CP&C Function Evaluated

NOTES

Online Resources

Cumulative Table of Cases

Cumulative Table of IRS Revenue Rulings

Cumulative Table of IRS Revenue Procedures

Cumulative Table of IRS Private Letter Rulings

Cumulative Table of IRS Technical Advice Memoranda

Table of Chief Counsel Advice Memoranda

Cumulative Table of IRS General Counsel Memoranda

Table of Tax Reform Legislation

OVERVIEW OF LEGISLATION

TAX‐EXEMPT ORGANIZATIONS LAW CHANGES

INCOME TAX CHARITABLE DEDUCTION LAW CHANGES

DELETED PROPOSALS

NOTES

Cumulative Index

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An eligible individual is an individual entitled to benefits based on blindness or disability under the Social Security Act, where the blindness or disability occurred before the date on which the individual attained age 26, or a disability certification143 with respect to the individual is filed with the IRS.144 A designated beneficiary in connection with an ABLE account established under a qualified ABLE program is the eligible individual who established an ABLE account and is the owner of the account.145 The term qualified disability expenses means expenses related to the eligible individual's blindness or disability that are made for the benefit of an eligible individual who is the designated beneficiary, including expenses for education, housing, transportation, health, financial management services, and legal fees.146

Contributions to an ABLE account generally must be in the form of money.147 There is an annual per‐account funding limit equal to the annual gift tax exclusion.148 A qualified ABLE program must provide a separate accounting for each designated beneficiary.149 A beneficiary may, directly or indirectly, direct the investment of contributions to the program, and earnings thereon, no more than two times in any calendar year.150 Distributions from a qualified program are not includable in the beneficiary's gross income to the extent they do not exceed the amount of qualified disability expenses.151

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