Redlands (Calif.) Health Systems has appealed a federal tax court decision that the not-for-profit system can't extend its tax-exempt status to an ambulatory surgery center jointly owned by physicians or other private for-profit interests.
Redlands contends the tax court applied the wrong legal standards and the joint venture should be tax exempt because it operates in a charitable manner.
In July, the U.S. Tax Court in Washington said the surgery center didn't qualify for an exemption, because Redlands ceded too much control of the center to for-profit interests (July 26, p. 8).
A group of 30 physicians on staff at the hospital owns 39% of the center, and 61% is owned by a partnership between Redlands and HealthSouth Corp., Birmingham, Ala.
Redlands filed its appeal of the tax court ruling on Sept. 9 with the 9th U.S. Circuit Court of Appeals in San Francisco. The court has yet to schedule oral arguments in the case.