July 19, 2010
Authored by: Keith Kehrer
IRC § 501(r) was enacted during 2010 to tighten the requirements that hospitals must satisfy to maintain IRC § 501(c)(3) status. IRC § 501(r) also complements steps taken by the IRS in the last couple of years to increase hospital transparency and supplement the”community benefit” standard set out in IRS Rev. Rul. 69-545, including more detailed requirements for reporting charity care and community benefits in the redesigned annual federal information return form (Form 990, particularly Schedule H). Under IRC § 501(r) a hospital organization that wants to retain its IRC § 501(c)(3) status must: (1) at least every three years conduct a community health needs analysis and develop a plan to meet these needs; (2) adopt, implement, and widely publicize written financial assistance and emergency care policies that must cover specified topics; (3) limit charges to persons qualifying for financial assistance to amounts charged to persons with emergency insurance; and (4) not take extraordinary collection actions without first trying to find out whether the individual is eligible for financial assistance under its policy.
IRC § 501(r) is generally effective for tax years beginning after March 23, 2010, and will apply to any “hospital organization” that operates a facility that requires hospital licensing or registration under state law or that the Treasury Secretary determines to be providing “hospital care” as the basis for its tax exemption. Where a hospital organization operates more than one facility, each must satisfy IRC § 501(r) separately. To back up certain IRC § 501(r) requirements, the recent legislation also adds IRC § 4959, which imposes an excise tax for failure to timely conduct a community health needs assessment and implement a strategy to meet such needs, and adds additional reporting requirements under IRC § 6033(b) relating to both IRC § 501(r) and § 4959. Before the full impact of this legislation can be understood completely, the Treasury Department will have to provide significant regulatory guidance. Hospital organizations should start to take steps now to assure that they will be in compliance with these new and additional conditions. For a few more of the particulars comprising IRC § 501(r) see the following linked summary: Section 501(r) Extends Community Benefit Standard for 501(c)(3) Hospitals.