The Law of Tax-Exempt Healthcare Organizations 2017 Cumulative Supplement, Fourth Edition + website

CHAPTER THIRTYTax‐Exempt Bond Financing

1. § 30.3 Disqualification of Tax-Exempt Bonds
   1. *(d) Avoiding Management Contract Problems

§ 30.3 DISQUALIFICATION OF TAX‐EXEMPT BONDS

*(d) Avoiding Management Contract Problems

p. 830. Insert following the last paragraph of the section:

On October 24, 2014, the IRS issued a new notice that modified the safe harbors established in Revenue Procedure 97‐13 by adding a new five‐year contract safe harbor and expanding the scope of permitted productivity awards to include quality‐based incentive payments. The notice also offered interim guidance for determining whether private business use includes the use of tax‐exempt, bond‐financed facilities by a charitable organization or a state or local government entity in the Medicare Shared Savings Program (MSSP) through an accountable care organization (ACO).^76.1

The notice identified the challenge facing exempt organizations participating in the MSSP, noting that organizations using a facility financed with tax‐exempt bonds must structure their participation in an ACO so that it neither jeopardizes their charitable tax‐exempt status nor causes them to be engaged in an unrelated trade or business. The IRS established the position that the participation of a qualified user in the MSSP through an ACO will not result in private business use of a facility financed with tax‐exempt bonds if all of the following conditions are met:

• The terms of the qualified user's participation in the MSSP (including ...