The IRS has issued final regulations providing guidance on certain complex requirements imposed on charitable hospital organizations added by the Patient Protection and Affordable Care Act of 2010. Specifically, the Regulations clarify the types of entities subject to the requirements, the consequences for failing to satisfy the requirements and certain reporting obligations. Importantly, charitable hospital organizations must satisfy these requirements to retain tax-exempt status under Section 501(c)(3) of the Internal Revenue Code .
Among other items, the Act provides that charitable hospital organizations are required to:
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Conduct a community health needs assessment, and adopt an implementation strategy to satisfy the community health needs identified in the CHNA at least once every three years;
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Establish a written financial assistance policy and a written policy related to care for emergency medical conditions; and
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Make reasonable efforts to determine whether an individual is eligible for assistance under a FAP before engaging in extraordinary collection actions.
An entity is subject to the requirements to the extent it is treated as a “hospital organization.” The Regulations define a “hospital organization” as an organization recognized (or seeking to be recognized) as tax-exempt under Section 501(c)(3) operating one or more facilities that are required to be licensed, registered or similarly recognized as a hospital.
The Regulations clarify that, subject to certain exceptions, a charitable hospital organization that fails to comply with the CHNA requirements for a taxable year will be subject to a $50,000 excise tax. However, the tax may not apply if the error is minor, and either inadvertent or due to reasonable cause, and is corrected. Lastly, the Regulations provide that the IRS will consider all of the relevant facts and circumstances in determining whether to revoke a charitable hospital organization’s tax-exempt status.
The Regulations generally apply to tax years beginning after Dec. 29, 2015. For tax years beginning on or before then, organizations may generally rely on a reasonable, good faith interpretation of the requirements. The full text of the Regulations may be accessed here.
The requirements described in this legal alert are detailed and complex.
