Cooperative Hospital Service Organizations (§ 501(e))

Definition

A section 501(e) organization is a cooperative owned by two or more tax-exempt or government hospitals that performs shared services for them on a centralized basis, such as data processing, purchasing, billing and collection, laboratory, or personnel services. It must operate on a cooperative basis, paying out all net earnings to its patron hospitals in proportion to the services it performed for them, and Congress treats it as an organization operated exclusively for charitable purposes.^[1]

Federal law

1. Revenue and Expenditure Control Act of 1968, Pub. L. 90-364, § 109, 82 Stat. 269. Added § 501(e) (cooperative hospital service organizations) to the Internal Revenue Code of 1954, treating qualifying organizations as charitable organizations. Official text: govinfo.gov, U.S. Government Publishing Office.