Mr. HUMPHREYS. We thank you for your attention.

The CHAIRMAN. Thank you, Mr. Humphreys, for your statement. We appreciate your coming to the committee.

Are there any questions?

Mr. Byrnes.

Mr. BYRNES. To show my ignorance, what is a camp cover? What does it look like?

Mr. HUMPHREYS. You may have seen pickup trucks going around with aluminum shells attached to the back of them. That is basically what we call a recreational vehicle cover. They have been called tops, caps, many other designations.

Mr. BYRNES. Does this cover bear the excise tax today?

Mr. HUMPHREYS. Yes, sir; at least that is the way the law is being administered.

Mr. BYRNES. But the trailer does not?

Mr. HUMPHREYS. That is right. All other recreational types of vehicles are exempt. We define a recreational vehicle as something on wheels having living quarters. This would not include snow-mobiles, motorcycles, and so forth.

Mr. BYRNES. On page 3 you say certain items are exempt from section 4061, 4062, 4063. What is a slide-in?

Mr. HUMPHREYS. That would be a self-contained living unit which is inserted into the back of a pickup truck. It can actually be used as living quarters without the truck. The items we are talking about do not have a floor, do not have a bottom. They are incomplete shelves attached to the back of trucks and in connection with the back of the trucks they make the are usable as living quarters.

Mr. BYRNES. If it is a unit all by itself that you can live in when disconnected, then it is not subject to the tax?

Mr. HUMPHREYS. That is right.

Mr. BYRNES. Why don't you put a floor in this cover?

Mr. CONABLE. It costs more.

Mr. HUMPHREYS. There are many reasons for that. People have tried to design flexibility into these. These units that are complete, that you mention, have a floor in them, for example, are really basically much larger. They extend considerably higher. The cap we are talking about or recreational vehicle cover does not go any higher than the top of the cab.

Mr. BYRNES. It goes over the top of the cab?

Mr. HUMPHREYS. Yes; for example, hunters will use them for sleeping.

Mr. CONABLE. If we are going to get into problems of definition here and start trying to distinguish, it seems to me you could very easily wind up with something that was primarily commercial in nature or really actually part of the truck, if by some stretch of the imagination, a person could stay overnight in it.

I am very sympathetic to the problem you have described here, and I am wondering why this distinction has not been made before.

Has it been just a matter of our failing to understand the problem, or are there real problems of definition in determining what is a cover and what is something that is primarily a truck part?

Mr. HUMPHREYS. I think the problem has become complicated by the fact that when the original legislation was passed, these recreational vehicle covers were not that common as such. It has been difficult. The problem in the original statute really is the word "primarily.' There seems to be no dispute that these units are designed for recreational use. Most of them have insulation and lights and there is a whole industry that supplies bunks and so forth that you can put in them. They have ventilation and screens on the window that could only be used for recreational purposes.

The difficulty we get into with the Internal Revenue Service and the courts is whether these units are designed primarily for use as living quarters. Our suggestion takes out this word "primarily" and add "for recreational purposes."

Mr. CONABLE. I agree it is an anomaly if we are going to have the cheapest part of the camping equipment subject to tax and not the expensive part.

Thank you for bringing it to our attention.

The CHAIRMAN. Are there any further questions?

If not, we thank you gentlemen very much.

Mr. HUMPHREYS. Copies of the membership list and study are here. The CHAIRMAN. Did you ask for the study to be included in the record?

Mr. HUMPHREYS. Yes, sir.

The CHAIRMAN. How voluminous is it?

Mr. HUMPHREYS. Twenty-five pages.

The CHAIRMAN. Without objection, it will be included at the conclusion of your statement.

The CHAIRMAN. The next witness is Mr. William J. Lehrfeld. Mr. Lehrfeld, if you will identify yourself for the record, we will be glad to recognize you.

STATEMENT OF WILLIAM J. LEHRFELD, COUNSEL, COMMUNITYGROUP HEALTH FOUNDATION, INC., ACCOMPANIED BY DR. EDDIE G. SMITH, DIRECTOR OF HEALTH SERVICE

Mr. LEHRFELD. Mr. Chairman, my name is William Lehrfeld, with the law firm of Arent, Fox, Kintner, Plotkin & Kahn, and we are Counsel to the Community Group Health Foundation, Inc., of Washington, D.C.

On my left is Dr. Eddie G. Smith, Director of Health Service of the foundation.

As with the last witness, we have a problem with the interpretation of the tax on communications services by the Internal Revenue Service.

Section 4251 imposes a tax on the telephone use and 4253 (h) exempts nonprofit hospitals.

The nonprofit hospital exemption refers to the income tax deduction provision of section 170, and section 170 exempts as a hospital any organization, the principal purpose or function of which is the providing of medical or hospital care.

The Community-Group Health Foundation, on April 30, 1969, ap

plied to the Internal Revenue Service for a ruling that it was a nonprofit hospital for purposes of the communications tax.

The Community-Group Health Foundation is a nonprofit organization providing outpatient care in the upper Cardoza area of Washington, D.C. It is funded by the Office of Economic Opportunity for the benefit of approximately 100,000 citizens in the Cardoza area who do not have outpatient facilities readily available to them.

It represents a unique concept in medical care treatment. It focuses on the family as the basis for such treatment. It does not have any facilities for inpatient care.

The Internal Revenue Service advised us in a ruling of July 31, 1970. that the term "hospital" used in the communications tax area only includes those organizations which have inpatient facilities.

This advice was rendered to us notwithstanding that the income tax regulations under section 170 provide an outpatient facility may be regarded as a hospital if its primary purpose is rendering medical

care.

We are simply here to ask the committee to rectify this interpretational problem because we don't see how Community-Group Health Foundation can be a hospital for charitable contribution purposes and not be a hospital for the communications tax exemption.

We don't think the statute allows that type of interpretation, especially because of the identity of the language in both provisions. We would ask that the committee consider this particular problem so that outpatient facilities may be granted the same communications tax exemption presently made available to inpatient facilities. That concludes my oral statement.

(Mr. Lehrfeld's prepared statement follows:)

PREPARED STATEMENT OF WILLIAM J. LEHRFELD, COUNSEL, COMMUNITY-GROUP HEALTH FOUNDATION, INC.

The Community-Group Health Foundation, Inc. requests consideration by the House Ways and Means Committee of its statement on the extension of the federal excise tax on communication services (telephone services) dealing with the exemption from this tax contained in section 4253 (h) of the Internal Revenue Code. The statement contains the following contents, in the order noted: A. Summary of Comments and Recommendations.

B. Purpose and Function of the Community-Group Health Foundation, Inc. C. Tax Status of Foundation.

D. Discussion of Federal Tax Treatment of Hospitals.

E. Conclusion.

F. Other Exhibits

(a) IRS Ruling of July 30, 1970.

(b) H. Rep. 89-1285 (pp. 31 and 48).

(c) Newspaper Clippings.

A. SUMMARY OF COMMENTS AND RECOMMENDATIONS

Since 1966, nonprofit hospitals have been exempted from the communications tax on telephone services. The Internal Revenue Service, Excise Tax Branch, ruled, in the case of the Community-Group Health Foundation, that a hospital for purposes of the communications tax must be one which provides in-patient facilities. It held the exemption does not apply to an "out-patient clinic". Under its income tax regulations, the Internal Revenue Service has held that an "outpatient clinic" is a hospital if its principal purpose is providing hospital or medical care. Taken together, the effect of these two provisions is that the Com