The IRS is concerned about process, policing and transparency in reviewing
compliance with the rules under section 501(r), according to IRS Commissioner of
Tax Exempt and Governmental Entities Sarah Hall Ingram, who discussed exempt
hospital requirements during a recent VHA Inc.-hosted panel.
The Patient Protection and Affordable Care Act, enacted March 23, 2010,
requires hospitals to report to the IRS on their community benefit activity
every three years. Chris Giosa, an IRS economist, said this requirement doesn’t
necessarily mean that hospitals will be audited every three years. IRS Notice
2010-39 outlined the additional requirements for hospitals to remain exempt, and
asked for comments on such requirements, including: completing a community
health needs assessment; determining eligibility for assistance; limiting fees
charged for emergency care; and abstaining from extraordinary collection
While the reporting on community health needs assessment requirement is not
effective until tax years beginning after March 23, 2012, the IRS expects that
hospitals may begin reporting on the assessment even earlier. The other
requirements of reporting compliance with section 501(r) are applicable to tax
years beginning after March 23, 2010.
Based on more than 200 comments received by July 22, 2010, Ingram reassured
hospitals that are government instrumentalities that are also recognized as
exempt under section 501(c)(3), that they would be required to comply
with section 501(r), but not required to file Form 990. She also expects
that the 2010 Form 990 will ask for audited financial statements as required
under section 6040 to be reported at the entity level, rather than on a
facility-by-facility basis. The IRS expects to release the core form for the
2010 Form 990 soon, with an updated Schedule H to follow.
According to Ingram, making a community health needs assessment “widely
available to the public” means that section 6104 rules on disclosure may be
applied to fulfill this requirement. She also said existing rules under the
Emergency Medical Treatment and Active Labor Act are different from the
emergency medical care policy under section 501(r) because section 501(r) may
extend beyond emergency room care, but that the issue is still under
Ingram also discussed the requirement that hospitals charge the “lowest
paying commercial rate,” by noting that the new law requires amounts charged for
emergency or other medically necessary care to individuals eligible for
assistance must not be more than the amounts generally billed to individuals who
have insurance. She noted three major challenges for the IRS: (1) incentivizing
good hospital behavior; (2) dealing with minor infractions; and (3) avoiding
putting a burden on compliant hospitals.
Further information about the new healthcare legislation can be found in our
earlier news alert,
Nonprofit Hospitals in Need of an Aspirin.
McGuireWoods Nonprofit & Tax-Exempt Organizations Group
and tax-exempt organizations lawyers provide advice and guidance that enable
charities and other nonprofits to operate more efficiently and effectively in
today’s increasingly complicated, regulated and competitive environment.