TaxNewsFlash-Exempt Organizations

August 11, 2008
No. 2008-75

PRINTABLE VERSION

Vision Care Plan Petitions U.S. Supreme Court for Certiorari Concerning Tax-Exempt Status Under Section 501(c)(4)

A petition for a writ of certiorari was recently filed with the U.S. Supreme Court following a January 2008 decision of the U.S. Court of Appeals for the Ninth Circuit that affirmed a federal district court’s decision that Vision Service Plan, Inc.—which provides vision care benefits to subscribers—is not entitled to tax-exempt status as a social welfare organization under section 501(c)(4) because it is not primarily engaged in promoting the common good and general welfare of the community. Vision Service Plan, Inc. v. United States, No. 08____, filed August 7, 2008.

In the petition for certiorari, the following arguments were made:

The decision of the lower courts conflicted with long-standing common law principles and with congressional intent to preserve nonprofit HMOs’ tax-exempt status.

The petitioner is exactly the sort of nonprofit organization that Congress intended to remain tax-exempt.

It is important to a large sector of the U.S. economy that the issues be resolved without delay.

In asserting that certiorari ought to be granted, it was concluded that the results of the lower courts’ decisions threatened established tax practices and jeopardized the tax-exempt status of a segment of the economy. It was also asserted that the decision that the “public benefits” were “not enough” to justify a tax exemption for an HMO provided the industry with no guidance in an area where guidance “is urgently required.”

For an electronic version of the petition for writ of certiorari: Vision Services Plan

For more information, contact Rick Speizman, National Partner-In-Charge, KPMG’s Exempt Organizations Tax Practice (ExoTax), at (202) 533-3084 or rspeizma@kpmg.com

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