The IRS issued temporary rules on the recognition of healthcare cooperatives under Section 501(c)(29) of the IRC. See Reg. 13507-11, T.D 9574, Federal Register, Feb. 7, 2012, for more details. The IRS also issued a revenue procedure for the issuance of determination letters and rulings. See IRS Rev. Proc. 2012-11 scheduled for publication in Internal Revenue Bulletin 2012-7, Feb. 13, 2012.
The proposed and temporary rules provide that "qualified" nonprofit health insurers must apply for tax-exempt recognition with the IRS. The effective date of exemption will be the later of the date of application or March 23, 2010, the date of the enactment of the Patient Protection and Affordable Care Act.
As it has with other provisions of the act, the IRS looks to the rules that are being promulgated by the Centers for Medicare & Medicaid Services (CMS). See Legal Update dated March 15, 2011, " IRS Issues First Guidance on Exempt Health Insurance Entities."
Qualified Organizations
Once the Consumer Operated and Oriented Plan (CO-OP) qualifies under the CMS plan and CMS acts, then the CO-OP can apply for IRS tax exemption under Section 501(c)(29).
CMS issued final rules in December 2011 for eligibility to be part of the CMS program. These rules provided guidelines for the compensation of the board of directors, financial solvency requirements and loan requirement terms.
Revenue Procedure 2012-11
The IRS has provided additional rules in a revenue procedure for applications for tax exemption, including rules precluding private inurement of earnings to shareholders or individuals. Under these rules, private inurement will not result from the lowering of premiums, the improvement of benefits or the improvement of the quality of healthcare. There will also be proscriptions on substantial legislative activities and a prohibition on political activities.
The revenue procedure will require a copy of the notice of award issued by CMS together with the executed loan agreement accompanying the CO-OP's application for exemption.
http://www.mondaq.com/unitedstates/x/164758/IRS+HRMC/IRS+Provides+More+Guidance+On+Health+Insurance+Cooperatives
Hat tip: Mondaq
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