Tax News & Views: Health Care Edition

November 2015 | Vol. 12 No. 21

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.

Internal Revenue Service releases tax exempt and government entities priorities for FY 2016

The Internal Revenue Service (IRS) Commissioner of the Tax-Exempt and Government Entities (TE/GE) division, Sunita Lough, recently released a program letter for fiscal year 2016 outlining TE/GE’s priorities and focus for the coming year. The program letter indicates that TE/GE continues to focus on five key areas, including:

  1. Continuous improvement
  2. Knowledge management
  3. Employee engagement and development
  4. Data-driving decision making
  5. Risk management

In response to feedback received on FY15’s program letter, the Commissioner has provided specific information in the FY16 program letter regarding plans and priorities for TE/GE in the form of Workplan Briefings.

In the area of continuous improvement, the Exempt Organizations (EO) determinations unit implemented changes in FY15 to the exemption application process. EO now assigns determinations applications directly to specialists rather than waiting for requests by agents or managers for new cases. In addition, rather than holding cases in suspense for 90 days, EO now closes cases within a 35-day time frame if an applicant fails to respond to a request for additional information. EO states that these changes have reduced cycle time, benefiting both applicants and the IRS. In FY16, EO will work on several additional long-term projects, such as evaluating the Form 1023-EZ process, developing a program to make Forms 990 available in Modernized e-File format, and simplifying tax forms and enhancing their digital functionality.

With regard to knowledge management (KO), the Commissioner states that TE/GE has made tremendous progress in developing a KO framework. Specifically, TE/GE created and launched Knowledge Networks and began building knowledge libraries to provide technical assistance to TE/GE employees and managers on cases and issues in a collaborative environment.

Included in the program letter is a Workplan Briefings which highlights the focus areas for the EO unit. The briefing highlights four areas of focus: Examinations, Determinations, Processing, and Technical.

Examinations — The Commissioner states that EO’s overarching compliance strategy is to ensure organizations enjoying tax-exempt status comply with the requirements for exemption and adhere to all applicable federal tax laws. In accomplishing this goal, EO will use educational efforts, compliance reviews, compliance checks, and correspondence and field examinations. Through this process, EO will focus resources on five strategic issue areas:

  • Exemption: Issues include nonexempt purpose activity and private inurement, enforced primarily through field examination;
  • Protection of assets: Issues include self-dealing, excess benefit transactions, and loans to disqualified persons, enforced primarily through correspondence audits and field examination;
  • Tax gap: Issues include employment tax and Unrelated Business Income Tax liability, enforced through compliance checks, correspondence audits, and field examination;
  • International: Issues include oversight on funds spent outside the US, including funds spent on potential terrorist activities, EO operating as foreign conduits, and Report of Foreign Bank and Financial Accounts requirements, enforced through compliance reviews, compliance checks, correspondence audits, and field examination; and
  • Emerging issues: Issues include nonexempt charitable trusts and IRC 501(r), enforced through compliance reviews, correspondence audits, and field examination.

Determinations — In FY 2016, EO Rulings and Agreements anticipates having 100 determination specialists to review Form 1023 and Form 1024 application receipts and to participate in pre-determination reviews of sampled Form 1023-EZ receipts. EO anticipates that efficiencies gained through streamlined case processing and continue improvements will allow determinations to generally keep pace with current inventory levels and ensure timeliness of application case processing.

Processing — EO will continue to reduce its correspondence inventory, and EO has implemented a new, customer service-focused process to help prevent erroneous revocations. In FY 2015, this has resulted in preventing over 1,000 erroneous revocations, and EO will refine and formalize this process in FY 2016.

Technical — EO will continue to aggressively build out its KM program through additional staff participation and accumulation of tax law content. A fully functional KM program will improve collaboration between employees, which will mitigate risks and benefit employee engagement. Additionally, EO expects the overall knowledge base of employees to improve, which will drive improvements in technical quality and consistency of work completed within EO.

Did you know?

Georgia reenacts sales and use tax exemptions for nonprofit health centers

The State of Georgia recently enacted House Bill 426, which reenacts and amends sales and use tax exemptions applicable to nonprofit health centers and nonprofit volunteer health clinics. These exemptions were previously in effect from July 1, 2008, to June 30, 2010. The amended law, which adds informational requirements that taxpayers must satisfy in order to claim the exemptions, is effective for the period of July 1, 2015, to June 30, 2018.

Adjusted annual amount for Patient-Centered Outcomes Research Institute fee

Notice 2015-60 provides the adjusted applicable dollar amount to be multiplied by the average number of covered lives for purposes of calculating the Patient-Centered Outcomes Research institute fee for policy years and plan years that end on or after October 1, 2015, and before October 1, 2016. The applicable dollar amount is $2.17 per covered life, up from $2.08 for the previous year. The amount is paid by certain health insurance policies and applicable self-insured health plans.

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.

2015 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.

Download this edition

  • Internal Revenue Service releases tax exempt and government entities priorities for FY 2016

Did you know?

  • Georgia reenacts sales and use tax exemptions for nonprofit health centers
  • Adjusted annual amount for Patient-Centered Outcomes Research Institute fee
November 2015

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