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IRS issues final regs on community health needs assessment requirement for charitable hospitals

T.D. 9708, 12/29/2014; Reg. § 1.501(r)-1, Reg. § 1.501(r)-2, Reg. § 1.501(r)-3, Reg. § 1.501(r)-4, Reg. § 1.501(r)-5 , Reg. § 1.501(r)-6, Reg. § 1.501(r)-7

TD 9708, “Additional Requirements for Charitable Hospitals; Community Health Needs Assessments for Charitable Hospitals; Requirement of a Section 4959 Excise Tax Return and Time for Filing the Return.”

IRS has issued final regs that provide guidance to charitable hospital organizations on the community health needs assessment (CHNA) requirements of Code Sec. 501(r)(3), which was added by the Patient Protection and Affordable Care Act of 2010 (ACA).

Background. Code Sec. 501(r), added by the ACA, requires hospitals exempt from tax as charitable organizations under Code Sec. 501(c)(3) to meet various new requirements in order to keep their exempt status. One of these, under Code Sec. 501(r)(3) requires such a hospital to conduct a CHNA at least once every three years, for tax years beginning after Mar. 23, 2012, and adopt an implementation strategy to meet the community health needs identified through the assessment.

The CHNA must (1) take into account input from persons who represent the broad interests of the community served by the hospital facility, including those with special knowledge of or expertise in public health, and (2) be made widely available to the public. (Code Sec. 501(r)(3)) Hospitals subject to the Code Sec. 503(r) requirements that fail to meet them are subject to a $50,000 excise tax. (Code Sec. 4959) A hospital fails to meet the requirements of Code Sec. 501(r)(3) for any tax year if it fails to conduct a CHNA and adopt an implementation strategy during the three-year period ending on the last day of any of its tax years.

In April of 2013, IRS issued proposed regs providing guidance on the CHNA requirements and the related excise tax under Code Sec. 4959 (for details, see Weekly Alert ¶  42  4/11/2013). These proposed regs detailed the consequences for failure to satisfy any of the Code Sec. 501(r) requirements, but did not provide guidance on what return to file with payment of the excise tax, or the time for filing such a return.

In August of 2013, IRS issued temporary and proposed regs that provided guidance to charitable hospital organizations on how and when to file returns reporting the $50,000 excise tax under Code Sec. 4959 for failure to meet the CHNA requirements of Code Sec. 501(r)(3) for any tax year.

Final regs. IRS has issued final regs that provide guidance on the requirements described in Code Sec. 501(r), the entities that must meet these requirements, and the reporting obligations relating to these requirements under Code Sec. 6033. In addition, the final regs provide guidance on the consequences described in Code Sec. 501(r)(1), Code Sec. 501(r)(2)(B), and Code Sec. 4959 for failing to satisfy the Code Sec. 501(r) requirements.

These regs will be discussed in greater detail in an upcoming article.

References: For community health needs assessment (CHNA) requirements for charitable hospitals, see FTC 2d/FIN ¶  D-4141.2  ; United States Tax Reporter ¶  5014.46  ; TaxDesk ¶  670,614.1  ; TG ¶  20691  . For the excise tax on a charitable hospital’s failure to meet CHNA requirements, see Federal Tax Coordinator 2d ¶  D-4141.5  ; United States Tax Reporter ¶  49,594  ; TaxDesk ¶  670,614.2

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