Section of Taxation Publications
  VOL. 55
NO. 1
FALL 2001
Contents | TTL Home

 Note: The following is an excerpt from the introduction to the article as published in The Tax Lawyer. Author citations have been omitted for brevity. Tax Section members may read the article in its entirety in Adobe Acrobat format.
Joint Ventures Between Non-Profit and For-Profit Healthcare Providers: Redlands Surgical Services v. Commissioner
Stephen M. Albrecht


In Redlands Surgical Services v. Commissioner, the U.S. Court of Appeals for the Ninth Circuit upheld a Tax Court decision denying section 501(c)(3) tax-exempt status to Redlands Surgical Services (the “taxpayer”). The Tax Court held that even though the taxpayer was a subsidiary of a nonprofit charitable health system, the taxpayer’s participation in a joint venture with a for-profit entity ceded control to the for-profit partner and disqualified the taxpayer from tax-exempt status.

Part I of this Note summarizes the tax treatment of joint ventures between nonprofit and for-profit entities and reviews the facts of the Redlands case. Part II explains the decisions of the Tax Court and Ninth Circuit. Part III analyzes the Redlands decisions and discusses the implications for nonprofit health service providers. This part concludes that while the decision is correct, the standard established in Redlands will make it difficult for charitable health service providers to attain the benefits of joint ventures.


Published by
Section of Taxation, American Bar Association
With the Assistance of
Georgetown University Law Center


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