Tax News & Views: Health Care Edition

April 2016 | Vol. 12 No. 24

Tax News & Views: Health Care Edition is a timely news summary bulletin authored by the Health Care Industry Group, Deloitte Tax LLP. The newsletter contains highlights from the latest tax developments in health care on Capitol Hill, at the White House, at the Internal Revenue Service, at the Treasury Department and in the courts. It is a valuable resource for tax and other professionals involved in the tax-exempt health care providers and health plans sectors, helping them remain current on tax developments that stand to have an impact on their businesses.

Industry Issue Resolution program expanded

The Internal Revenue Service (IRS) Industry Issue Resolution (IIR) program has been expanded to now include issues under the Tax Exempt and Government Entities (TE/GE) Division. Revenue Procedure 2016-19 describes the expanded program.


In 2000, the IRS announced the IIR Pilot Program. The objective of the pilot program was to establish a procedure to address through prefiling guidance rather than postfiling examination frequently disputed tax issues that are common to a significant number of large or midsize business taxpayers. After evaluating the success of the pilot program, the IRS announced in Notice 2002-20 that the IIR Program would be made permanent. In addition, Notice 2002-20 expanded the IIR Program to address issues common to small businesses, as well as large and midsize businesses, and to address opportunities to reduce burden for all business taxpayers. Historically, Revenue Procedure 2003-36 limited the IIR program to taxpayers under the jurisdiction of the Large Business and International (LB&I) and Small Business and Self-Employed (SB/SE) Divisions.

Revenue Procedure 2016-19

The new revenue procedure expands the availability of the IIR Program to issues with respect to entities under the jurisdiction of the TE/GE Operating Division, and updates, revises, and clarifies the procedures.

The types of issues most appropriate for consideration under the IIR Program will have two or more of the following characteristics:

  1. The proper tax treatment of a common factual situation is uncertain
  2. The uncertainty results in frequent, and often repetitive, examinations of the same issue
  3. Frequent, and often repetitive, examinations require significant resources from both the IRS and impacted entities
  4. The issue is significant and impacts a large number of entities
  5. The issue requires extensive factual development
  6. Collaboration would facilitate proper resolution of the tax issues by promoting an understanding of entities' views and business practices

In general, a requester should be an organization or a group of entities that represents a significant number and cross section of the entities with the particular tax issue or issues. A requester may submit an IIR Program request at any time during the calendar year. Selected IIR Program requests may result in published guidance, such as a regulation, revenue ruling, revenue procedure, or notice. Alternatively, selected requests may result in new or revised administrative procedures, such as an LB&I Operating Division directive or a revision to an Internal Revenue Manual provision.

IIR Program requests and any additional information provided by a requestor in connection with a request are subject to the Freedom of Information Act. All submissions under the IIR Program will be made available for public inspection and copying. Submissions, therefore, should not include confidential or taxpayer specific information that is not intended to be disclosed.

TE/GE releases new “issue snapshots”

The IRS Tax Exempt and Government Entities (TE/GE) Division began disclosing “issue snapshots” which are used within the IRS as employee job aids to provide analysis and resources for a given technical issue. The snapshots are developed by TE/GE through internal collaboration and may evolve as the compliance environment changes and new insights and experiences are contributed. Issue Snapshots are not official pronouncements of law or directives and cannot be used, cited or relied upon as such; however, they provide insight into the IRS’s interpretation of current tax issues. There are currently four issue snapshots posted on the IRS website:

  1. IRC Section 4942 Taxes on Failure to Distribute Income Carryover of Excess Distributions or Undistributed Income
  2. Employers Must Withhold FICA Taxes for Aliens who Change Visa status to H-1B
  3. Excise tax on Federal Foreign Procurement Payments
  4. Lessening the Burdens of Government as a Basis for Tax Exemption under IRC Section 501(c)(3)

IRS issues revised procedures regarding revocations and modifications of exempt status

The IRS Tax Exempt and Government Entities (TE/GE) Division recently issued a memo (TEGE-04-0216-0003) regarding revised procedures for revocations and modifications of exempt status. The memo was issued as a result of new legislation provided in the Protecting Americans from Tax Hikes Act of 2015 (PATH Act). Section 506 of the PATH Act expands declaratory judgment rights under Internal Revenue Code Section 728 to all Section 501(c) organizations regardless of paragraph and to RIC Section 501(d) organizations. Therefore, all revocations of IRC Section 501(c) or 501(d) organization will follow the same procedures and processes as those previously used for Section 501(c)(3) organizations.

As a result of these expanded rights, modifications of tax-exempt status (such as modifying a recognized § 501(c)(4) exemption to a § 501(c)(7)) are no longer applicable. Rather, the Service will revoke (or treat as a revocation for declaratory judgment purposes) any organization that no longer qualifies under the Code section for which tax-exemption was granted or self-declared. A revoked organization is free to apply or reapply for recognition of exemption under a different Code section. For any organization that no longer qualifies for tax-exempt status based on an audit, IRS agents will now propose a revocation (rather than a modification of tax-exempt status) and issue a standard 30-day letter. Appropriate modifications will be made to the revocation and modification procedures stated in the Internal Revenue Manuals.

Did you know?

IRS provides additional time to file Form 8850 to claim work opportunity tax credit

The PATH Act retroactively extended the work opportunity tax credit (WOTC) expiration date from December 31, 2014, to December 31, 2016. The WOTC is a federal income tax credit for qualified newly hired employees who fall into one of nine targeted groups. Certain qualified tax-exempt organizations are allowed to claim the WOTC. The IRS recently issued Notice 2016-22, which provides transitional relief applicable to the timing for filing Form 8850 by employers that hire a member of a targeted group between January 1, 2015 and May 31, 2016. Employers will be allowed an automatic extension to file Form 8850 until June 29, 2016, for such employees.

Changes to property tax exemptions for New Jersey hospitals

New Jersey Governor Chris Christie recently announced a two-year freeze immediately on property tax rates for previously exempt nonprofit hospitals. Property tax assessments will be frozen for previously exempt hospitals for 2016 and 2017. In the meantime, a Property Tax Exemption Study Commission has been created to conduct a comprehensive review of New Jersey’s property exemption statute. The Commission will review the current statute, which affords certain nonprofit hospitals a property tax exemption.

IRS issues health care tax tips for Forms 1095-A, 1096-B and 1095-C

Forms 1095-A, 1095-B and 1095-C provide information to employees and taxpayers about 2015 health coverage. The IRS recently issued health care tax tips on the IRS website to provide some answers to common questions about these forms.

IRS Future State

The IRS recently updated its website related to the IRS Future State Initiative. The Initiative is part of the IRS’s efforts to enhance voluntary compliance by designing, developing, and implementing approaches to tax administration that are more proactive, accessible, and interactive. These efforts are known collectively as the IRS “Future State” and build upon operating division, technology, and support modernization efforts.

Additional Resources

Deloitte Center for Health Solutions

Deloitte Center for Health Solutions: The source for health care insights: The Deloitte Center for Health Solutions (DCHS) is the research division of Deloitte’s Life Sciences and Health Care practice. The goal of DCHS is to inform stakeholders across the health care system about emerging trends, challenges, and opportunities.

Health Care Current

This weekly series explores breaking news and developments in the US health care industry, examines key issues facing life sciences and health care companies and provides updates and insights on policy, regulatory and legislative changes.

2016 Health Care Providers Industry Outlook;  Interview with Mitchell Morris, MD

Mitch Morris, M.D., vice chairman and US/Global Health Care Providers leader, Deloitte Consulting LLP, weighs in on the evolution of value based care, aggressive industry consolidation and the role of the consumer.

This edition

  • Industry Issue Resolution program expanded
  • TE/GE releases new “issue snapshots”
  • IRS issues revised procedures regarding revocations and modifications of exempt status

Did you know?

  • IRS provides additional time to file Form 8850 to claim work opportunity tax credit
  • Changes to property tax exemptions for New Jersey hospitals
  • IRS issues health care tax tips for Forms 1095-A, 1096-B and 1095-C
  • IRS Future State

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