Mid-Atlantic Health Law TOPICS

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Tax-Exempt HIEs and RHIOs

The need for multiparty access to health information and data has spawned the growth of Health Information Exchange organizations (HIEs), which at the regional level are also known as Regional Health Information Organizations (RHIOs). Now, as a result of the American Recovery and Reinvestment Act of 2009 (ARRA), these organizations may be able to qualify as tax-exempt under Section 501(c)(3) of the Internal Revenue Code.

To qualify under Section 501(c)(3), the organization must be organized and operated exclusively for exempt purposes. Additionally, the "private benefit" attributable to any cost savings realized by for-profit entities that participate in the venture cannot be more than "incidental." Fortunately, the ARRA committee report helps to flesh out both of these requirements.

The report specifically provides that facilitating the electronic use or exchange of health related information can meet the long-recognized exempt purpose of "lessening the burdens of government." Additionally, the report states that the private benefit attributable to cost savings realized from the conduct of such activities will be viewed as incidental to the accomplishment of the non-profit organization's exempt purpose.

Now, with this new Congressional guidance, it is expected that the Internal Revenue Service will find it easier to approve 501(c)(3) status for HIEs and RHIOs, and that status will, in turn, make it easier for these organizations to have access to capital, including money in the Federal Stimulus Bill, charitable contributions and tax-exempt bond financing. Such tax-exempt qualification, however, is not automatic, and care must be taken to ensure that all of the other conditions established by the Internal Revenue Code and the IRS are met.

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Date

03.31.10

Type

Publications

Authors

Rosen, Barry F.

Teams

Health Care
Tax