Spirit of the Law

Understanding 501(c)(6): Trade Associations and Business Leagues

The common knowledge surrounding nonprofits often revolves around the well-known 501(c)(3) charitable organizations. However, there exists another significant category: the 501(c)(6) organizations, commonly known as trade associations or business leagues. This article aims to shed light on the definition, examples, and process of starting a 501(c)(6).

501(c)(6) Defined:

A 501(c)(6) organization, interchangeably called a trade association or business league, represents the business interests of its members rather than the public at large. The IRS defines a business league as an association of persons with a common business interest, aiming to promote that interest without engaging in regular business for profit. In simpler terms, it is a member organization supporting the common business interests of its members.

Activities and Requirements:

To gain tax-exempt status as a business league, the organization must demonstrate how its activities will improve the business conditions of its members. It should focus on enhancing specific lines of business rather than offering services to individual persons. Examples of such organizations include Chambers of Commerce and trade associations.

Examples of 501(c)(6) Nonprofits:

Chambers of Commerce, operating at local, regional, or national levels, are prime examples of business leagues. These organizations, comprising companies in a common geographic area, aim to enhance the overall business environment for their members. Trade associations, catering to individuals or businesses, work towards improving business prospects through various activities like publications, conventions, and education opportunities.

Professional sports organizations, such as the National Football League (NFL), have also operated as 501(c)(6) business leagues. While the NFL voluntarily relinquished its tax-exempt status in 2015 due to public opinion, other sports leagues like the National Hockey League (NHL), Professional Golfers Association (PGA), and LPGA continue to operate under 501(c)(6).

Starting a 501(c)(6):

Initiating a 501(c)(6) involves incorporation, followed by applying to the IRS for tax-exempt status using Form 1024 or Form 1024-A. Since 2021, filings can only be done through Pay.gov. Foundation Group provides assistance to startup 501(c)(6) organizations in this process.

Tax Treatment of Contributions:

Donations to 501(c)(6) nonprofits are not tax-deductible as charitable contributions. However, members can often deduct dues and other membership-related expenses as ordinary business expenses.

Conclusion:

While many may not be familiar with the term "501(c)(6)," these organizations play a crucial role in our communities. From local Chambers of Commerce to professional sports leagues, they impact lives positively by focusing on the collective business interests of their members. Understanding the diversity within the nonprofit sector is essential for appreciating the valuable contributions of 501(c)(6) organizations.

Ambiguities in CMS Medical Staffing Rule Raise Questions

Published on May 12, 2014, by the Centers for Medicare & Medicaid Services (CMS), the final rule on Medicare Conditions of Participation (CoPs) introduced revisions for Medical Staffs and Governing Boards. While the aspects of medical staff composition and governing body are clear, this article focuses on uncertainties surrounding the unified and integrated medical staff in multihospital systems.

Medical Staff Composition CoPs - Final Rule:

CMS's second revision addresses the composition of medical staff. The 2012 rule allowed various nonphysician practitioners based on state law. The 2014 update expanded the definition to include practitioners like optometrists, chiropractors, clinical psychologists, and dependent practitioners eligible as per the governing body. States must carefully assess which professionals align with their laws.

Governing Body CoPs - Final Rule:

Regarding governing body CoPs, CMS removed the requirement for a medical staff member on the board. Instead, it mandates periodic consultations between the governing body and the medical staff president or designee, focusing on medical care quality. While not expected to significantly alter board composition, it emphasizes ongoing communication on quality care.

Unified and Integrated Medical Staff CoPs - Final Rule:

The 2012 rule initially mandated independent medical staff for each hospital. However, the 2014 CoPs permit a unified and integrated medical staff in multihospital systems. CMS stresses that each hospital must comply with all CoPs despite integration. Requirements include a majority vote of medical staff in each hospital, bylaws for self-governance, and addressing unique circumstances of each hospital.

Discussion on Unified and Integrated Medical Staff CoPs:

The first requirement emphasizes a majority vote by all medical staff members with privileges to opt in or out. However, ambiguity arises regarding what constitutes a majority. There are two interpretations: considering all members versus those entitled to vote under medical staff bylaws. The latter interpretation might require fewer votes for decision-making. Clarification from CMS is deemed necessary.

Factors Influencing Unified and Integrated Medical Staff Decision:

The decision to develop a unified and integrated medical staff in a multihospital system relies on factors like geographic distance, types of services, historical independence, and the ability to obtain physician acceptance. Governing boards play a crucial role in determining the feasibility and advantages of such integration.

Conclusion:

While the CMS final rule provides clarity on certain aspects of medical staffing, ambiguities persist, especially concerning the unified and integrated medical staff. Clear guidance on the majority vote requirement is essential to ensure consistency and understanding across healthcare organizations navigating these regulatory changes.