Blue Shield of California Loses CA Tax Exemption

In August, the Franchise Tax Board actually revoked Blue Shield of California's state tax-exempt status and ordered it to file returns and pay taxes going back to 2013.  Although Blue Shield was not tax-exempt for federal tax purposes, it had attempted to retain its state tax-exempt status which it has maintianed for over 70 years.  Although the reasons for the revocation are not public, it is likely due to the fact taht the company is reported to hold massive billion dollar reserves, but makes annual charitable distributions that are much smaller.  The operative question is whether Blue Shield, as a non-profit company, was actually benefitting the public to such an extent that it merited its tax-exempt status. 

This is a good reminder to all charities, no matter how big or small, to constantly reexamine and evaluate their operations in light of the public good they proclaim to advance.  It is not uncommon for operations to slowly drift away from the charities original, core purposes.  In the case of Blue Shield, drifting too far can trigger a heavy consequence.