[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[H.R. 483 Introduced in House (IH)]

103d CONGRESS
  1st Session
                                H. R. 483

 To amend the Internal Revenue Code of 1986 to impose an excise tax on 
 certain sales of assets of medical service organizations to managers, 
                       etc. of such organization.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            January 6, 1993

  Mr. Stark introduced the following bill; which was referred to the 
                      Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
 To amend the Internal Revenue Code of 1986 to impose an excise tax on 
 certain sales of assets of medical service organizations to managers, 
                       etc. of such organization.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. EXCISE TAX ON SELF-DEALING IN CERTAIN ASSETS OF TAX-EXEMPT 
              MEDICAL SERVICE ORGANIZATIONS.

    (a) In General.--Chapter 42 of the Internal Revenue Code of 1986 
(relating to private foundations and certain other tax-exempt 
organizations) is amended by redesignating subchapter D as subchapter E 
and by inserting after subchapter C the following new subchapter:

 ``Subchapter D--Self-Dealing in Certain Assets of Tax-Exempt Medical 
                         Service Organizations

                              ``Sec. 4958. Tax on self-dealing in 
                                        certain assets of tax-exempt 
                                        medical service organizations.

``SEC. 4958. TAX ON SELF-DEALING IN CERTAIN ASSETS OF TAX-EXEMPT 
              MEDICAL SERVICE ORGANIZATIONS.

    ``(a) Initial Taxes.--
            ``(1) On self-dealer.--There is hereby imposed a tax on 
        each self-dealing asset transaction between a disqualified 
        person and a medical service organization. The rate of tax 
        shall be equal to 5 percent of the amount involved with respect 
        to such transaction for each year (or part thereof) in the 
        taxable period. The tax imposed by this paragraph shall be paid 
        by any disqualified person (other than an organization manager 
        acting only as such) who participates in such transaction.
            ``(2) On organization manager.--In any case in which a tax 
        is imposed by paragraph (1), there is hereby imposed on the 
        participation of any organization manager in any self-dealing 
        asset transaction between a disqualified person and a medical 
        service organization, knowing that it is such a transaction, a 
        tax equal to 2.5 percent of the amount involved with respect to 
        such transaction for each year (or part thereof) in the taxable 
        period, unless such participation is not willful and is due to 
        reasonable cause. The tax imposed by this paragraph shall be 
        paid by any organization manager who participated in the self-
        dealing asset transaction.
    ``(b) Additional Taxes.--
            ``(1) On self-dealer.--In any case in which an initial tax 
        is imposed by subsection (a)(1) on a self-dealing asset 
        transaction by a disqualified person with a medical service 
        organization and such transaction is not corrected within the 
        taxable period, there is hereby imposed a tax equal to 200 
        percent of the amount involved. The tax imposed by this 
        paragraph shall be paid by any disqualified person (other than 
        an organization manager acting only as such) who participated 
        in such transaction.
            ``(2) On organization manager.--In any case in which an 
        additional tax is imposed by paragraph (1), if an organization 
        manager refused to agree to part or all of the correction, 
        there is hereby imposed a tax equal to 50 percent of the amount 
        involved. The tax imposed by this paragraph shall be paid by 
        any organization manager who refused to agree to part or all of 
        the correction.
    ``(c) Joint and Several Liability.--If more than one person is 
liable under any paragraph of subsection (a) or (b) with respect to any 
one self-dealing asset transaction, all such persons shall be jointly 
and severally liable under such paragraph with respect to such 
transaction.
    ``(d) Self-Dealing Asset Transaction.--For purposes of this 
section--
            ``(1) In general.--The term `self-dealing asset 
        transaction' means any direct or indirect sale or exchange, or 
        leasing, of any medical asset to any disqualified person.
            ``(2) Exception.--Such term shall not include any 
        transaction if it is established to the satisfaction of the 
        Secretary that--
                    ``(A) such transaction is at arm's length and for 
                fair market value, and
                    ``(B) such transaction does not involve (and is not 
                part of a series of transactions involving) the 
                disposition of any medical activity (or of a 
                substantial portion of any medical activity).
            ``(3) Controlled entities.--In the case of any 50-percent 
        controlled entity (other than an entity exempt from tax under 
        section 501(a)) of a medical service organization--
                    ``(A) if there is a disposition of any medical 
                asset by such entity, such organization shall be 
                treated as disposing of such asset to the extent of 
                such organization's proportionate share of such entity, 
                and
                    ``(B) any disposition of an interest referred to in 
                subsection (f)(2) in such entity shall be treated as a 
                disposition of such organization's proportionate share 
                of the medical assets of such entity.
        For purposes of the preceding sentence, the term `proportionate 
        share' means the percentage of the interests referred to in 
        subsection (f)(2) in such entity which are held by such 
        organization.
    ``(e) Disqualified Person; Organization Manager.--For purposes of 
this section--
            ``(1) Disqualified person.--The term `disqualified person' 
        means--
                    ``(A) any organization manager,
                    ``(B) any person who performs substantial 
                professional medical services for the medical service 
                organization pursuant to an employment or other 
                contractual relationship with such organization,
                    ``(C) any member of a family (as defined in section 
                4946(d)) of any individual described in subparagraph 
                (A) or (B), and
                    ``(D) any 35-percent controlled entity of persons 
                described in subparagraph (A), (B), or (C).
            ``(2) Organization manager.--The term `organization 
        manager' means, with respect to a medical service organization, 
        any officer, director, or trustee of such organization (or any 
        individual having powers or responsibilities similar to those 
        of officers, directors, or trustees of the organization).
    ``(f) Medical Service Organization; Medical Activity; Medical 
Asset.--For purposes of this section--
            ``(1) Medical service organization.--The term `medical 
        service organization' means any organization which (without 
        regard to any self-dealing asset transaction) would be 
        described in section 501(c)(3) and exempt from tax under 
        section 501(a) if such organization (either directly or through 
        any 50-percent controlled entity of such organization) engages 
        in a medical activity.
            ``(2) Medical activity.--The term `medical activity' means 
        any activity of providing medical or hospital care or medical 
        education or medical research.
            ``(3) Medical asset.--The term `medical asset' means any 
        tangible or intangible asset used in a medical activity.
    ``(g) Controlled Entities.--For purposes of this section--
            ``(1) 35-percent controlled entity.--The term `35-percent 
        controlled entity' means--
                    ``(A) a corporation in which persons described in 
                subparagraph (A), (B), or (C) of subsection (e)(1) own 
                more than 35 percent of the combined voting power,
                    ``(B) a partnership in which such persons own more 
                than 35 percent of the profits interest, and
                    ``(C) a trust or estate in which such persons own 
                more than 35 percent of the beneficial interest.
            ``(2) 50-percent controlled entity.--The term `50-percent 
        controlled entity' means any corporation, partnership, or trust 
        in which a medical service organization owns more than 50 
        percent of the combined voting power, profits interest, or 
        beneficial interest, as the case may be.
            ``(3) Constructive ownership rules.--Rules similar to the 
        rules of paragraphs (3) and (4) of section 4946(a) shall apply 
        for purposes of this subsection.
    ``(h) Other Definitions.--For purposes of this section--
            ``(1) Taxable period.--The term `taxable period' means, 
        with respect to any self-dealing asset transaction, the period 
        beginning with the date on which the transaction occurs and 
        ending on the earliest of--
                    ``(A) the date of mailing a notice of deficiency 
                under section 6212 with respect to the tax imposed by 
                subsection (a)(1),
                    ``(B) the date on which the tax imposed by 
                subsection (a)(1) is assessed, or
                    ``(C) the date on which correction of the self-
                dealing asset transaction is corrected.
            ``(2) Amount involved.--The term `amount involved' means, 
        with respect to any self-dealing asset transaction, the amount 
        of money and fair market value of other property transferred by 
        the medical service organization in the transaction (or in the 
        case of a lease, the fair market value of the leased property). 
        For purposes of the preceding sentence--
                    ``(A) in the case of the taxes imposed by 
                subsection (a), fair market value shall be determined 
                as of the date of which the transaction occurs, and
                    ``(B) in the case of the taxes imposed by 
                subsection (b), fair market value shall be the highest 
                fair market value during the taxable period.
            ``(3) Correction.--The terms `correction' and `correct' 
        mean, with respect to any self-dealing asset transaction, 
        undoing the transaction to the extent possible, but in any case 
        place the medical service organization in a financial position 
        not worse than that in which it would be if the disqualified 
        person were dealing under the highest fiduciary standards.''
    (b) Technical and Conforming Amendments.--
            (1) Subsections (a), (b), and (c) of section 4963 of such 
        Code are each amended by inserting ``4958,'' after ``4955,''.
            (2) Subsection (b) of section 4962 of such Code is amended 
        by inserting before the period ``and shall not include the tax 
        imposed by section 4958(a) (relating to initial tax on self-
        dealing asset transactions)''.
            (3) Subsection (e) of section 6213 of such Code is amended 
        by inserting ``4958 (relating to self-dealing in certain assets 
        of tax-exempt medical service organizations),'' before 
        ``4971''.
            (4) The table of subchapters for chapter 42 of such Code is 
        amended by striking the last item and inserting the following:

                              ``Subchapter D. Self-dealing in certain 
                                        assets of tax-exempt medical 
                                        service organizations.
                              ``Subchapter E. Abatement of first and 
                                        second tier taxes in certain 
                                        cases.''
    (c) Effective Date.--The amendments made by this section shall 
apply to transactions occurring after November 26, 1991.

                                 <all>