Tax News & Views: Health Care Edition

Analysis

Tax News & Views: Health Care Edition

July 2021 | Vol. 12 No. 82

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.

Electronic Filing Updates

The Internal Revenue Service released an Exempt Organization Update on June 16th that provides several updates on electronic filing. Private foundations that are required to file a Form 4720, Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code, must file these forms electronically due to requirements set forth in the Taxpayer First Act. Private Foundations must file electronically any 2020 and future year Form 4720, with a due date on or after July 15, 2021. An exception to the rule applies to the 2020 Form 4720 with a due date on or after July 15 that were submitted on paper with a postmark date on or before June 16, 2021. Organizations other than private foundations that are required to file a Form 4720 are encouraged, but not required, to file the Form 4720 electronically. The IRS has provided a list of approved software vendors for electronic filing of the Form 4720.

Healthcare organizations that are not organized as private foundations are required to file the Form 4720 to report and submit various excise taxes. Some of the excise taxes imposed on these organizations include the following:

  • Taxes on Excess Lobbying Expenditures under IRC section 4911, which applies to organizations that elected to be subject to the lobbying expenditure limitations under IRC section 501(h) and made excess lobbying expenditures.
  • Taxes on disqualifying lobbying expenditures under IRC section 4912, which occurs when an exempt organizations IRC section 501(c)(3) status is revoked because of excess lobbying activities. The excise tax is imposed on the organization and any organization manager who willfully and without reasonable cause consented to the lobbying expenditures.
  • Excess benefit transactions under IRC section 4958, which occur when applicable organizations engage in certain transaction with disqualified persons. This excise tax is imposed on the disqualified person and any organization manager that knowingly participated in the excess benefit transaction.
  • Excise tax on hospital organizations for failure to meet the community health needs assessment requirements under IRC section 4959, which is imposed on the hospital organization that fails to meet the requirements under IRC section 501(r)(3) in regards to the community health needs assessment for any tax year.
  • Excise tax on excess executive compensation under IRC section 4960, which is imposed on any applicable tax-exempt organization that pays remuneration over $1 million to a covered employee or pays any excess parachute payment to a covered employee, and
  • Excise tax on net investment income of private colleges and universities under IRC Section 4968, which is a 1.4% excise tax that applies to any private college or university that meets all four of following requirements:
    • Must be an eligible educational institution defined under IRC section 25A(f)(2),
    • Have at least 500 tuition-paying students,
    • More than 50% of those students must have been located within the US, and
    • The aggregate fair market value, at the end of the preceding tax year, of the assets not used directly in carrying out the organization’s exempt purpose, held by the organization and related organization, must be at least $500,000 per student.

The Internal Revenue Service within the update also encourages organizations that are filing a Form 990-EZ, Short Form Return of Organization Exempt from Income Tax, and Form 8868, Application of Extension of Time to File an Exempt Organization Return, to file these forms electronically. The Internal Revenue Service is experiencing delays in processing of paper returns, and due to these delays, taxpayers may prematurely receive a CP259A notice of non-filing, or CP211A notice for approval of the taxpayer’s extension request. If taxpayers timely filed these forms on paper, the IRS states that no further actions are required and recommend that you do not file a second return or contact the IRS about the status of the filing.

Tax News & Views: Health Care Edition - July 2021

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Biden Administration’s Green Book
The Biden Administration released its fiscal year 2022 budget blueprint on May 28th. Within the budget blueprint is a “Green Book” which provides tax proposals that would impact the budget. A summary of the some of the proposals found within the “Green Book” can be found in special edition Tax News & Views, Vol. 22, No. 27, May 29, 2021.

Spring 2021 Regulatory Agency Rule List
The Biden Administration released its regulatory agenda on Friday, June 11th. The regulatory agenda contains some pending guidance that would impact tax-exempt organizations including proposed rules on excess benefit transactions under IRC section 4958 for donor advised funds, taxes on prohibited transactions under IRC section 4967 and allocation of certain expenses by exempt organizations with more than one unrelated trade or business. The full list of regulatory items can be found at Reginfo.gov.

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Additional Resources

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 Forward blog
Connect to the forces of change across life sciences and health care today. Explore our latest leadership insights to stay ahead of industry trends and key issues on health care, medtech, and biopharma.

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Contacts

Rachel Becker
Milwaukee
rbecker@deloitte.com 
+1 414 977 2567

Jim Sowar 
Cincinnati
jsowar@deloitte.com
+1 513 784 7242

Fran Bedard
Nashville
fbedard@deloitte.com 
+1 615 259 1811

Alicia Janisch
Detroit
ajanisch@deloitte.com
+1 313 324 1442

Jeff Frank
Indianapolis
jdfrank@deloitte.com
+1 317 656 6921

Christine Kawecki
New York and Boston
ckawecki@deloitte.com
+1 516 918 7138

John W. Sadoff, Jr
Costa Mesa
jsadoff@deloitte.com
+1 714 913 1281

Kristina Rasmussen
Minneapolis
krasmussen@deloitte.com
+1 612 397 4178

Joan McMahon
San Francisco
jmcmahon@deloitte.com
+1 415 783 5568

Anne Fulton
Minneapolis
anfulton@deloitte.com
+1 612 397  4242

Mary Rauschenberg
Chicago and Washington National Tax
mrauschenberg@deloitte.com 
+1 312 486 9544

 

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