00-2944 ABC for Health, Inc. and Wisconsin Coalition for Advocacy v. Commissioner of Insurance

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“The record conclusively shows that BC/BSUW has not been operated exclusively for charitable purposes. At least since 1979 when Associated Hospital Service, Inc. was reorganized as BC/BSUW, it has provided health insurance to individuals who paid premiums. Although it operated as a nonprofit corporation, being a nonprofit, non-stock corporation is different from operating exclusively as a charitable entity.

“For example, BC/BSUW has not qualified for I.R.C. § 501(c)(3) (2000) status because that section requires, among other things, that the organization be operated ‘exclusively for religious, charitable … or educational purposes.’ Additionally, there is nothing in the record which shows BC/BSUW was created or maintained through charitable gifts. It sold insurance to people who paid premiums to become policyholders. Therefore, we conclude that the Commissioner was correct in determining that neither the cy pres doctrine nor § 701.10 is an impediment to the plan of conversion. …

“ABC contends that the acquisition of BC/BSUW’s assets by the holding company, which in turn issued stock equivalent to the assets’ value and then transferred the stock to the Foundation, was a distribution which violated Wis. Stat. §§ 181.1301 and 181.1302(3). …We conclude that ABC’s argument is without merit for a number of reasons.

“First, a corporate conversion is not a corporate dissolution. …

“Second, BC/BSUW’s articles of incorporation were amended in 1979 to permit distributions to ‘the medical colleges’ upon dissolution.

“Third … the stock transfer to the Foundation is not a distribution as defined in sec. 181.0103(10). …

“Fourth, Wis. Stat. § 181.1302 was created by 1997 Wis. Act 79, § 48, effective January 1, 1999, which Act repealed and recreated ch. 181. Section 181.1302 permits distributions from non-stock corporations, which distributions had previously been prohibited. …

“And finally, BC/BSUW’s plan of conversion appears to have been drawn to equitably address the value BC/BSUW accumulated while it was a nonprofit entity so that the Commissioner would conclude that conversion was not contrary to the interests of the public, pursuant to Wis. Stat. § 611.76(7).”

Judgment affirmed.

Recommended for publication in the official reports.

Dist IV, Dane County, Nowakowski, J., Roggensack, J.

Attorneys:

For Appellant: Robert A. Peterson Jr, Madison; Jeffrey Spitzer-Resnick, Madison

For Respondent: Peter C. Anderson, Madison; Stephen E. Bablitch, Madison; Joseph C. Branch, Milwaukee, et al.