Friday, June 25, 2010

Vision Service Plan Subsidiaries Lose Bid for 501(c)(4) Status

We previously blogged about Vision Service Plan's quixotic quest to be recognized as tax-exempt under Internal Revenue Code section 501(c)(4), up to and including hiring Ken Starr to petition for certiorari after losing in the U.S. Court of Appeals for the Ninth Circuit.  Still not willing to abandon the fight, six VSP subsidiaries sought to revisit the issue again in a different circuit.  The U.S. District Court for the Southern District of Ohio ruled, however, that these VSP-related entities are collaterally estopped from claiming such recognition based on "their operational model of delivering vision care services to subscribing members" because of their parent's previous loss on this issue.  The Court, did, however, consider whether these VSP entities provided sufficient individual charity and community outreach efforts to support such recognition.  But that consideration was in vain for VSP, as the court found that "the undisputed evidence demonstrates that those efforts are so minimal in relation to plaintiffs' overall operations that plaintiffs cannot be said to be operating 'exclusively for the promotion of social welfare.'"


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