Wednesday, October 12, 2005

No Private Cause of Action Against Section 501(c)(3) Entities

Code Section 501(c)(3) organizations are generally exempt from federal income taxes, and contributors receive a tax deduction for their contributions.

In an interesting case, an individual sued a hospital and related health care entities, claiming damages for failing to provide “mutually affordable medical care” to indigent or uninsured patients without regard to their ability to pay, as purportedly required for the Code Section 501(c)(3) status of the health care entities. The individual alleged that due to the defendants' tax-exempt status under the Internal Revenue Code, the Defendants entered into an express or implied contract with the United States, the Commonwealth of Pennsylvania, and local government bodies and agreed to provide affordable medical care to all hospital patients, to abstain from “humiliating” debt collection practices, and to prevent any private entities from deriving a profit from Defendants' healthcare operations.

While an interesting argument, it was not a good argument, and the case was dismissed. FELICIANO v. THOMAS JEFFERSON UNIVERSITY HOSPITAL, 96 AFTR 2d 2005-XXXX, (DC PA), 09/28/2005.
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