Organ-recovery charter flights qualify for medical-service tax exemption

Plain-English summary

A federally designated organ procurement organization chartered aircraft on short notice to carry transplant teams to donor hospitals and return recovered organs to transplant centers. The flights also returned teams and unused supplies and repositioned aircraft for the next emergency, and the aircraft carried specialized organ-transport equipment. The IRS concluded that all of these flight segments were equipped for and exclusively dedicated to acute care emergency medical services. Amounts paid for the flights therefore were exempt from the air transportation taxes on persons and property under IRC § 4261(g).

Ruling snapshot

• Question: Were the organ-recovery and related return charter flights exempt emergency medical air transportation?
• Outcome: Approved, no tax applied under IRC §§ 4261 or 4271.
• Key authorities: IRC §§ 4261(g), 4262, 4271, 4272.

Full text (IRS public release)

Internal Revenue Service                                      Department of the Treasury
                                                              Washington, DC 20224

Number: 201638002                                             Third Party Communication: None
Release Date: 9/16/2016                                       Date of Communication: Not Applicable
Index Number: 4261.00-00
                                                              Person To Contact:
-----------------------------                                 ---------------------, ID No. -----------------
-----------------------------------                           Telephone Number:
-------------------------------                               --------------------
------------------------------------------                    Refer Reply To:
----------------------------                                  CC:PSI:B07
                                                              PLR-100740-16
                                                              Date: June 7, 2016




Legend

X                 =- ---------------------------------------------------------

Region            = ------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------

Network           = ---------------------------------------------------


Dear ----- ---------------:

      This letter responds to a letter dated December 21, 2015, requesting a ruling
under § 4261 of the Internal Revenue Code.

        The facts submitted state that X is a federally designated organ procurement
organization (OPO) under 42 U.S.C. 273 and a § 501(c)(3) organization. X organizes
the recovery, preservation, transportation and distribution of human organs and tissues
for transplantation in Region. X works with numerous hospitals and transplant centers
to coordinate organ transplants.

        X responds to notifications from acute care hospitals in Region of recent or
imminent deaths. Following this notification, X screens the potential donor and may
send staff to the hospital to make a determination of the suitability of the donor's organs
for transplant. When a potential donor is identified, X obtains the appropriate consent
and takes responsibility for maintaining the donor body until the organs have been
removed for transplant.

       After X has made a determination that an organ is suitable for transplantation,
the organ is matched with an appropriate recipient though a system maintained by
Network. The donated organs may be matched with a recipient inside or outside of
Region.
PLR-100740-16                                2


       If an organ screened by X is matched with a recipient outside of Region, the
OPO from the recipient's region will generally arrange to send a transplant team to the
hospital where the donor is located to remove the organ and return it to the transplant
center in its region for the recipient's transplant surgery. If an organ screened by X is
matched with a recipient within Region, or if an organ screened by another OPO is
matched with a recipient within Region, X will arrange for a transplant team to travel to
recover the organ and transport it to the transplant center within Region.

       X assembles the transplant team and arranges for them to travel to the donor
hospital to recover the organ. Once the organ has been recovered, it is preserved,
packaged and transported with the transplant team to a transplant center in Region
where the transplant surgery immediately commences. In most cases, the transplant
team that recovers the organ includes the surgeon or surgeons who will perform the
transplant surgery. X staff also travels with the transplant team to assist with the
recovery, preservation, packaging and transportation of the organ.

         Air travel is usually required to recover an organ and transport it to a transplant
center. Flights must take place on very short notice at any time day or night, and are,
therefore, unscheduled. The success of the surgery is dependent, in part, upon the
speed at which the organ can be recovered and transported to the transplant site. To
facilitate this process, X frequently charters fixed-wing aircraft having a maximum
certificated takeoff weight in excess of 6,000 pounds from a charter operator. The
charter operator either provides the flights directly or through a subcharter arrangement.
The flights are solely used to (i) transport the transplant team to the donor hospital (ii)
transport the transplant team, along with the recovered organ, to a transplant center, (iii)
return the transplant team and any unused supplies back to their point of origin if
different from the transplant center, and (iv) return the aircraft to its home base in order
to reposition it for the next emergency. The aircraft is equipped with the medical
equipment necessary to transport the organ to the transplant site, such as specialized
ice storage containers. In some instances, the flights may also be equipped with an
“organ pump” in order to help maintain the function of the organ prior to transplantation.

       X requests a ruling that its charter flight segments transporting the transplant
team to organ recovery sites, transporting the recovered organ(s) and the team to organ
recipient sites, returning the team and any unused supplies back to their point of origin,
and returning the aircraft to its home base in order to reposition it for the next
emergency constitute air transportation described in § 4261(g), and that any amount
paid by X relating to such flights is exempt from the taxes imposed under §§ 4261 and
4271.

       Section 4261(a) imposes a 7.5 percent tax on amounts paid for taxable
transportation of any person. Taxable transportation is defined in § 4262(a)(1) to
include transportation by air that begins and ends in the continental United States.
PLR-100740-16                                 3

        Section 4271(a) imposes a 6.25 percent tax on amounts paid for the taxable
transportation of property. Such tax is imposed only on amounts paid to a person
engaged in the business of transporting property by air for hire. Taxable transportation
is defined in § 4272 as transportation by air which begins and ends in the United States.

         Section 4261(g) provides that no tax shall be imposed under §§ 4261 or 4271 on
any air transportation for the purpose of providing emergency medical services — (1) by
helicopter, or (2) by a fixed-wing aircraft equipped for and exclusively dedicated on that
flight to acute care emergency medical services.

       Based on the facts submitted and representations made, we conclude that X's
charter flight segments that transport the transplant team to organ recovery sites,
transport the recovered organ(s) and the team to a transplant center, return the team
and any unused supplies back to their point of origin, and return the aircraft to its home
base to reposition it for the next emergency are equipped for and exclusively dedicated
to acute care emergency medical services within the meaning of § 4261(g).
Accordingly, no tax will be imposed under §§ 4261 or 4271 on amounts paid for such
charter flight segments.

       Except as specifically set forth above, no opinion is expressed or implied as to
the federal tax consequences of the transaction described above under any other
provision of the Code.

      This ruling is directed only to the taxpayer on whose behalf it was requested.
Section 6110(k)(3) provides that it may not be used or cited as precedent.

        In accordance with the power of attorney on file with this office, copies of this
letter are being sent to X's authorized representatives.

                                       Sincerely,


                                       Stephanie Bland
                                       Stephanie Bland
                                       Branch Chief, Branch 7
                                       Office of the Associate Chief Counsel
                                       (Passthroughs & Special Industries)

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