## Facts

- HCSC-Laundry, a Pennsylvania nonprofit, was formed to provide shared laundry and linen services to multiple tax-exempt nonprofit hospitals and a related ambulance service.
- It operated a centralized off-premises laundry intended to improve service quality and reduce costs through economies of scale.
- Participating hospitals paid annual dues based on bed capacity and paid service charges based on budgeted costs plus a per-pound laundry charge; excess amounts were retained for equipment acquisition and replacement.
- No net earnings inured to any private individual; the facility was financed through loans supported by long-term service contracts, and it employed roughly 125 workers.
- HCSC-Laundry sought federal income tax exemption under I.R.C. § 501(c)(3); the IRS denied the request, reasoning that § 501(e) specifically governs cooperative hospital service organizations and does not include laundry among the listed qualifying services.

## Issues

1. Whether a cooperative hospital service organization providing laundry and linen services to § 501(c)(3) hospitals can obtain tax exemption under § 501(c)(3) when § 501(e) provides a specific exemption scheme that omits laundry services.
2. Whether § 501(e) operates as the exclusive statutory route to exemption for cooperative hospital service organizations.

## Decision

- The Supreme Court affirmed the Third Circuit.
- The Court held that a cooperative hospital service organization may qualify for exemption only if it performs one or more services listed in § 501(e)(1)(A).
- Because laundry services were not listed in § 501(e)(1)(A), HCSC-Laundry was not entitled to exemption under § 501(c)(3).

## Legal Principles

- A specific statutory provision controls over a more general provision when both address the same subject and are closely related within the statutory scheme.
- Section 501(e) defines when cooperative hospital service organizations are treated as organizations organized and operated exclusively for charitable purposes; organizations within its scope cannot bypass its conditions by invoking § 501(c)(3).
- When Congress enumerates qualifying activities in a statutory list and omits an activity, the omission is treated as intentional, particularly where legislative history indicates deliberate exclusion.

## Conclusion

The Court ruled that § 501(e) is the controlling, exclusive exemption provision for cooperative hospital service organizations and that a hospital laundry cooperative cannot claim exemption under § 501(c)(3) when laundry services are omitted from § 501(e)’s enumerated qualifying services.


HCSC-Laundry v. United States, 450 U.S. 1 (1981)