Washington, D.C. partner T.J. Sullivan was quoted in a Daily Tax Report article titled, “Superiors Nixed Push to Revoke McLaren HMO Exempt Status.” The article discussed the IRS’ decision to revoke a health maintenance organization’s tax-exempt status and replace it with a less advantageous status, despite an examiner’s recommendation.
The Internal Revenue Service stated that McLaren Health Plan was no longer organized and operation for exclusively exempt purposes following its merger with another organization.
T.J. said there wasn’t much different between the two subsections. Now, contributions to the organization will not be deductible as charitable contributions, and the organization cannot issue tax-exempt bonds for physical facilities. T.J. states that these do not heavily affect HMOs, because very few of them rely on outside contributions and many will contract with provider groups rather than operate their own physical facilities.