Singularity Health Law Blog

HEALTH CARE REFORM BILL (IV) : NEW REQUIREMENTS FOR NOT FOR PROFIT HOSPITALS TO MAINTAIN TAX EXEMPTION.

    As part of the Patient Protection and Affordable Care Act (“PPACA”) not for profit hospitals must satisfy four new requirements to maintain their tax exemptions. They must:

• Conduct a community health needs assessment once every three years.
• Adopt a policy for financial assistance.
• Limit charges for those qualifying for financial assistance  and 
• Refrain from taking extraordinary collection actions before undertaking reasonable efforts to determine whether a patient qualifies for financial assistance.

    

HEALTH CARE REFORM BILL (II): MEDICAL DEVICE TAX - CONTROLLING COSTS OR STIFLING INNOVATION

There were not any easy choices in the Patient Protection and Affordable Care Act  (“PPACA”)as amended by the Health Care and Education Affordability Reconciliation Act (“HCEAR”), except perhaps the opportunity to stick it to the perpetually tanned Rep. John Boehner (R.Ohio), by imposing a 10 percent excise tax on tanning salons using ultraviolet lamps.  The Congress did impose a 2.9 percent excise tax on the sales of medical devices which is expected to raise $2OB in revenues to fund the expanded coverage of health care reform.  (The  original proposal was for $40B.) (See section 9009 of the PPACA and section 1405 of the HCEAR)  In addition new rules on proof of safety first and the implementation of “effective research” requirements are expected to further raise the cost of doing business in  the Medical Device field.

COLORADO FUROR OVER INTERNET SOFTWARE TAX BILL.

 The Colorado legislature has many high technology companies and consumers up in arms over the passage of HB 10-1192, which in effect imposes a sales and use tax on downloaded software in the state of Colorado. This may have some impact on Colorado companies that sell healthcare software over the internet to consumers in Colorado.

The bill taxes downloads of “standardized software,” which the bill defines as “computer software, including prewritten upgrades, that is not designed or developed to the specifications of a specific purchaser: or Computer software designed and developed to the specifications of a specific purchaser but then sold to another purchaser.”

The legislation has been met with load outcries of alarm from the Colorado technology community and those actively engaged in economic development in the state. The original bill has been modified with an expansive legislative declaration that the bill is 'not intended to alter, other than the designation of standardized software as tangible personal property, the tax treatment of what is known in the industry as "digital goods", "application service providers", software as a service" or "cloud computing"'.   

This bill was designed to reach the "Turbo Tax" crowd.  The idea is to eliminate the perceived inequality in tax application when software is sold in shops from where it is sold over the internet and downloaded.  It is one of a series of bills where the legislature is reaching to tax on line product sales.  Although the bill is self described as the repeal of an "exemption" in truth there was no "exemption."  There was no tax in the past because the tax is on "tangible personal property" and software is an intangible, except when it sold on DVD. The legislative solution is to change the definition of "tangible" to include what is "intangible."  Just redefine "white" as "black." Problem solved.  "Down" is the new "up."  Is this a wonderful country or what?  This may be an example of that wonderful definition of statutory law as “common sense as amended by the legislature.

“GENDER REASSIGNMENT THERAPY” CAN BE TAX DEDUCTIBLE --TAX COURT.

63 year old Rhiannon O’Donnabhain, formerly known as Robert O’Donnell, divorced father of three, former sailor, construction worker and engineer, has prevailed in tax court on her claim for the deductibility of $25,000.00 in out of pocket expenses for therapy and surgery related to converting her sex from male to female. The issue is whether 26 U.S.C. Section 213 of the federal tax code permits the deduction of sex change expenses as treatment for a “disease” or whether it was non-deductible as “cosmetic surgery.”

Illinois Supreme Court says 503(C)(3) Company Must Walk the Talk for Property Tax Exemption.

Eden Retirement Center is a federal tax exempt entity that provides independent living facilities for seniors. It has a bylaw that permits the entity to waive or defer certain fees for impecunious applicants to its facilities. The Center applied for a state property tax exemption on the basis of its federal tax exempt status and its charitable waiver bylaw. The state rejected the application. In Eden Retirement Center V. Department of Revenue, Doc. No. 97703 filed on December 2, 2004, the Illinois Supreme Court reversed decisions by a state trial court and appellate court which had granted and sustained the tax exemption.

Thank You Richard Grasso - IRS Launches Tax Exempt "Compensation Enforcement Project."

In the wake of Richard Grasso's obscene money grab from the tax exempt New York Stock Exchange, Steve Miller, the newly appointed head of the IRS Commission For Tax Exempt Organizations recently announced a new IRS initiative tentatively entitled "Compensation Enforcement Project" to review the level and methodology of executive compensation for tax exempt originations. There are approximately 1.8 million tax exempt organizations in the United States and the levels of compensation in the health and hospital sector is likely to be a prime target.

St. David's II - A Faustian Bargain For Tax Exempt Hospitals?

Last year Tax Exempt Hospitals engaged in joint ventures with For Profit entities breathed a sigh of relief as a Federal District Court in Texas granted Summary Judgment to St. David's Health System of Austin, Texas in their Joint Venture with Columbia HCA on St. David's suit for the recovery of taxes paid because of an IRS determination that they were no longer tax exempt.