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Ways and Means Members Turn Over New Information on AARP to IRS

December 22, 2011

Washington, DC – Health Subcommittee Chairman Wally Herger (R-CA), Ways and Means Member Dave Reichert (R-WA), Oversight Subcommittee Chairman Charles Boustany, Jr. (R-LA) sent a letter to Internal Revenue Service (IRS) Commissioner Douglas Shulman with new information relevant to AARP’s tax-exempt status.  Specifically, the letter requests that IRS examine new information regarding AARP’s financial arrangements with HearUSA, Inc. (HearUSA) and UnitedHealth Group (United).

Following a year-long investigation, the Members authored and issued a report in April.  The report found that, as a result of the new health care law, AARP stands to make an additional one billion dollars over the next ten years through the sale of AARP-endorsed insurance products.  The report raised serious concerns about whether AARP was fulfilling the requirements of a tax-exempt organization, or if AARP’s significant involvement in the business affairs of its numerous partners indicates the organization is a for-profit business operating under a tax-exempt status.  Following a joint hearing of the Ways and Means Health and Oversight Subcommittees, the Members forwarded the report to the IRS for review and requested the agency assess whether AARP’s tax status should be reconsidered.

As a follow-up to the hearing, the Members obtained additional information regarding AARP’s business practices.  Today’s letter details the new findings and requests the IRS consider the new details when conducting its review of AARP’s tax status.  In particular, the letter raises specific concerns about AARP’s involvement in third-party contractors’ day-to-day business activity.  

The letter notes, “These contracts suggest that AARP’s relationship with United is much more than an agreement to license the AARP name.  Rather, AARP has extensive decision-making authority over, and is deeply involved in, United’s business operations.  The AARP relationship with both United and HearUSA seem to suggest a pattern of business partnerships and activities that permits AARP to engage in for-profit businesses under the cover of its tax-exempt status.”

  • In 2008, AARP entered into a financial arrangement with HearUSA to endorse the company’s hearing aids, and in return AARP would receive a commission on each hearing aid sold.  The HearUSA contract raises additional issues regarding AARP’s ongoing characterization of certain payments as tax-exempt “royalties.”  AARP’s ability to dictate HearUSA advertising expenditures and mandate “charitable” donations from HearUSA to AARP’s Foundation exceeds simple brand and quality management. 
  • Additionally, information gleaned from AARP, AARP Services Inc. (ASI), and United’s three Medicare contracts reveals the financial incentives for different insurance product lines.  The contracts dictate United’s marketing and sale of AARP-branded Medigap, Medicare Advantage, and Medicare Part D policies and details AARP and ASI’s extensive influence over and involvement in United’s daily business operations.

The full letter can be found here.