Taxation of Healthcare Institutions - Assignment Example

The major theme of module six is the taxation of healthcare institutions and Competition- Antitrust Laws. Under the IRC § 501(c) (3) it provides for Federal tax exemption on organized institutions that are operated for charitable purposes. The section does not provide for non-private inurement. A tax-exempt corporation is a corporation that is formed and used for scientific, religious, educational, and charitable services. However, in order for an institution to be classified as one that is tax exempt they must follow certain criteria. Therefore, in order to determine the admissibility for tax-exempt status the purpose of the corporate charter must be established, as well as, the way the company operates.

Additionally, charitable institutions are exempted from sales and income tax, as well as, Ad valorem property tax. Charitable institutions are defined as institutions that do not have capital, shareholders, or capital stock. Additionally, they dispense help or charity to people who need it and to people who apply for it. Charitable institutions do not make any profits or gains in a private sense to any individual who is connected to the institution. For charitable organizations to be exempted under federal law, the institution must be operated and organized for charitable purposes. Additionally, none of the earnings made by the organization should insure for the purposes of benefiting the individual.

For an organization to be exempted from tax the net earnings may not inure to the benefit of any corporation or individual. According to section 501 (c) (3) not all income tax is exempted, for example, in case the charity gets revenue from another business that is not related to charity then they are taxable. Therefore, the lessons I have learned from this module is that charity organizations are made for the benefit of helping people and in case they operate besides their charity work then their income is taxable. Additionally, property that is owned by federal or state government hospitals is exempted from tax.

In the case of Provena Covenant Medical Center vs. V Department of Revenue, the medical center applied for tax-exempt status that was based on debt-collection amounts and tactics that the hospital offered. However, the Illinois Department of Revenue denied this application. On Appeal, the Supreme Court further denied the application for tax exemption stating that the Department of Illinois was correct in denying the religious and property tax exemptions because the hospital was charging uninsured patients, which was more than the actual cost of care. Although the hospital was granting patients discounts at 20 to 25 percent, they were still making profits.

In its decision, the court defined what a charitable organization is by providing six characteristics. They included that a charitable institution does not have capital, shareholders, or capital stock. Secondly, the organization does not earn any profits, but get its funds from private and public charity where they hold in trust for the aims expressed in the charter. Thirdly, the institutions dispense charity to all people in need and to those who apply it. Fourthly, it does not provide profit or gain in a private sense to any individual connected to it. Lastly, charitable institutions do not appear to place any obstacles in the way of people in need. The charitable organizations also avail themselves of any charitable benefit that they dispense.