Tax-Exempt Status for Hospitals
The article “DOJ Settles Z Street lawsuit over IRS Treatment” looks at how Z Street was mistreated by the IRS while trying to apply for tax-exempt status. From the article, we learn that Z Street is a non-profit organization that offers to educate the public on the issues that the Middle East and Israel face (Cohn, 2018). IRS was concerned with this organization among other organizations that are associated with Israel fearing that they might indulge in inappropriate activities that may threaten the U.S. (Cohn, 2018). As such the organization was scrutinized extraordinarily and their status delayed for some years. However, the U.S. District Court for the District of Columbia settled this issue by instructing the IRS to apologize to the organization (Cohn, 2018). This matter was settled after a seven-year odyssey with various officials that served in the IRS being ousted.
The tax-exempt status of Morristown Hospital in New Jersey failed to comply with the conditions set for an organization to not pay taxes on its properties. As per judge Vito Bianco, the legal test that was given to the hospital was not passed and as such its tax-exempt status was revoked (Keyser et al., 2015). While giving this ruling, the court found out that there was a blurred line between the for-profit and non-profit activities that were carried out by the hospital. For instance, the judge looked at the compensations that were given to executives, employed physicians, and third-party service providers (Keyser et al., 2015). Moreover, judge Bianco made this ruling because she saw that is was difficult to disentangle the for-profit activities that were taking place in this organization (Keyser et al., 2015). All these contributed to the questioning of Morristown Hospital’s tax-exempt status.
The ruling that judge Bianco gave on Morristown Hospital did not go unnoticed by other municipalities. Various hospital tax-exempt status was also questioned because it is believed that the organizations that were traditionally charitable institutions have turned into sophisticated centers of medical care. Additionally, they provide education, a litany of healthcare services regardless of a patient being able to pay (NJ.com, 2016). Such issues make municipalities question how genuine the tax-exempt are thus leading to lawsuits. Another example of a tax-exempt case that was witnessed is Bob Jones University where their tax-exempt status was revoked because they enforced admission standards that were racially discriminatory (Cloud, 2019). According to Section 501 (c)(3) of the U.S. Internal Revenue Code, an organization cannot qualify for tax-exempt if they base their admission on the religious doctrine of an individual.
In a situation where a charitable non-profit organization loses its tax-exempt status, they will be required to pay income taxes on the revenue they earn not excluding donations and every donor will not be able to deduct contributions to the organization. Furthermore, foundations that are private may be unwilling or not able to make grants to the organization. They will have to comply with all the policies set by the IRS. From my point of view, hospitals should be tax-exempt. After all, they are a vital part of society because they help in maintaining the health status of a community. However, if a hospital indulges in for-profit activities, it should not be exempt from paying taxes because it will be serving an individual’s agenda and not the community.