CHAPTER ONE Tax‐Exempt Healthcare Organizations: An Overview

§ 1.1 CONSTITUTIONAL LAW PERSPECTIVE

       *p. 6, note 14. Delete 132 S. Ct. 2566 and insert 567 U.S. 519.

       *p. 6. Insert following first paragraph, before heading:

The penalty tax underlying the individual health insurance mandate (also known as the shared‐responsibility payment) was, however, reduced to zero, effective January 1, 2029. Thereafter, a federal district court held that the Patient Protection and Affordable Care Act is unconstitutional, on the ground that the individual mandate is no longer constitutional, in that its justification can no longer rest on Congress's power to tax, and that the mandate is inseverable from the Act's remaining provisions.^14.1 This court, observing that the mandate “no longer contains an exaction,” held that “[s]o long as the shared responsibility payment is zero, the saving construction articulated in NFIB is inapplicable and the individual mandate cannot be upheld under Congress's tax power.”^14.2 The court sifted through provisions of the Act, writings of Supreme Court justices in NFIB, and the legislation repealing the mandate to conclude that the mandate is “inseverable from the ACA,” being essential to the ACA's architecture.”^14.3 Congress, it wrote, “intended [the mandate] to place the Act's myriad parts in perfect tension”; “without it,” the “architectural design fails.”^14.4 “To find otherwise,” the court continued, “would be to introduce an entirely new regulatory scheme never intended by Congress or signed by the President.”^14.5 Thus, the court held that because the individual mandate, being so “interwoven” with the Act's “major” and “minor” provisions, is unconstitutional, “none [of the Act's provisions] can stand.”^14.6

This decision finding the individual mandate unconstitutional was affirmed, with the appellate court writing that “[n]ow that the shared responsibility payment amount is set at zero, the provision's saving construction is no longer available.”^14.7 The court of appeals, however, concluded that the severability analysis in the district court opinion is incomplete, directing the lower court to “employ a finer‐toothed comb on remand and conduct a more searching inquiry into which provisions of the ACA Congress intended to be inseverable from the individual mandate.”^14.8 The appellate court wrote that the district court opinion “does not do the necessary legwork of parsing through the over 900 pages of the post‐2017 ACA, explaining how particular segments are inextricably linked to the individual mandate.”^14.9 This court stated that it does “not hold forth on just how fine‐toothed that comb should be—the district court may use its best judgment to determine how best to break the ACA down into constituent groupings, segments, or provisions to be analyzed.”^14.10 Before the district court could act on remand, however, the Supreme Court assumed jurisdiction over the case.^14.11 The Fifth Circuit laid out the options for the Court: it may be that all of the Affordable Care Act is severable from the individual mandate, some of the Act is severable from the mandate and some is not, or none of the Act is severable from the mandate.^14.12

      Oral arguments in this case were heard by the Court on November 10, 2020.

§ 1.2 DEFINING TAX‐EXEMPT ORGANIZATIONS

       p. 9. Insert as second paragraph:

The U.S. Supreme Court, reflecting these principles, wrote that a “nonprofit entity is ordinarily understood to differ from a for‐profit corporation principally because it ‘is barred from distributing its net earnings, if any, to individuals who exercise control over it, such as members, officers, directors or trustees.’”^23.1 The Court has discussed the concept of