Читать книгу The Law of Tax-Exempt Healthcare Organizations - Bruce Hopkins R., Bruce R. Hopkins, David Middlebrook - Страница 9
ОглавлениеCHAPTER ONE Tax‐Exempt Healthcare Organizations: An Overview
*§ 1.1 Constitutional Law Perspective
§ 1.2 Defining Tax‐Exempt Organizations
§ 1.1 CONSTITUTIONAL LAW PERSPECTIVE
*p. 6, note 14. Delete 132 S. Ct. 2566 and insert 567 U.S. 519.
*p. 6. Insert following first paragraph, before heading:
The penalty tax underlying the individual health insurance mandate (also known as the shared‐responsibility payment) was, however, reduced to zero, effective January 1, 2029. Thereafter, a federal district court held that the Patient Protection and Affordable Care Act is unconstitutional, on the ground that the individual mandate is no longer constitutional, in that its justification can no longer rest on Congress's power to tax, and that the mandate is inseverable from the Act's remaining provisions.14.1 This court, observing that the mandate “no longer contains an exaction,” held that “[s]o long as the shared responsibility payment is zero, the saving construction articulated in NFIB is inapplicable and the individual mandate cannot be upheld under Congress's tax power.”14.2 The court sifted through provisions of the Act, writings of Supreme Court justices in NFIB, and the legislation repealing the mandate to conclude that the mandate is “inseverable from the ACA,” being essential to the ACA's architecture.”14.3 Congress, it wrote, “intended [the mandate] to place the Act's myriad parts in perfect tension”; “without it,” the “architectural design fails.”14.4 “To find otherwise,” the court continued, “would be to introduce an entirely new regulatory scheme never intended by Congress or signed by the President.”14.5 Thus, the court held that because the individual mandate, being so “interwoven” with the Act's “major” and “minor” provisions, is unconstitutional, “none [of the Act's provisions] can stand.”14.6
This decision finding the individual mandate unconstitutional was affirmed, with the appellate court writing that “[n]ow that the shared responsibility payment amount is set at zero, the provision's saving construction is no longer available.”14.7 The court of appeals, however, concluded that the severability analysis in the district court opinion is incomplete, directing the lower court to “employ a finer‐toothed comb on remand and conduct a more searching inquiry into which provisions of the ACA Congress intended to be inseverable from the individual mandate.”14.8 The appellate court wrote that the district court opinion “does not do the necessary legwork of parsing through the over 900 pages of the post‐2017 ACA, explaining how particular segments are inextricably linked to the individual mandate.”14.9 This court stated that it does “not hold forth on just how fine‐toothed that comb should be—the district court may use its best judgment to determine how best to break the ACA down into constituent groupings, segments, or provisions to be analyzed.”14.10 Before the district court could act on remand, however, the Supreme Court assumed jurisdiction over the case.14.11 The Fifth Circuit laid out the options for the Court: it may be that all of the Affordable Care Act is severable from the individual mandate, some of the Act is severable from the mandate and some is not, or none of the Act is severable from the mandate.14.12
Oral arguments in this case were heard by the Court on November 10, 2020.
§ 1.2 DEFINING TAX‐EXEMPT ORGANIZATIONS
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The U.S. Supreme Court, reflecting these principles, wrote that a “nonprofit entity is ordinarily understood to differ from a for‐profit corporation principally because it ‘is barred from distributing its net earnings, if any, to individuals who exercise control over it, such as members, officers, directors or trustees.’”23.1 The Court has discussed the concept of nonprofit organizations on other occasions.23.2 (Of course, before there can be a nonprofit organization or a tax‐exempt organization, there must first be an organization.23.3)
§ 1.5 CHARITABLE HEALTHCARE ORGANIZATIONS
*p. 15. Insert following existing text:
Meanwhile, state courts continue to challenge the qualification of hospitals as charitable organizations for real property tax exemption purposes. In a 91‐page decision that describes the current structure and operations of the majority of hospitals in the United States, the New Jersey Tax Court revoked the property tax exemption for Morristown Memorial Hospital.79.1 See generally, Paff, “Is Your Nonprofit Hospital's Property Tax Exemption Safe?,” Bloomberg Daily Report for Executives, August 25, 2015.
§ 1.8 PROMOTION OF HEALTH
p. 20. Insert at end of first paragraph:
In some instances, activities that would seem to promote health are insufficient to support qualification as a charitable organization. An organization was formed to promote sports, recreation, health, and fitness through church leagues and tournaments, exercise programs, and recreational activities. The organization's goal was to organize adult and youth athletic competitions. Its proposed sources of financial support were ticket sales, advertising income, auctions, annual fundraisers, and donations.
The IRS determined that the organization did not qualify as a charitable organization because it did not meet the organizational or operational tests for charitable status. The IRS focused on the fact that the bulk of the organization's activities were geared toward encouraging sports, recreational, and social interaction between adults. These are not exempt purposes in the IRS's view. Sports and social and recreational activities are not considered exempt activities. The IRS distinguished other guidance in which sports were provided to children under the age of 18. Recreational sports for adults are not considered charitable or educational purposes, according to the IRS.118.1
p. 22. Insert following existing material:
*§ 1.10 ABLE PROGRAMS (NEW)
The newest category of tax‐exempt organization, modeled somewhat on the state‐sponsored qualified tuition program,137 is the qualified ABLE program.138 This is a program established and maintained by a state, or agency or instrumentality of a state, under which a person may make contributions for a tax year, for the benefit of an eligible individual, to an ABLE account that is established for the purpose of meeting the qualified disability expenses of the designated beneficiary of the account.139 The term ABLE account means an account established by an eligible individual, owned by the individual, and maintained under a qualified ABLE program.139.1 A designated beneficiary may have only one ABLE account.140 A beneficiary must be a resident of the state that established the program or a resident of a contracting state.141 An interest in an ABLE program may not be pledged as security for a loan.142
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
Each officer or employee having control of the qualified ABLE program or their designee must make reports regarding the program to the IRS and to designated beneficiaries with respect to matters such as contributions, distributions, and the return of excess contributions.152 For research purposes, the IRS must make available to the public reports containing aggregate information, by diagnosis and other relevant characteristics, on contributions and distributions from the qualified ABLE programs.153
NOTES
1 14.1 Texas v. United States, 340 F. Supp. 3d 579 (N.D. Tex. 2018).
2 14.2 Id. at 599.
3 14.3 Id. at 601.
4 14.4 Id. at 613.
5 14.5 Id. at 614.
6 14.6 Id. at 615.
7 14.7 Texas v. United States, 945 F.3d 355, 390 (5th Cir. 2019).
8 14.8 Id. at 402.
9 14.9 Id. at 400.
10 14.10 Id. at 402.
11 14.11 California v. Texas, 140 S. Ct. 1262 (2020).
12 14.12 Texas v. United States, 945 F.3d 355, 369 (5th Cir. 2019).
13 23.1 Camps Newfound/Owatonna, Inc. v. Town of Harrison, 520 U.S. 564, 585 (1987).
14 23.2 Burwell v. Hobby Lobby Stores, Inc., 573 U.S. 682, 709–713 (2014); Corporation of the Presiding Bishop of the Church of Jesus Christ of Latter‐Day Saints v. Amos, 483 U.S. 327, 344–346 (1987) (concurring opinion).
15 23.3 E.g., George v. Commissioner, 110 T.C.M. 190 (2015) (where the court concluded that, for tax exemption purposes, an organization was not formed).
16 79.1 The court concluded that “[i]f it is true that all non‐profit hospitals operate like the Hospital in this case … then for purposes of the property tax exemption, modern non‐profit hospitals are essentially legal fictions. Clearly, the operation and function of modern non‐profit hospitals do not meet the current criteria for property tax exemption under [New Jersey law.]” AHS Hospital Corp., d/b/a Morristown Memorial Hospital v. Town of Morristown, 2015 BL 206190 (N.J. Tax Ct. 2015).
17 118.1 Priv. Ltr. Rul. 201835012.
18 137 IRC § 529. See Tax‐Exempt Organizations § 19.19(a).
19 138 IRC § 529A(a); Reg. §§ 1.529A‐1(a), 1.511‐2(e), 1.529A‐2. This acronym is in reference to the Achieving a Better Life Experience Act of 2014, Pub. L. 113‐295, div. B, 128 Stat. 4056.
20 139 IRC § 529A(b)(1)(A).
21 139.1 IRC § 529A(e)(6).
22 140 IRC § 529A(b)(1)(B).
23 141 IRC § 529A(b)(1)(C).
24 142 IRC § 529A(b)(5).
25 143 IRC § 529A(e)(2).
26 144 IRC § 529A(e)(1).
27 145 IRC § 529A(e)(3).
28 146 IRC § 529A(e)(5).
29 147 IRC § 529A(b)(2)(A).
30 148 IRC § 529A(b)(2)(B). That exclusion amount currently is $14,000 (IRC § 2503(b)(2)). See Charitable Giving § 8.2(h).
31 149 IRC § 529A(b)(3).
32 150 IRC § 529A(b)(4).
33 151 IRC § 529A(c)(1)(B)(i); Reg § 1.529A‐3.
34 152 IRC § 529A(d)(1); Reg. § 1.529A‐3.
35 153 IRC § 529A(d)(2).
