Memorial Hermann Faces Court Skepticism in Tax Status Appeal

Memorial Hermann Accountable Care Organization got a chilly reception in the Fifth Circuit as one judge questioned why it should qualify for a tax exemption as a social welfare group, despite the IRS’s assertion that it operates to benefit commercial insurers.

MHACO said the IRS was wrong to deny its tax-exempt status because any benefits its services provide to commercial insurers are incidental, and its primary purpose is to avoid duplicate services and lower medical costs for individuals.

But lowering the overall cost of health care isn’t itself evidence of a public benefit, Judge Catharina Haynes of the US Court ...