426 U.S. 26 (1976), 74-1124, Simon v. Eastern Kentucky Welfare Rights Organization

Docket Nº:No. 74-1124
Citation:426 U.S. 26, 96 S.Ct. 1917, 48 L.Ed.2d 450
Party Name:Simon v. Eastern Kentucky Welfare Rights Organization
Case Date:June 01, 1976
Court:United States Supreme Court

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426 U.S. 26 (1976)

96 S.Ct. 1917, 48 L.Ed.2d 450



Eastern Kentucky Welfare Rights Organization

No. 74-1124

United States Supreme Court

June 1, 1976

Argued December 10, 1975




Respondents in No. 74-1124 (hereinafter respondents), several low income individuals and organizations representing such individuals, brought this class action in District Court on behalf of all persons unable to afford hospital services, against the Secretary of the Treasury and the Commissioner of Internal Revenue. They claimed that Revenue Ruling 69-545, which announced an Internal Revenue Service policy of extending favorable tax treatment under the Internal Revenue Code of 1954 (Code) to hospitals that did not serve indigents to the extent of the hospitals' financial ability, "encouraged" hospitals to deny services to indigents, and was invalid because it was an erroneous interpretation of the Code and because it had been issued in violation of the Administrative Procedure Act (APA). The complaint described instances in which [96 S.Ct. 1919] the individual respondents had been refused treatment, because of their indigency, at hospitals enjoying favorable tax treatment under the policy announced in the challenged Revenue Ruling and alleged to be receiving substantial contributions as a result of that treatment. The District Court overruled the motion to dismiss of petitioners in No. 74-1124 (hereinafter petitioners), which included a challenge to respondents' standing, and, on cross-motions for summary judgment, held Revenue Ruling 69-545 void as contrary to the Code. The Court of Appeals also found standing in respondents, but upheld Revenue Ruling 69-545.

Held: The District Court should have granted petitioners' motion to dismiss because respondents failed to establish their standing to bring this suit. Pp. 37-46.

(a) When a plaintiff's standing is challenged the relevant inquiry is whether, assuming justiciability of the claim, the plaintiff

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has shown an injury to himself that is likely to be redressed by a favorable decision, and unless such a showing is made, a federal court cannot exercise its power consistent with the "case or controversy" limitation of Art. III of the Constitution. Pp. 37-39.

(b) The respondent organizations, which alleged no injury to themselves qua organizations, cannot establish standing simply on the basis that they are dedicated to promoting access of the poor to health services. An organization's abstract concern with a subject that could be affected by an adjudication does not substitute for the concrete injury required by Art. III. Sierra Club v. Morton, 405 U.S. 727. Pp. 39-40.

(c) Allegations that the individual respondents and members of respondent organizations were denied hospital services because of indigency do not establish a case or controversy in this suit, which is not brought against any hospital, but against Treasury officials. The Art. III "case or controversy" limitation requires that a federal court act only to redress injury that fairly can be traced to the challenged action of a defendant, and not solely to some third party. Pp. 40-42.

(d) Though petitioners alleged that the adoption of Revenue Ruling 69-545 "encouraged" hospitals to deny services to indigents, it is purely speculative (1) whether the alleged denials of service are ascribable to petitioners' "encouragement" or resulted from the hospitals' decisions apart from tax considerations, and (2) whether the exercise of the District Court's remedial powers would make such services available to respondents. Respondents' allegation that the hospitals that denied them service receive substantial contributions, without more, does not establish that those hospitals are dependent upon such contributions. It thus appears that respondents relied

on little more than the remote possibility, unsubstantiated by allegations of fact, that their situation might have been better had [petitioners] acted otherwise, and might improve were the [District Court] to afford relief.

Warth v. Seldin, 422 U.S. 490, 507. Consequently, respondents failed to carry their burden of showing that their injury is the consequence of petitioners' action or that prospective relief will remove the harm. Warth v. Seldin, supra; Linda R.S. v. Richard D., 410 U.S. 614, followed. Pp. 42-46.

165 U.S.App.D.C. 239, 506 F.2d 1278, vacated and remanded.

POWELL, J., delivered the opinion of the Court, in which BURGER, C.J., and STEWART, WHITE, BLACKMUN, and REHNQUIST, JJ.,

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joined. STEWART, J., filed a concurring statement, post, p. 46. BRENNAN, J., filed an opinion concurring in the judgment, in which MARSHALL, J., joined, post, p. 46. STEVENS, J., took no part in the consideration or decision of the cases.

POWELL, J., lead opinion

MR. JUSTICE POWELL delivered the opinion of the Court.

Several indigents and organizations composed of indigents brought this suit against the Secretary of the Treasury and the Commissioner of Internal Revenue. They asserted [96 S.Ct. 1920] that the Internal Revenue Service (IRS) violated the Internal Revenue Code of 1954 (Code) and the Administrative Procedure Act (APA) by issuing a Revenue Ruling allowing favorable tax treatment to a nonprofit hospital that offered only emergency room services to indigents. We conclude that these plaintiff lack standing to bring this suit.


The Code, in its original version and by subsequent amendment, accords advantageous treatment to several types of nonprofit corporations, including exemption of

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their income from taxation and deductibility by benefactors of the amounts of their donations. Nonprofit hospitals have never received these benefits as a favored general category, but an individual nonprofit hospital has been able to claim them if it could qualify as a corporation "organized and operated exclusively for . . . charitable . . . purposes" within the meaning of § 501(c)(3) of the Code, 26 U.S.C. § 501(c)(3).1 As the Code does not define the term "charitable," the status of each nonprofit hospital is determined on a case-by-case basis by the IRS.

In recognition of the need of nonprofit hospitals for some guidelines on qualification as "charitable" corporations, the IRS in 1956 issued Revenue Ruling 56-185.2 This Ruling established the position of the IRS to be

that the term "charitable" in its legal sense and as it is used in section 501(c)(3) of the Code contemplates an implied public trust constituted for some public benefit. . . .

In addition, the Ruling set out four "general requirements" that a hospital had to meet, "among other

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things," to be considered a charitable organization by the IRS. Only one of those requirements is important here, and it reads as follows:

It must be operated to the extent of its financial ability for those not able to pay for the services rendered and not exclusively for those who are able and expected to pay. It is normal for hospitals to charge those able to pay for services rendered in order to meet the operating expenses of the institution, without denying medical care or treatment to others unable to pay. The fact that its charity record is relatively low is not conclusive that a hospital is not operated for charitable purposes to the full extent of its financial ability. It may furnish services at reduced rates which are below cost, and thereby render charity in that manner. It may also set aside earnings which it uses for improvements and additions to hospital facilities. It must not, however, refuse to accept patients in need of hospital care who cannot pay for such services. Furthermore, if it operates with the expectation of full payment from all those to whom it renders services, it does not dispense charity merely because some of its patients fail to pay for the services rendered.

Revenue Ruling 56-185 remained the announced policy with respect to a nonprofit hospital's "charitable" status for 13 years, until the IRS issued Revenue Ruling 69-545 on November 3, 1969.3 This new Ruling described two unidentified hospitals, referred [96 S.Ct. 1921] to simply as Hospital A and Hospital B, which differed significantly in both

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corporate structure and operating policies.4 The description of Hospital A included the following paragraph:

The hospital operates a full-time emergency room, and no one requiring emergency care is denied treatment. The hospital otherwise ordinarily limits admissions to those who can pay the cost of their hospitalization, either themselves, or through private health insurance, or with the aid of public programs such as Medicare. Patients who cannot meet the financial requirements for admission are ordinarily referred to another hospital in the community that does serve indigent patients.

Despite Hospital A's apparent failure to operate "to the extent of its financial ability for those not able to pay for the services rendered," as required by Revenue Ruling 56-185, the IRS in this new Ruling held Hospital A exempt as a charitable corporation under § 501(C)(3).5 Noting that Revenue Ruling 56-15 had set out requirements

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for serving indigents "more restrictive" than those applied to Hospital A, the IRS stated that

Revenue Ruling 56-185 is hereby modified to remove therefrom the requirements relating to caring for patients without charge or at rates below cost.


Issuance of Revenue Ruling 69-545 led to the filing of this suit in July, 1971, in the United States District Court for the District of Columbia, by a group of organizations and individuals. The plaintiff organizations described themselves as an unincorporated association6 and several nonprofit corporations7 each of which included low-income persons among its members and represented the interests of all such persons in obtaining hospital...

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