Redlands Surgical Services v. Commissioner of Internal Revenue case brief

Redlands Surgical Services v. Commissioner of Internal Revenue case brief summary
113 T.C. 47 (1999)

CASE SYNOPSIS

Petitioner sought review of ruling by respondent Internal Revenue Service, which determined that petitioner was not operated for charitable purposes within the meaning of I.R.C. § 501(c)(3).

CASE FACTS

• Petitioner was a nonprofit corporation. 
• Its sole activity was participating as co-general partner with a for-profit corporation that was general partner of an operating partnership engaged in the business of operating an ambulatory surgery center. 
• Petitioner argued that it met the operational test under I.R.C. § 501(c)(3) because its activities with regard to the surgery center furthered its purpose of promoting health for the benefit of the community by providing access to a surgery center for all members of the community based upon medical need rather than ability to pay. 
• Respondent contended that petitioner was not operated exclusively for charitable purposes because it operated for the benefit of private parties and failed to benefit a broad cross-section of the community. 

DISCUSSION

• Based on all the facts and circumstances, the court held that petitioner had ceded effective control of the partnerships' and the surgery center's activities to for-profit parties, conferring on them significant private benefits and, therefore, was not operated exclusively for charitable purposes within the meaning of I.R.C. § 501(c)(3). 
• The court did not view any one factor as crucial.

CONCLUSION

The court held for respondent because petitioner failed to satisfy operational test since it ceded control over the operations of the partnerships and surgery center to private parties, conferring impermissible private benefit. Petitioner was therefore not operating exclusively for exempt purposes.

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