Favorable Ruling: Taxability of HMOs Under New York City General Corporation Tax

A New York City Tax Appeals Tribunal Administrative Law Judge (ALJ) recently ruled in favor of Aetna, Inc. (Aetna) on whether a health maintenance organization (HMO) was "doing an insurance business" in New York State, thereby exempting it from the New York City General Corporation Tax (GCT). In New York City, a corporation whose business in New York is an insurance business is not subject to the GCT. In Matter of Aetna, Inc., TAT(H) 12-3(GC), TAT(H) 12-4(GC) (N.Y.C. Tax App. Trib., ALJ Div., July 22, 2014), the ALJ determined that the HMO at issue was "doing an insurance business" in New York because insurance risk was present in contracts covering the members of the HMO, the members of the HMO spread the risk of loss due to unforeseen medical expenses to the HMO and the HMO was subject to significant regulation under New York State Insurance Law and Public Health Law.

Aetna Health, Inc. (Health), a subsidiary of Aetna, was issued a Health Maintenance Organization Certificate of Authority by the New York State Department of Health, Division of Managed Care...