N.Y. Comp. Codes R. & Regs. tit. 20 § 529.6

Current through Register Vol. 46, No. 45, November 2, 2024

Section 529.6 - Health maintenance organizations

Tax Law, § 1116(a)(7)

(a)General.

(1) Not-for-profit corporations operating as health maintenance organizations subject to the provisions of article 44 of the New York State Public Health Law (hereinafter referred to as HMO's) meeting the qualifications of subdivision (b) of this section are exempt from the sale and use tax on purchases of tangible personal property, services, food and drink, hotel occupancy or admissions and dues. (For application of tax to sales by HMO's, see subdivision [h] of this section.)

(2) To confirm its exempt status, an HMO must complete and file an application meeting all the requirements set forth in subdivision (e) of this section and prove that it meets the statutory requirements.

(3) HMO's qualifying for exemption will be issued an exempt organization certificate as set forth in subdivision (e) of this section.

(b)Qualifications.

(1) To qualify for exemption, an HMO must:

(i) be formally organized as a not-for-profit corporation with articles of incorporation defining its purposes and activities;

(ii) have bylaws or other codes of rules or regulations describing how it will function and select the officers empowered to act for it; and

(iii) have actually selected, elected or appointed such persons authorized to act on its behalf.

(2) In addition to the formal organizational requirement, an HMO must prove that it is both organized and operated exclusively as a health maintenance organization under article 44 of the New York State Public Health Law and not for pecuniary profit or financial gain. If the corporation fails to meet either the organizational test or the operational test set forth in subdivisions (c) and (d) of this section, it is not exempt.

(c) Organizational test.

(1) A not-for-profit corporation acting as a health maintenance organization will satisfy the organizational test only if its articles of incorporation:

(i) contain a provision prohibiting the distribution of its income and assets, in whole or part, to the benefit of any director, officer, member or other private person;

(ii) limit the purposes of such corporation to the provision of comprehensive health services to an enrolled population for a basic advance or periodic charge; and

(iii) do not expressly empower the corporation to participate, other than as an insubstantial part of its activities, in activities which themselves are not in furtherance of such purposes.

(2) However, the not-for-profit corporation may:

(i) pay reasonable compensation for services actually rendered; and

(ii) make reimbursements for expenses reasonably and necessarily incurred in carrying out the purposes of a health maintenance organization.

(d)Operational test.

(1) Activities.

A not-fot-profit corporation will be regarded as operated exclusively as a health maintenance organization only if almost all of its activities accomplish the purpose of providing comprehensive health services to an enrolled population for a basic advance or periodic charge.

(2) Certificate of authority.

A not-for-profit corporation will not be considered to be operating exclusively as a health maintenance organization unless in accordance with the Public Health Law it has received a certificate of authority from the New York State Department of Health.

(3) Noninurement requirement.

An HMO is not exempt from sales tax if any part of its net earnings, income, or assets inure in whole or part to the benefit of any director, officer, member or other private person, except that the corporation may pay reasonable compensation for services actually rendered and make reimbursements for expenses reasonably and necessarily incurred in carrying out the purpose of a health maintenance organization.

(e)Applications for exempt status.

(1) To establish its status as an organization exempt from the sales and use tax, an HMO must submit to the Taxpayer Assistance Bureau, W.A. Harriman Campus, Albany, NY 12227, an application for the exemption, stating on the application form the basis for its claimed exemption from the tax, as prescribed by the Department of Taxation and Finance.

(2) The application must be signed by a responsible officer of the corporation.

(3) The application will not be considered complete unless the following documents, which will be retained as part of the application for the exemption, are submitted:

(i) a copy of the articles of incorporation, with any amendments thereto, and filing receipt(s) from an appropriate governmental entity or entities;

(ii) a copy of the bylaws or other similar code of regulations with a copy of any amendments;

(iii) a statement of activities which fully describe the operations of the health maintenance organization, including descriptions of the geographic area to be served, enrollment policy, services provided to subscribers, location of its facilities, type and number of health care personnel employed at the facilities, and a listing of the name, address and service(s) of all providers of health services with whom the health maintenance organization has contracted;

(iv) a copy of the certificate of authority to operate a health maintenance organization issued to the HMO by the New York State Department of Health;

(v) a statement of receipts and expenditures (which should clearly reflect the nature and amount of the receipts, and the purpose and amount of the expenditures) for the most recent fiscal year of operation, or for the period which the corporation has been in existence, if less than a year; and

(vi) a statement of assets and liabilities as of the end of the most recent fiscal year of operation, or as of the date of the filing of the application, if the organization was in existence for less than a year.

(4) In addition to the information specifically called for by this section, the Tax Department may require additional information which it deems necessary for a proper determination of whether the corporation is exempt under section 1116(a)(7) of the Tax Law and may prescribe the form in which the proof of such entitlement to exemption is to be furnished.

(5) The application, of which all supporting documents are a part, must contain or be verified by written declaration that it is understood that any willfully false representation made therein may be subject to the penalties prescribed by section 1817(b) of the Tax Law and section 210.45 of the Penal Law.

(6) Upon the approval of the application by the taxpayer assistance bureau, the bureau will issue to the applicant a numbered exempt organization certificate.

Cross-reference:

For applicable general regulations, including denials, see section 529.1(j) of this Part.

(f)Amendments and revocations.

(1) The exempt organization certificate must be returned to the Sales Tax Exempt Organization Section, Taxpayer Assistance Bureau, W.A. Harriman Campus, Albany, NY 12227, if the HMO changes its status as a not-for-profit corporation, or if its certificate of authority to operate as a health maintenance organization is revoked or annulled by the New York State Department of Health.

(2) The taxpayer assistance bureau must be notified if the HMO changes its purposes or activities, or its certificate of authority to operate as a health maintenance organization is limited by the New York State Department of Health. Upon receipt of the applicable amended organizing documents or statement of activities, a reappraisal of the HMO's exempt status will be made by the department.

(3) When an HMO changes its structural form (e.g., one not-for-profit corporation consolidating or merging with another not-for-profit corporation), it must submit an application and supporting documents for an exempt organization certificate in order to establish the new entity's status for sales tax exemption.

(4) An exempt organization certificate may be revoked if there is misuse of the exemption granted, or if it is discovered that the HMO's application contained misleading or deceptive information, or if the HMO fails to notify the taxpayer assistance bureau as provided by this subdivision of any change in its purposes, activities, organizational structure or of the revocation, limitation or annulment of its certificate of authority to operate as a health maintenance organization. Where the Department of Taxation and Finance determines it to be appropriate, such as circumstances evidencing the intentional misuse and/or other similar misuse of the exemption granted the revocation may be effective retroactively to the date of misuse.

Cross-reference:

For misuse and revocation, see section 529.1(j) of this Part.

(g)Sales to HMO's.

(1) Any sale or amusement charge to or any use or occupancy by an HMO to which an exempt organization certificate has been issued is not subject to the sales and use tax.

(2) To exercise its right to exemption, the HMO must be the direct purchaser, occupant or patron of record. It must also be the direct payer of record and furnish its vendors with a properly completed exempt organization certification. Direct purchaser, occupant or patron as used in this paragraph, includes any agent or employee authorized by the HMO to act on its behalf when making purchases, provided the corporation and its agent or employee are both identified on any bill or invoice. An HMO is the direct payer of record where direct payment is made by the corporation or from the corporation's funds directly to the vendor.

(3) An exempt organization certification is deemed to be properly completed when it contains the:

(i) name and address of the vendor;

(ii) name and address of the HMO;

(iii) number assigned to the exempt organization certificate;

(iv) signature of a responsible officer of the exempt HMO; and

(v) date the certification was executed.

(4) Sales to any member, officer, or employee of an exempt HMO are subject to the sales and use tax when the sales are for the personal use of the purchaser rather than the corporation.

(h)Sales by HMO's.

Sales of tangible personal property, services and food and drink by HMO's exempt under section 1116(a)(7) of article 28 of the Tax Law are not subject to the sales and use tax.

Cross-reference:

For application of tax on admissions, see section 527.10 of this Title.

N.Y. Comp. Codes R. & Regs. Tit. 20 § 529.6