How intermediate sanctions change the dynamics of healthcare transactions

The Taxpayer Bill of Rights 2 contains significant reforms relating to tax-exempt organizations, most notably the establishment of intermediate tax sanctions. These changes, which clarify tax rules applicable to tax-exempt HMOs, hospitals, and integrated delivery systems, are of particular interest to entities that are or will be involved in joint ventures or other business alliances with physicians and other for-profit partners, the officers and directors of such entities, and the physicians and for-profit partners in the ventures. For the first time, the legislation imposes monetary penalties on those engaging in transactions with tax-exempt healthcare providers if impermissible private inurement is involved.