Focusing on excess benefits
* The Internal Revenue Service distributed to IRS agents two technical-advice memorandums in recent weeks on excess benefit transactions. One, issued last week, involves a large, unnamed health system that has signed a consulting contract with its former chief executive officer and his wife. Although the healthcare system assessed the fair-market value of the executive's services while he was CEO, it did not update the analysis for a post-employment consulting agreement with him. The IRS makes it clear that "the system must go through the process again and reassess the value of the work performed even if the pay rate remains the same," said healthcare tax attorney Gerald Griffith of Honigman Miller Schwartz and Cohn, Detroit. The other memorandum, distributed late last month, discusses an unidentified charity that accepts donations of used cars in exchange for tax deductions. According to Griffith, the memorandum shows that the IRS is very serious about pursuing excess benefit transaction violations.
Banner sues another state AG
* Banner Health System, Phoenix, last week sued its third state attorney general this year for allegedly illegally interfering in the health system's efforts to divest more than half of its hospitals. The latest target is North Dakota Attorney General Wayne Stenehjem, who contends the proceeds of Banner's sale of a hospital and five nursing homes in the state belong to the public because the facilities benefited from years of tax-exempt status. In a lawsuit filed in U.S. District Court in Fargo, Banner said the state does not have control over the sales. Stenehjem said his office planned to file a suit against Banner. Earlier this year, Banner dropped a lawsuit against New Mexico's attorney general after she agreed not to oppose the system's sale of 47-bed Los Alamos (N.M.) Medical Center. Banner's lawsuit against South Dakota Attorney General Mark Barnett is pending.