Tax News & Views: Health Care Edition

Non-Profit Hospital Tax Exemption Transparency Act introduced in the House

On September 29, 2022 House Representative Victoria Spartz introduced the Non-Profit Hospital Tax Exemption Transparency Act (H.R. 9080) which would primarily establish a new community benefit standard for tax-exempt hospitals. While it is unclear if this bill will become law, the proposed bill would modify IRC Section 501(r) to require that non-profit hospitals meet a new community benefit standard part of which stipulates those hospitals meet an expenditure threshold for each taxable year for spending on training, education, or research designed to improve patient care, improvements to facilities and equipment, and free or discounted care pursuant to a financial assistance policy. The proposed bill also considers amendments to the financial assistance policy requirements and, if passed, would have TIGTA conduct a review of the financial assistance policies of hospital organizations under IRC section 501(r)(4).

IRS Issues Final Rule Expanding Affordable Care Act Subsidies

The IRS issued final regulations under IRC section 36B amending the regulations regarding eligibility for the premium tax credit (PTC) by clarifying to provide that affordability of employer-sponsored minimum essential coverage for family members of an employee is determined based on the employee’s share of the cost of covering the employee and those family members, not only the cost of covering the employee. The final regulations also amend the rules relating to determination of whether employer coverage provides a minimum level of benefits, adding a minimum value rule for family members of employees based on the benefits provided to the family members. The final regulations affect taxpayers who enroll, or enroll a family member, in individual health insurance coverage through a Health Insurance Exchange and who may be allowed a PTC for the coverage. These final regulations are effective on December 12, 2022.

TIGTA Report on Streamlined Applications for Tax Exemption

The Treasury Inspector General for Tax Administration (TIGTA) issued a report on October 3, 2022 summarizing its findings from a review conducted around Form 1023-EZ, Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code. TIGTA’s report notes that the overall objective for the review was to assess the efficiency of the streamlined application process for recognition of tax-exempt status, including whether the application provides the IRS with sufficient information to approve or deny tax-exempt status for an organization and the use of resources and processing times in making determinations. TIGTA looked at data around application process and timing for both the longer Form 1023 and the streamlined Form 1023-EZ. The report also explains that as part of the review, TIGTA created five fake organizations and applied for tax-exempt status using the Form 1023-EZ application process with the IRS ultimately approving four of the five fabricated applications. The report acknowledges that entities can file fraudulent applications using the longer Form 1023 application as well but noted the streamlined Form 1023-EZ has fewer barriers to creating a fictitious organization and obtaining tax-exempt status.

TIGTA ultimately determined that more information is needed about the organization in the streamlined application and made four recommendations: (1) revise the activities description narrative on Form 1023-EZ, (2) assess the feasibility of requiring applicants to submit their organizing documents as an attachment to Form 1023- EZ, (3) notify applicants when additional time is needed to process their Form 1023-EZ applications, and (4) update online guidance on the application process for Form 1023-EZ filers.

Did you know?

Tax Relief for Natural Disasters Extends Certain Filing Deadlines
The IRS extended the tax deadlines for various taxpayers in areas of the country which are victims of recent natural disasters, such as hurricanes and flooding. Certain taxpayers, including tax-exempt organizations, with an IRS address of record in areas covered by Federal Emergency Management Agency disaster declarations now have until February 15, 2023 for certain tax filings and payments that were otherwise due in fall of 2022. To see if your organization may be an affected taxpayer for such relief and for more information on tax relief after such disasters, visit the disaster relief page on IRS.gov for the latest information.

IRS Technical Guides and Issue Snapshots
The IRS publishes materials on its website that may be helpful resources for your organization:

• Audit Technique Guides (ATGs) and Technical Guides (TGs) for Exempt Organizations: These guides offer techniques and methods and technical information to help IRS agents work cases involving specific types of exempt organizations but provide insight for exempt organizations as well. The guides cover a wide variety of exempt organization topics, including this recent one published in September regarding IRC Section 501(c)(6) Business Leagues.
• Tax Exempt and Government Entities Issue Snapshots: Issue snapshots are employee job aids that provide analysis and resources for a given technical tax issue. They cover topics applicable to different kinds of charities and non-profits, such as unrelated business taxable income and excise taxes for failure to meet certain IRC section 501(r) requirements. There are also issue snapshots related to retirement plans, governments and employment taxes, and tax-exempt bonds.
  

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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