The Law of Tax-Exempt Healthcare Organizations, 3rd Edition

CHAPTER TWENTY-FOUR

Tax Treatment of Unrelated Business Activities

• § 24.10 Pharmacy, Medical Supplies, and Services Sales
• § 24.12 Medical Research
• § 24.17 Other Exceptions to Unrelated Income Taxation
  • (b) Exceptions for Income
    • (ii) Rules Concerning Rent
• § 24.19 Revenue from Controlled Organizations
  • (a) General Rules
  • (b) Temporary Rule
• § 24.20 Unrelated Debt-Financed Income
  • (b) Acquisition Indebtedness

§ 24.10 PHARMACY, MEDICAL SUPPLIES, AND SERVICES SALES

p. 565. Insert as third complete paragraph:

The IRS ruled that the operation by a public charity of a national Internet-based specialty pharmacy that sells prescription pharmaceuticals, durable medical equipment, and nonprescription vitamins and other supplements, all pertaining to a disease, is a substantially related business.^248.1 Commercial pharmacies do not stock these pharmaceuticals and supplements because they must be refrigerated and delivered in cold packages; thus, they are too expensive to purchase and hold in inventory. This organization also provides free medication to certain individuals, offers financial assistance to individuals with this disease, and sponsors an annual conference on ways to treat and cure the disease. By contrast, the IRS ruled that a nonprofit organization that provides paratransit services to healthcare institutions does not qualify for tax exemption as a charitable entity because this type of transportation activity is not inherently charitable and because the fees charged for these ...