IRS Publishes Tax Guidance Plan for Tax-Exempt Organizations

December 9, 2010

The IRS published its 2010-2011 priority guidance plan with 310 projects covering a broad range of issues including tax-exempt organizations. For further details, see Joint Treasury, IRS 2010-2011 Priority Guidance Plan, DTR News Archive 12/7/2010.

Specific Items of Interest to Tax-Exempt Organizations and Their Advisors

  • Final regulations under §§170, 507, 509, 6033 & 6043 to implement Form 990 revisions and modify the public support test.
  • Guidance updating grantor and contributor reliance criteria under §§170 and 509.
  • Guidance under §§501(r) and 6033 on additional requirements for charitable hospitals.
  • Final regulations under §§509 and 4943 regarding the new requirements for supporting organizations, as added by §1241 of the Pension Protection Act of 2006.
  • Guidance under §4943, as amended by §§1233 and 1243 of the Pension Protection Act of 2006, on excess business holdings rules.
  • Guidance under §4944 on program-related investments.
  • Regulations regarding the new excise taxes on donor-advised funds and fund management under §4966 added by §1231 of the Pension Protection Act of 2006.
  • Regulations under §6033 on group returns.
  • Guidance regarding certain annual information return requirements under §6033.
  • Regulations to update the final regulations under §6104(c) relating to disclosure to state charity agencies for changes made §1224(a) of the by the Pension Protection Act of 2006.
  • Final regulations under §7611 relating to church tax inquiries and examinations.
  • Guidance to facilitate modernizing administrative processes.

The final regulations regarding the new requirements for supporting organizations under IRC §509 are critically important, and there is still a chance they will be published by the end of 2010. For a discussion of the proposed regulations published Sept. 24, 2009, see Proposed Regulations for Type III Supporting Organizations. In the past, the IRS and Treasury have waited until the very end of a calendar year to issue significant regulations that impact filing requirements.

The other eagerly awaited guidance includes IRS rules for nonprofit charitable hospitals, implementing IRC §501(r) and additional reporting requirements added by the Patient Protection and Affordable Care Act. The IRS has indicated at various meetings with health industry groups that it is “finalizing” rules that will implement the new requirements, and it has asked for practitioner comments. Whether we’ll see this guidance before the close of 2010 remains to be seen.

What the IRS has indicated is that the new 2010 Form 990 Schedule H, yet to be published, will include questions on the new requirements that are in effect under the law regarding financial assistance, emergency care, and billing and collection policies. These questions will be optional for hospitals whose tax year began on or before March 23, 2010. Answering questions on the community health assessment is also optional for hospital organizations on the 2010 return.

All hospital organizations will have to answer those questions for tax years beginning after March 23, 2012. Hospitals with multiple facilities will be allowed to complete just one schedule H for all their facilities, but will be required to address the new requirements of §501(r) under Part V of the return.

For further information on IRS thinking and comments by the hospital industry, see Health Reform: Is the Hospital Industry applying Congressional Intent?; IRS Addresses Hospital Concerns Regarding Section 501(r); and Nonprofit Hospitals in Need of an Aspirin.

McGuireWoods’ nonprofit lawyers are available to address your questions and keep you informed as developments occur in this important area.

McGuireWoods’ Nonprofit & Tax-Exempt Organizations Group

Our Nonprofit and Tax-Exempt Organizations lawyers provide advice and guidance that enable charities and other nonprofits to operate efficiently and effectively in today’s increasingly complicated, regulated and competitive environment.

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