Washington, D.C., partner T.J. Sullivan offered commentary on a recent decision by the IRS to revoke the tax-exempt status of a Section 501(c)(3) hospital. He was quoted in Bloomberg BNA’s Health Law Reporter and the EO Tax Journal on the subject.
The pieces examine the revocation of a hospital’s tax-exempt status after allowing a for-profit hospital company to lease and operate its facility. This determination by the IRS is troubling for rural community hospitals that continue to search for ways to lessen the burden of meeting community needs.
T.J. shared his insights on the important differentiation between lessor/lessee relationships and joint ventures: “[T]he taxpayer appears to have simply leased its hospital assets to a for-profit operator, yet was treated by the revenue agent as though it was a joint venture.” He added, “[Requiring ongoing control by the exempt organization] might be the proper standard under which to review a joint venture, but seems wide of the mark for a lease transaction”