Rev. Rul. 80-30
1980-1 C.B. 250, 1980-5 I.R.B. 7.
Internal Revenue Service
Revenue Ruling
EXEMPTION; COMMUNICATION SERVICES; NONPROFIT HOSPITAL AND DOCTORS
Published: February 4, 1980
Section 4253.--Exemptions
(Also Section 4251; 26 CFR 49.4251-1.)
Exemption communication services; nonprofit hospital and doctors. The exemption from communications taxes provided by section 4253(h) of the Code does not apply to amounts paid by a nonprofit hospital for communication services and facilities that are used exclusively by nonstaff doctors on the hospital premises or that are shared jointly by the doctors and the hospital. The exemption does apply to separate amounts paid by the hospital for communication services and facilities that are furnished for the exclusive use of the hospital in conducting its business. Rev. Rul. 68-382 distinguished.
ISSUE
Under the circumstances described below, does the exemption from the federal communication taxes provided by section 4253(h) of the Internal Revenue Code apply to communication services furnished jointly to a nonprofit hospital and an associated medical activity?
FACTS
A hospital, incorporated as a separate entity, qualifies as a 'nonprofit hospital' for purposes of the exemption under section 4253(h) of the Code. The hospital operates under a contract with a health plan that also provides general medical services through separate contracts with private doctors in the community. The doctors rent and maintain offices that are located in the hospital. Although many of the hospital's patients are under the care of these doctors, none of the doctors are on the hospital staff and their function under the health plan is to administer to any persons in the community enrolled in the plan, whether or not such persons are patients of the hospital.
Various taxable communication services and facilities are furnished for the exclusive use of the hospital. Some services and facilities, such as individual telephone instruments (stations), are furnished for use exclusively by the doctors in their offices. Other communications services and facilities are shared jointly by the hospital and the doctors. The hospital is billed by the telephone company for all services and facilities furnished. The doctors reimburse the hospital for a proportionate share of the charges for communication services and facilities.
The method of billing by the telephone company distinguishes the telephone stations used exclusively by the hospital through means of a coding system. The system is based on a physical identification of the actual telephone lines and equipment furnished exclusively for use by the hospital.
Section 4251 of the Code imposes a tax on amounts paid for certain communication services, including local telephone service, toll telephone service, and teletypewriter exchange service. Under section 4253(h), no tax is imposed under section 4251 on any amount paid by a nonprofit hospital for services furnished to such organization. For purposes of section 4253(h), the term 'nonprofit hospital' means a hospital referred to in section 170(b)(1)(A)(iii) which is exempt from income tax under section 501(a).
In Rev. Rul. 66-382, 1966-2 C.B. 474, a nonprofit hospital is furnished telephone service that includes telephones for use by patients in their rooms. The charge for the entire service is paid by the hospital to the local telephone company. The revenue ruling holds that the exemption from tax under section 4253(h) of the Code applies to the hospital's payment of charges for the communication services, notwithstanding the fact that the hospital charges its patients for the use of its telephone facilities either on a per-day basis or on a per-call basis.
The circumstances in this case are distinguishable from those in Rev. Rul. 66-382. In that revenue ruling, the telephones in the rooms of the patients are provided as part of the overall telephone service furnished the hospital for use in conducting its business and the telephones are available and charged for by the telephone company whether or not the rooms are occupied. Thus, they are regarded as being for the sole use of the hospital in caring for and meeting the needs of its patients and are analogous to other operating costs for which a hospital charges patients.
In this case, the medical offices operated by the doctors on the hospital's premises are not part of the hospital's business and thus the communication services and facilities that are used exclusively by the doctors are not furnished for the use of the hospital and would not have otherwise been provided, but for the needs of the doctors. Further, the communication services and facilities shared jointly by the hospital and the doctors are greater than would normally be necessary to meet the needs of the hospital and, therefore, are not for the sole benefit of the hospital in conducting its business.
HOLDING
The exemption provided by section 4253(h) of the Code does not apply to amounts paid for the taxable communication services and facilities furnished that are used exclusively by the doctors or that are shared jointly by the hospital and the doctors. However, separate amounts paid by the hospital for the communication services and facilities that are furnished for the exclusive use of the hospital in conducting its business come within the exemption.
See Rev. Rul. 78-109, 1978-1 C.B. 360, which holds that the exemption from the communications tax for nonprofit hospitals applies to communication services furnished exclusively to a nonprofit hospital for which there is a separate charge, but does not apply to services that are used jointly by the hospital and a for-profit clinic or to services used solely by the clinic.
EFFECT ON OTHER DOCUMENTS
Rev. Rul. 66-382 is distinguished.
Rev. Rul. 80-30, 1980-1 C.B. 250, 1980-5 I.R.B. 7.