Recommended Reading: Nonprofit & Tax Law

boozang1Miranda Perry Fleischer’s Theorizing the Charitable Tax Subsidies:  The Role of Distributive Justice, just published at 877 Wash. U.L. Rev. 505 is a must-read for anyone asking what justifies hospitals’ tax-exemption in a post-reform world.  The least that can be said for this incredibly thoughtful article, which is apparently the first in a series on the topic, is that it provides a superb overview of tax-exemption theory for those who do not regularly read this literature.  It is perfect background reading for the non-tax teacher who introduces students to the topic in her health survey class, or the person who just wants a quick overview of the extant theoretical justifications for the charitable tax exemption.  Fleischer makes two primary points.  First, she chides tax theorists for their failure to acknowledge that tax exemptions for charities, and the attendant deductibility of charitable contributions, are redistributive. Second, she seeks a clearer justification for the determination for the charitable exemption, and convincingly enumerates disparate examples that prove the lack of coherence of current IRS policy, particularly with respect to the question as to whether charities are expected to serve the poor.  Unsurprisingly, hospitals are but one example.  She urges the adoption of a moral theory to facilitate the development of a coherent system of tax exemption, and starts the process of describing potential outcomes if we subscribed to a utilitarian, maximin, egalitarian or capabilities approach to defining charity.  Apparently, this project will be further developed in future articles, which is just in time, at least for the health care sector.

Jessica  Berg’s Putting the Community  Back into the “Community Benefit” Standard, just published at 44 Ga. L. Rev. 375, represents one of the first articles of what can be expected to be a flurry of post-PPACA proposals to reform the criteria for hospitals’ tax-exempt status when  charity care begins to decrease, at least in some markets (undocumented aliens will continue to be a significant burden in several states).  Professor Berg seeks to shift the focus from the provision of individual charity care as a means to satisfy the community benefit standard, to the provision of population health care benefits, which can be measured by local, state and federal authorities to justify their respective tax exemptions.  Berg seeks to avoid adopting a method for quantifying the value of the hospital’s community benefit that encourages hospitals to expend resources for the purpose of earning the tax exemption, rather than promotion of population health.  Consequently, she proposes that tax authorities measure the value of the effect or outcome of the hospital’s population health programs, by analyzing participation, mind states, behavior, health status, sickness care utilization, sickness care expenditures, and community value, which can be accomplished by looking at statistical lives saved, lack of pain and suffering, gains in productivity, and risk reductions.  Berg also proposes the administrative mechanism, which would include community participation, for identifying appropriate programs for hospitals’ implementation.  As is generally the case with Professor Berg’s scholarship, this article proposes on-the-ground solutions to pressing problems of the day worthy of serious consideration.

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