Catholic Health East, Newtown Square, Pa., became the second health system to settle an Internal Revenue Service examination of its bonds, signing an agreement late last week that preserves the bonds' tax-exempt status and doesn't require the Roman Catholic system to pay a fine. The IRS had been reviewing $362.3 million of bonds issued in 1998 to finance a merger. The bonds were part of a $1 billion tax-exempt financing. The closing agreement recognizes that the bonds were for acquisitions rather than refundings, which are subject to more tax restrictions, and that the accounting used in the deal followed IRS requirements, said CHE counsel John Cross III, a partner at the Hawkins, Delafield & Wood law firm in Washington. In June, MedStar Health, Columbia, Md., agreed to pay $500,000 to resolve a 3-year-old audit of its bonds. Five other systems with bonds under IRS review have been working on settlements. -- by Mary Chris Jaklevic
CHE settles IRS review of bond issue
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