Hospital Central Services Association, a Nonprofit Corporation v. United States

Hospital Central Services Association, a nonprofit Washington Corporation which operated a laundry, paid income taxes for 1974 and, after exhausting its administrative remedies, sued under § 501(c)(3) of the Internal Revenue Code for a refund. The district court held the association to be a tax-exempt charity and granted the refund. The government appeals, contending that § 501(c)(3) does not extend to hospital laundry services like those involved here.

The identical issues were recently before the Third Circuit in HCSC-Laundry v. United States of America, 624 F.2d 428 , (3rd Cir. 1980). There, as here, a group of charitable hospitals had formed a nonprofit corporation in order to effect economies of scale that could not be realized if each hospital were to install and staff its own laundry. There, as here, the laundry services were performed for the tax-exempt hospitals that had created the corporation. There, as here, the district court held that because a charitable hospital could operate its own laundry without impairing its exemption under § 501(c)(3), it should be able to pool its laundry facilities (and its exemptions) with other hospitals and thus confer tax exemption…