I
103D CONGRESS
1ST SESSION
H. R. 483
To amend the Internal Revenue Code of 1986 to impose an excise tax
on certain sales of assets of medical service organizations to managers,
etc. of such organization.
IN THE HOUSE OF REPRESENTATIVES
JANUARY 6, 1993
Mr. STARK introduced the following bill; which was referred to the Committee
on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to impose
an excise tax on certain sales of assets of medical service
organizations to managers, etc. of such organization.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. EXCISE TAX ON SELF-DEALING IN CERTAIN
ASSETS OF TAX-EXEMPT MEDICAL SERVICE
ORGANIZATIONS.
(a) IN GENERAL.—Chapter 42 of the Internal Reve-
nue Code of 1986 (relating to private foundations and cer-
tain other tax-exempt organizations) is amended by redes-
ignating subchapter D as subchapter E and by inserting
after subchapter C the following new subchapter:
‘‘SUBCHAPTER D—SELF-DEALING IN CERTAIN ASSETS
OF TAX-EXEMPT MEDICAL SERVICE ORGANIZATIONS
‘‘Sec. 4958. Tax on self-dealing in certain assets of tax-exempt
medical service organizations.
‘‘SEC. 4958. TAX ON SELF-DEALING IN CERTAIN ASSETS OF
TAX-EXEMPT MEDICAL SERVICE ORGANIZA-
TIONS.
‘‘(a) INITIAL TAXES.—
‘‘(1) ON SELF-DEALER.—There is hereby im-
posed a tax on each self-dealing asset transaction
between a disqualified person and a medical service
organization. The rate of tax shall be equal to 5 per-
cent of the amount involved with respect to such
transaction for each year (or part thereof) in the
taxable period. The tax imposed by this paragraph
shall be paid by any disqualified person (other than
an organization manager acting only as such) who
participates in such transaction.
‘‘(2) ON
ORGANIZATION
MANAGER.—In any
case in which a tax is imposed by paragraph (1),
there is hereby imposed on the participation of any
organization manager in any self-dealing asset trans-
action between a disqualified person and a medical
service organization, knowing that it is such a trans-
action, a tax equal to 2.5 percent of the amount in-
volved with respect to such transaction for each year
(or part thereof) in the taxable period, unless such
participation is not willful and is due to reasonable
cause. The tax imposed by this paragraph shall be
paid by any organization manager who participated
in the self-dealing asset transaction.
‘‘(b) ADDITIONAL TAXES.—
‘‘(1) ON SELF-DEALER.—In any case in which
an initial tax is imposed by subsection (a)(1) on a
self-dealing asset transaction by a disqualified per-
son with a medical service organization and such
transaction is not corrected within the taxable pe-
riod, there is hereby imposed a tax equal to 200 per-
cent of the amount involved. The tax imposed by
this paragraph shall be paid by any disqualified per-
son (other than an organization manager acting only
as such) who participated in such transaction.
‘‘(2) ON
ORGANIZATION
MANAGER.—In any
case in which an additional tax is imposed by para-
graph (1), if an organization manager refused to
agree to part or all of the correction, there is hereby
imposed a tax equal to 50 percent of the amount in-
volved. The tax imposed by this paragraph shall be
paid by any organization manager who refused to
agree to part or all of the correction.
‘‘(c) JOINT AND SEVERAL LIABILITY.—If more than
one person is liable under any paragraph of subsection (a)
or (b) with respect to any one self-dealing asset trans-
action, all such persons shall be jointly and severally liable
under such paragraph with respect to such transaction.
‘‘(d) SELF-DEALING
ASSET
TRANSACTION.—For
purposes of this section—
‘‘(1) IN GENERAL.—The term ‘self-dealing asset
transaction’ means any direct or indirect sale or ex-
change, or leasing, of any medical asset to any dis-
qualified person.
‘‘(2) EXCEPTION.—Such term shall not include
any transaction if it is established to the satisfaction
of the Secretary that—
‘‘(A) such transaction is at arm’s length
and for fair market value, and
‘‘(B) such transaction does not involve
(and is not part of a series of transactions in-
volving) the disposition of any medical activity
(or of a substantial portion of any medical ac-
tivity).
‘‘(3) CONTROLLED ENTITIES.—In the case of
any 50-percent controlled entity (other than an en-
tity exempt from tax under section 501(a)) of a
medical service organization—
‘‘(A) if there is a disposition of any medi-
cal asset by such entity, such organization shall
be treated as disposing of such asset to the ex-
tent of such organization’s proportionate share
of such entity, and
‘‘(B) any disposition of an interest referred
to in subsection (f)(2) in such entity shall be
treated as a disposition of such organization’s
proportionate share of the medical assets of
such entity.
For purposes of the preceding sentence, the term
‘proportionate share’ means the percentage of the
interests referred to in subsection (f)(2) in such en-
tity which are held by such organization.
‘‘(e) DISQUALIFIED PERSON; ORGANIZATION MAN-
AGER.—For purposes of this section—
‘‘(1) DISQUALIFIED PERSON.—The term ‘dis-
qualified person’ means—
‘‘(A) any organization manager,
‘‘(B) any person who performs substantial
professional medical services for the medical
service organization pursuant to an employment
or other contractual relationship with such or-
ganization,
‘‘(C) any member of a family (as defined
in section 4946(d)) of any individual described
in subparagraph (A) or (B), and
‘‘(D) any 35-percent controlled entity of
persons described in subparagraph (A), (B), or
(C).
‘‘(2) ORGANIZATION MANAGER.—The term ‘or-
ganization manager’ means, with respect to a medi-
cal service organization, any officer, director, or
trustee of such organization (or any individual hav-
ing powers or responsibilities similar to those of offi-
cers, directors, or trustees of the organization).
‘‘(f) MEDICAL SERVICE ORGANIZATION; MEDICAL
ACTIVITY; MEDICAL ASSET.—For purposes of this sec-
tion—
‘‘(1) MEDICAL
SERVICE
ORGANIZATION.—The
term ‘medical service organization’ means any orga-
nization which (without regard to any self-dealing
asset transaction) would be described in section
501(c)(3) and exempt from tax under section 501(a)
if such organization (either directly or through any
50-percent controlled entity of such organization)
engages in a medical activity.