Law Students - Health Law Section

Health Law Section Law Students

Welcome Law Students

Welcome to the Health Law Section's Web page designed specifically for law students. We see this as an evolving project, so we appreciate your feedback with respect to what you find useful or not.

Hot Topics In Health Law

The Price is Right!—Taxpayers prevail in the First Case to Review IRS Imposition of Intermediate Sanctions

Bernadette M. Broccolo, Elizabeth M. Mills, Robert C. Louthian, Amy Hooper Kearbey In the first case arising under the intermediate sanction provisions of Section 4958 of the Internal Revenue Code, Caracci v. Commissioner, 456 F.3d 444 (5th Cir. 2006), the court ruled for the taxpayers, owners of three home health agencies in rural Mississippi. The Caracci family had converted their companies from tax-exempt to nonexempt by selling the businesses' assets. The Caracci's owned both the exempt and nonexempt corporations involved in the transaction. The IRS audited the new companies in 1999, finding an excess benefit and assessed excise taxes, fines, and penalties over $250 million and revoking the exempt status of the old companies.

On appeal, the Tax Court relied on its own valuation of the companies, rather than the valuation analysis of either the IRS or the Caracci's advisors. This reduced the excise taxes to about $69 million. The Fifth Circuit rejected the valuation methods used by the IRS and Tax Court. Instead, the court held that no excess benefit inured to the Caracci family from the conversion process.

Caracci provides guidance on valuation of health care facilities, particularly those that consistently generate losses. The court stressed the importance of several factors in valuation analysis: (1) the selection of valuation methods; (2) the factual assumptions used in valuation; (3) the valuation of intangibles; and (4) the selection of comparables.

In addition, Caracci may indicate that the courts will not force taxpayers to adhere to the requirements of the rebuttable presumption of reasonableness under Section 4958 as a safe harbor. Caracci seems to support the theory that courts will treat businesses favorably if they make good faith efforts to document fair market value using independent, qualified experts and an extensive review process of these expert opinions.

For more information on how Caracci provides guidance on valuation of health care facilities, see Volume 19, Number 1, October 2006 issue of The Health Lawyer.

Jeanne Scott Duke
Texas Wesleyan University School of Law, Class of 2008

The Health Law Section is looking for student contributors!

Would you like to get more involved as a student member? The Health Law Section is looking for student contributors for its monthly “Hot Topics” section of the website. Students will write a short summary or review of a selected article in the most recent issue of The Health Lawyer, to be published on the website. This is a great way to learn more about the practice of health law, hone your legal writing skills, and connect with the Section!

Contact Katie Rose Fink or Jill C. Peña for more information

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Health Law Student Society Information

Are you interested in starting a health law student society at your school? Are you curious about what other health law student societies are doing? Please visit our health law student society link today.