The contrast between Federated Pharmacy Services and our treatment of nonprofit hospitals is striking. Each operates a business, providing goods and/or services for a fee. Most nonprofit hospitals, in fact, strive to be profitable, and as noted above, at least some are extremely successful in that regard. These organizations are considered charities, but an organization that strives to serve an underserved population without making a profit is not a charity. This comparison alone should make one question the usefulness of our current definition of a prima facie charitable purpose. If benefit” is the test of exemption, someone “community should explain exactly why Federated Pharmacy Services was not providing such a benefit. I cannot do so. c. Banking, Real Estate Development, and Law Firms When is a bank or a real estate developer charitable? If you said exit stage left. The correct answer is they are targeted toward poor relief or “when combatting discrimination.” The IRS concluded in Rev. Rul. 74-587 that an organization providing loans and start-up capital to businesses owned by minorities or other disadvantaged groups in a depressed urban area was charitable, because the organization because the organization’s activities helped combat racial prejudice and poverty. In Rev. Rul. 70-585, the Service ruled that an organization that builds housing for the poor is exempt; an organization that builds housing for minority families in order to integrate a neighborhood is exempt, even if the housing is not strictly aimed at the poor. But an organization that builds modestly-priced housing for the middle class to promote economic integration of a wealthy neighborhood not exempt. With respect to law firms, organizations that provide legal services to the poor have long been exempt under the long-standing relief” thread of charity. But “poor in the 1970’s the IRS decided that interest” law firms also could be exempt. “public These are organizations that do not dedicate services to the poor, but (in theory, at least) litigate issues that involve important public policy and likely would otherwise not be litigated because of the lack of sufficient economic stake by potential litigants. The Service later augmented this ruling with a Revenue Procedure that placed some strict procedural limits on organizations applying for exempt status. For example, a
The contrast between Federated Pharmacy Services and our treatment of nonprofit hospitals is striking. Each operates a business, providing goods and/or services for a fee. Most nonprofit hospitals, in fact, strive to be profitable, and as noted above, at least some are extremely successful in that regard. These organizations are considered charities, but an organization that strives to serve an underserved population without making a profit is not a charity. This comparison alone should make one question the usefulness of our current definition of a prima facie charitable purpose. If “community benefit” is the test of exemption, someone should explain exactly why Federated Pharmacy Services was not providing such a benefit. I cannot do so. c. Banking, Real Estate Development, and Law Firms When is a bank or a real estate developer charitable? If you said exit stage left. The correct answer is “when they are targeted toward poor relief or combatting discrimination.” The IRS concluded in Rev. Rul. 74-587 that an organization providing loans and start-up capital to businesses owned by minorities or other disadvantaged groups in a depressed urban area was charitable, because the organization because the organization’s activities helped combat racial prejudice and poverty. In Rev. Rul. 70-585, the Service ruled that an organization that builds housing for the poor is exempt; an organization that builds housing for minority families in order to integrate a neighborhood is exempt, even if the housing is not strictly aimed at the poor. But an organization that builds modestly-priced housing for the middle class to promote economic integration of a wealthy neighborhood not exempt. With respect to law firms, organizations that provide legal services to the poor have long been exempt under the long-standing “poor relief” thread of charity. But in the 1970’s the IRS decided that “public interest” law firms also could be exempt. These are organizations that do not dedicate services to the poor, but (in theory, at least) litigate issues that involve important public policy and likely would otherwise not be litigated because of the lack of sufficient economic stake by potential litigants. The Service later augmented this ruling with a Revenue Procedure that placed some strict procedural limits on organizations applying for exempt status. For example, a