Nonprofit and government-owned healthcare entities may qualify to be tax-exempt under federal law. Qualifying for tax-exempt status provides many benefits. One of the most significant benefits is not having to pay federal income tax. A tax-exempt status also makes fundraising easier because the entity may be able to issue tax-exempt bonds, and donations to the entity are tax deductible for the donors.

To qualify for federal tax exemption, a healthcare entity must satisfy the requirements set...