Rev. Rul. 59-328

Advice has been requested whether the Blue Cross-Blue Shield medical service operating as the fiscal administrator for a state medical society should file information returns, Forms 1099, U.S. Information Return for Calendar Year, with the Internal Revenue Service for payments made to the physicians who participate in a Federal medical program.

The Blue Cross-Blue Shield has contracted to act as fiscal administrator for a state medical society. As such, the Blue Cross-Blue Shield is charged with disbursing Government funds to the physicians participating in a Federal medical program. The medical program is handled by the Department of Defense pursuant to the Dependents' Medical Care Act, P.L. 569, 84th Congress, 10 U.S.C. 1071-1085.

The terms of the contract are that the fiscal administrator is to perform services relating to the medical program which include among other things, the receiving of claims submitted by physicians for services rendered, and, the processing and paying of such claims for authorized care rendered under the program.

Under the terms of the contract a physician to whom the fiscal administrator is authorized to make payment must exercise reasonable precaution in establishing that an individual seeking medical care is an eligible dependent, render authorized care to such individual in good faith, and submit a claim for payment. Upon receiving the claim, the fiscal administrator is to make the payment without recourse by the Government against him, subject to certain limitations.

The contract sets forth specific authority for the amounts paid by the fiscal administrator to physicians for certain authorized care and other costs to be paid by the Government to the fiscal administrator as promptly as possible on the basis of monthly invoices reflecting such costs.

Section 6041(a) of the Internal Revenue Code of 1954 provides, in part, that all persons engaged in a trade or business and making payment in the course of such trade or business to another person, of rent, salaries, wages, premiums, annuities, compensations, renumerations, emoluments, or other fixed or determinable gains, profits, and income (other than certain payments not pertinent here) of $600 or more in any taxable year, or, in the case of such payments made by the United States, the officers or employees of the United States having information as to such payments and required to make returns in regard thereto by certain regulations, shall render a true and accurate return to the Secretary of the Treasury or his delegate, under such regulations and in such form and manner and to such extent as may be prescribed by the Secretary or his delegate, setting forth the amount of such gains, profits, and income, and the name and address of the recipient of such payment.

Section 1.6041-1(a) of the Income Tax Regulations states that the return required by section 6041(a) must be made on Forms 1099 and 1096, except that the return with respect to distributions to beneficiaries of a trust or of an estate shall be made on Form 1041. A separate Form 1099 shall be furnished for each person to whom such payments of $600 or more are made.

Section 1.6041-1(b) of the regulations states that the term `all persons engaged in a trade or business,' as used in section 6041(a) includes not only those so engaged for gain or profit, but also organizations the activities of which are not for the purpose of gain or profit. See also Rev. Rul. 56-176, C.B. 1956-1,560.

Since, under the terms of the contract, the fiscal administrator is charged with making the payments, such administrator is the one making payment for the purposes of section 6041.

Accordingly, based upon the above information, it is held that he fiscal administrator, or in this case, the Blue Cross-Blue Shield medical service, is required to file Forms 1099. A separate Form 1099 must be furnished by the Blue Cross-Blue Shield for each physician to whom it makes payments of $600 or more in any taxable year.