RANCHO CORDOVA, Calif., Aug. 8 CA-VSP-PetitionsCourt
Former US Solicitor General Ken Starr named counsel of record for this appeal
RANCHO CORDOVA, Calif., Aug. 8 /PRNewswire/ -- America's largest not-for-profit eyecare benefits provider VSP(R) Vision Care and its legal team led by former U.S. Solicitor General Kenneth W. Starr today petitioned for a writ of certiorari with The Supreme Court of the United States.
VSP wants to make a final plea to the Supreme Court to regain its federal tax-exempt status. As stated directly in the VSP Supreme Court petition filed today:
"'This case presents a critically important, recurring question regarding the standards governing the tax-exempt status of nonprofit health care enterprises, particularly nonprofit health maintenance organizations (HMOs),' said Ken Starr, former U.S. Solicitor General.
"Without any change in statutory or regulatory law, and without any change in the operations of VSP, the IRS overturned its longstanding position, revoking VSP's tax exemption in 2002.
"Under the common law, which this Court has held is reflected in section 501(c) of the Internal Revenue Code, nonprofit health care organizations are deemed 'charitable' entities that promote the 'social welfare,' and are thus entitled to tax-exempt status, as long as the class of subscribers is not so small that the public benefits are insubstantial. Consistent with the common law, the IRS has long taken the position that nonprofit HMOs, including petitioner Vision Service Plan (VSP), are eligible for tax-exempt status. Indeed, the IRS granted VSP a tax exemption in 1960.
"According to the IRS, a nonprofit health care organization that limits its benefits to a class of subscribers is no longer eligible for tax-exempt status, unless it also provides some as-yet-unquantified, unspecified amount of 'community benefits.' By condoning the IRS' unfounded departure from the common law in a cursory, unpublished decision, the Ninth Circuit has cast tax exemption law into turmoil, introducing unprecedented uncertainty in a nonprofit industry that relies on tax exemptions in order to fulfill its basic mission of providing health care for the benefit of the community to all applicants. Indeed, the Ninth Circuit's ruling calls into question the tax exemptions for all nonprofit health care organizations, including not just otherwise qualified health plans and HMOs, but also hospitals, nursing homes, and others.
"'The IRS's revocation of VSP's tax-exempt status, over 40 years after it was initially granted, represents an unauthorized departure from the established law of charitable trusts and from the specific judgment of the 1986 Congress,' states VSP President and CEO Rob Lynch.
"As a nonprofit entity providing care to a large segment of the community, VSP pursues a goal of maximizing delivery of health care services within the limits of its financial capacity, rather than maximizing net income:
-- In 2003, the tax year in question, VSP had over 6 million enrollees, more than 40% of whom were poor or elderly beneficiaries of Medicaid, Medicare, or similar state programs;
-- VSP provides millions of dollars in free vision services to uninsured or underinsured children and victims of disasters;
-- even for those subscriber groups who participate at full rates, VSP has negotiated discounts with its contract providers of 20% or more off the providers' usual and customary rates, with even deeper discounts for services provided to Medicare and Medicaid patients;
-- over a third of the providers in VSP's network are in medically underserved communities;
-- VSP has no blackout provisions on enrollment and no limitation for pre-existing conditions;
-- VSP has a substantial program of community outreach and patient education on the health benefits of annual comprehensive eye examinations;
-- VSP uses its accumulated surplus and reserves for the purpose of providing a business safety net and improving the cost effectiveness and quality of the eye care services it provides;
-- no part of VSP's net revenues or assets can inure to any private person or be distributed as dividends; VSP's by-laws preclude such inurement; and
-- VSP's Articles of Incorporation affirm its nonprofit business model: the Articles require that if the organization dissolves, its remaining assets are to be distributed 'to an educational, research, scientific or health institution, organization, or association to be expended in the advancement of the science and art of optometry."
"'The IRS's changed position - now condoned by the Ninth Circuit - makes it much more difficult for a nonprofit health care organization to qualify for an exemption under sections 501(c)(3) or 501(c)(4),' said Thomas A. Fessler, VSP's vice president and general counsel. 'Despite the fact that the basic mission of these organizations is a charitable one - the promotion of health care - the IRS now requires something more in the way of "community benefits" or "public benefits" in order to qualify for an exemption.'"
About VSP
VSP's family of companies includes VSP Vision Care, the only not-for-profit managed vision care company in the United States serving 55 million members; VSP Labs, industry leaders in new technologies, production processes, service and logistics; Altair, the only eyewear company that exclusively supports private-practice eye doctors; and Eyefinity(R), offering private practices innovative solutions to improve overall practice management and the patient experience.
Since 1997, VSP has provided more than 470,000 low-income, uninsured children with free eyecare. Through relationships with the American Diabetes Association, Prevent Blindness America and the Center for Health Transformation, VSP promotes the importance of annual eye exams for maintaining eye health and overall wellness.
CONTACTS:
Andrea Collins
KCSA Strategic Communications
212-896-1232
acollins@kcsa.com
Pat McNeil
VSP Vision Care
916-851-4287
patrmc@vsp.com
SOURCE VSP
