[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[H.R. 483 Introduced in House (IH)]
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 Representatives 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 Revenue Code of 1986
(relating to private foundations and certain other tax-exempt
organizations) is amended by redesignating 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 ORGANIZATIONS.
``(a) Initial Taxes.--
``(1) On self-dealer.--There is hereby imposed 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 percent 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 transaction between a disqualified person and a medical
service organization, knowing that it is such a transaction, a
tax equal to 2.5 percent of the amount involved 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 person with a medical service
organization and such transaction is not corrected within the
taxable period, there is hereby imposed a tax equal to 200
percent of the amount involved. The tax imposed by this
paragraph shall be paid by any disqualified person (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 paragraph (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
involved. 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 transaction, 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 exchange, or
leasing, of any medical asset to any disqualified 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 involving) the
disposition of any medical activity (or of a
substantial portion of any medical activity).
``(3) Controlled entities.--In the case of any 50-percent
controlled entity (other than an entity exempt from tax under
section 501(a)) of a medical service organization--
``(A) if there is a disposition of any medical
asset by such entity, such organization shall be
treated as disposing of such asset to the extent 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 entity which are held by such
organization.
``(e) Disqualified Person; Organization Manager.--For purposes of
this section--
``(1) Disqualified person.--The term `disqualified 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 organization,
``(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 `organization
manager' means, with respect to a medical service organization,
any officer, director, or trustee of such organization (or any
individual having powers or responsibilities similar to those
of officers, directors, or trustees of the organization).
``(f) Medical Service Organization; Medical Activity; Medical
Asset.--For purposes of this section--
``(1) Medical service organization.--The term `medical
service organization' means any organization 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.
``(2) Medical activity.--The term `medical activity' means
any activity of providing medical or hospital care or medical
education or medical research.
``(3) Medical asset.--The term `medical asset' means any
tangible or intangible asset used in a medical activity.
``(g) Controlled Entities.--For purposes of this section--
``(1) 35-percent controlled entity.--The term `35-percent
controlled entity' means--
``(A) a corporation in which persons described in
subparagraph (A), (B), or (C) of subsection (e)(1) own
more than 35 percent of the combined voting power,
``(B) a partnership in which such persons own more
than 35 percent of the profits interest, and
``(C) a trust or estate in which such persons own
more than 35 percent of the beneficial interest.
``(2) 50-percent controlled entity.--The term `50-percent
controlled entity' means any corporation, partnership, or trust
in which a medical service organization owns more than 50
percent of the combined voting power, profits interest, or
beneficial interest, as the case may be.
``(3) Constructive ownership rules.--Rules similar to the
rules of paragraphs (3) and (4) of section 4946(a) shall apply
for purposes of this subsection.
``(h) Other Definitions.--For purposes of this section--
``(1) Taxable period.--The term `taxable period' means,
with respect to any self-dealing asset transaction, the period
beginning with the date on which the transaction occurs and
ending on the earliest of--
``(A) the date of mailing a notice of deficiency
under section 6212 with respect to the tax imposed by
subsection (a)(1),
``(B) the date on which the tax imposed by
subsection (a)(1) is assessed, or
``(C) the date on which correction of the self-
dealing asset transaction is corrected.
``(2) Amount involved.--The term `amount involved' means,
with respect to any self-dealing asset transaction, the amount
of money and fair market value of other property transferred by
the medical service organization in the transaction (or in the
case of a lease, the fair market value of the leased property).
For purposes of the preceding sentence--
``(A) in the case of the taxes imposed by
subsection (a), fair market value shall be determined
as of the date of which the transaction occurs, and
``(B) in the case of the taxes imposed by
subsection (b), fair market value shall be the highest
fair market value during the taxable period.
``(3) Correction.--The terms `correction' and `correct'
mean, with respect to any self-dealing asset transaction,
undoing the transaction to the extent possible, but in any case
place the medical service organization in a financial position
not worse than that in which it would be if the disqualified
person were dealing under the highest fiduciary standards.''
(b) Technical and Conforming Amendments.--
(1) Subsections (a), (b), and (c) of section 4963 of such
Code are each amended by inserting ``4958,'' after ``4955,''.
(2) Subsection (b) of section 4962 of such Code is amended
by inserting before the period ``and shall not include the tax
imposed by section 4958(a) (relating to initial tax on self-
dealing asset transactions)''.
(3) Subsection (e) of section 6213 of such Code is amended
by inserting ``4958 (relating to self-dealing in certain assets
of tax-exempt medical service organizations),'' before
``4971''.
(4) The table of subchapters for chapter 42 of such Code is
amended by striking the last item and inserting the following:
``Subchapter D. Self-dealing in certain
assets of tax-exempt medical
service organizations.
``Subchapter E. Abatement of first and
second tier taxes in certain
cases.''
(c) Effective Date.--The amendments made by this section shall
apply to transactions occurring after November 26, 1991.
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