Medical Act chapter three defines general principles about health care organizations, especially sub-chapter two regulates medical Juristic Persons. Section 41 of the Medical Act restricts the purpose of medical Juristic Persons that are organized and operated exclusively for diseases prevention and patient care, but not for profit. Thus, under the Medical Law, medical Juristic Persons must be non profit-making. Nevertheless, Corporation Tax Law defines health care organizations as Profit-making Juristic Persons.
On this conflict, U.S. tax law gives us one possible guideline. Section 501(c)(3) of the Internal Revenue Code provides for tax exemption for medical Juristic Persons that are organized and operated exclusively for religious, charitable, scientific or educational purposes. In order to qualify for 501(c)(3) status, an entity must meet both an organizational test and operational test. The organizational test requires that the organization´s article of incorporation specify that the organization is limited to exempt purposes. The operational test requires that the entity be operated primarily for exempt purposes. It also prohibits the distribution of earnings to private shareholders or individuals.
An exempt hospital may engage in business ventures that are not directly related to the exempt purposes of the organization. Income realized from such unrelated business endeavors is taxable, however.
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