A three-judge panel of the 5th U.S. Circuit Court of Appeal, New Orleans, has vacated a lower court decision that reinstated the tax-exempt status of six-hospital St. David's Health Care System, Austin, Texas. The system is a joint venture between for-profit HCA and not-for-profit St. David's. Last year U.S. District Judge James Nowlin in Austin ordered the Internal Revenue Service to reinstate the system's tax-exempt status, which the IRS revoked in 2000. On appeal from the IRS, the 5th Circuit said the lower court erred by granting summary judgment to St. David's because the case raised "genuine issues of material fact." It said, "If more than an insubstantial amount of the partnership's activities further noncharitable interests, then St. David's can no longer be deemed to operate exclusively for charitable purposes." The panel sent the case back to the lower court for trial. -- by Mark Taylor
Panel sends St. David's tax case back for trial
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