Tuesday, April 25, 2017
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Protect Your Hospital's Federal Tax Exemption!

IRS Review of Tax Exempt Hospitals:  On September 28, the Tax Exempt and Government Entities Division of the IRS issued its work plan for fiscal year 2017.  (Available through this link https://www.irs.gov/pub/irs-tege/tege_fy2017_work_plan.pdf )  The plan includes information on examinations of tax exempt organizations that took place during fiscal year 2016.   

The examinations were conducted to “ensure organizations enjoying tax-exempt status complied with the requirements for exemption and adhered to all applicable federal tax laws.”  Using a data driven process, the goal was to identify and address existing and emerging high risk areas of noncompliance.  A variety of actions were taken including educational efforts, compliance reviews, compliance checks and correspondence and field examinations.

 Nearly One-Quarter of Hospitals Reviewed to Receive Field Audit:   Regarding oversight of the Affordable Care Act, specifically issues related to compliance with Section 501 r, the IRS completed 692 reviews as of June 30, 2016.  Of this total, 166 hospitals referred for further field examination.   The report states that the following were the issues for which referrals were made.

  • Lack of a Community Health Needs Assessment (CHNA) under IRC 501(r)(3)
  • No Financial Assistance and/or Emergency Medical Care Policies under IRC 501(r)(4)
  • Billing & Collection Requirements under IRC 501(r)(6)

While no additional information was included on compliance concerns that triggered the field audits, it is clear that the IRS is prepared to conduct in-depth examinations.  Earlier this year, IRS reported that it had trained approximately 30 agents to conduct field audits of hospitals for 501 r compliance.   They have said that hospitals are typically chosen for the field audits based primarily on results from the initial reviews.  The IRS has also noted that whistleblower referrals will be considered when making a decision to audit a hospital.  It is important for hospitals to recognize that during a field audit, IRS agents may expand the examination to include any other areas of potential non-compliance.

Our Section 501 r Compliance Assessment:  Community Health Advisors, LLC is knowledgeable of Section 501 r requirements and leading industry practices.  We offer a range of services to help hospitals comply with Section 501 r.

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