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IRS Finds Health Care Entity Is Not Operated for Exempt Purposes, but Instead Provides Private Benefits to Members as a Cooperative Enterprise
The IRS has issued a final determination in which it concluded that an entity that gathered, analyzed, and reported health care data to its members who, in turn, used this information to reduce their costs of providing health insurance to their clients was not an exempt organization but was, in effect, a cooperative enterprise. PLR 200942068 (dated July 21, 2009, and publicly released October 16, 2009).
The entity’s members were large employers and large insurance companies. The health care data and information collected by the entity were summarized in reports to its members who used the information to reduce their costs of providing health care.
The IRS ruled that because the entity primarily provided substantial private benefits to its members—contrary to a prohibition under section 501(c)(3)—it was not organized and operated exclusively for exempt purposes but, instead, for non-exempt purposes. The operative of a commercial business and a cooperative enterprise primarily for the benefit of its members meant that the entity did not qualify for exempt status under the Code.
For an electronic version of the letter ruling:
PLR 200942068
For more information, contact KPMG’s National Director of Cooperative Tax Services:
David Antoni, in Philadelphia, (267) 256-1627,
dantoni@kpmg.com
Or Associate National Director of KPMG’s Cooperative Tax Services
Brett Huston, in Sacramento, 916 554 1654, bhuston@kpmg.com
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