Home Health & Hospice Week

Government must pay HHAs' attorneys' fees, costs in unprecedented award.

Not-for-profit providers should take note of this recent home health agency victory against the U.S. Internal Revenue Service.

Background: The recent decision concludes a tax dispute that came about when Sta-Home Health Agency converted from tax-exempt status to for-profit status in 1995. The IRS and the agency owners, the Caracci family, disagreed over whether the family had received any gain in the conversion. In 1999, the IRS issued $250 million in deficiency notices to the family.

In July 2006, the U.S. Court of Appeals for the Fifth Circuit reversed a ruling of the U.S. Tax Court, removing a $69.7 million tax bill on Sta-Home and its executives (Decision No. 02-60192) (see Eli's HCW, Vol. XV, No. 26).

Update: This month the news got even better: Sta-Home has received reimbursement of attorney fees and costs from the IRS in the amount of nearly $1.1 million, attorney Tom Kirkland of Ridgeland, MS-based Copeland Cook Taylor & Bush tells Eli.

"The award of attorney fees is a complete vindication of Sta-Home's conversion to for-profit status," says Vincent Caracci, Sta-Home president, in a prepared statement.

The amount and circumstances of the award are unprecedented, notes Copeland attorney Ted Sanderson, formerly a senior attorney in the IRS National Office.

Sta-Home provides home health services to thousands of patients in 46 counties throughout central and southwest Mississippi and the Mississippi Delta.