The Affordable Care Act (ACA), enacted March 23, 2010, added new requirements that hospital organizations must satisfy in order to be described in section 501(c)(3), as well as new reporting and excise taxes. Many of these provisions became effective as of the date of enactment. The Community Health Needs Assessment (CHNA) requirements, discussed below, became effective for tax years beginning after March 23, 2012.
New Requirements for Charitable 501(c)(3) Hospitals
Section 501(r), added to the Code by the ACA, imposes new requirements on 501(c)(3) organizations that operate one or more hospital facilities (hospital organizations). Each 501(c)(3) hospital organization is required to meet four general requirements on a facility-by-facility basis:
- establish written financial assistance and emergency medical care policies,
- limit amounts charged for emergency or other medically necessary care to individuals eligible for assistance under the hospital's financial assistance policy,
- make reasonable efforts to determine whether an individual is eligible for assistance under the hospital’s financial assistance policy before engaging in extraordinary collection actions against the individual, and
- conduct a CHNA and adopt an implementation strategy at least once every three years. (These CHNA requirements are effective for tax years beginning after March 23, 2012).
The ACA also added new section 4959, which imposes an excise tax for failure to meet the CHNA requirements, and added reporting requirements under section 6033(b) related to sections 501(r) and 4959
Notice 2010-39, 2010 IRB 24 (June 14, 2010) described the new requirements and solicited public comments.
Requirements Related to Financial Assistance and Emergency Medical Care
The IRS issued proposed regulations, which were published on June 26, 2012. These regulations provide information on the requirements for charitable hospitals relating to financial assistance and emergency medical care policies, charges for emergency or medically necessary care provided to individuals eligible for financial assistance, and billing and collections. A public hearing on these proposed regulations was held on December 5, 2012.
Notice 2011-52, addresses the CHNA requirements. Hospital organizations may continue to rely on the guidance provided in Notice 2011-52 for CHNAs conducted and implementation strategies adopted up to 6 months after April 5, 2013.
On April 3, 2013, the IRS issued proposed regulations on the CHNA requirements (formal publication on April 5, 2013). The proposed regulations also discuss the related excise tax and reporting requirements for charitable hospitals and the consequences for failure to satisfy the section 501(r) requirements.
On August 15, 2013, the IRS issued temporary regulations and proposed regulations under sections 6011 and 6071 on how to report any section 4959 excise tax owed for failing to meet the CHNA requirements. The temporary regulations provide that a charitable hospital organization liable for the section 4959 excise tax must file a return on Form 4720, Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code. The form must be filed by the 15th day of the fifth month after the end of the charitable hospital's tax year during which the liability under section 4959 was incurred.
Notice 2014-2 confirms that hospital organizations can rely on proposed regulations under section 501(r) of the Internal Revenue Code issued on June 26, 2012 and April 5, 2013, pending the publication of final regulations or other applicable guidance.
On December 30, 2013 the IRS issued Notice 2014-3 which contains a proposed revenue procedure that provides correction and disclosure procedures under which certain failures to meet the requirements of § 501(r) of the Internal Revenue Code will be excused for purposes of § 501(r)(1) and 501(r)(2)(B). This notice invites comments regarding the procedures set forth in the proposed revenue procedure, including what additional examples, if any, would be helpful and whether hospitals should be required to make additional disclosures.
On December 31, 2014, the IRS issued final regulations under the heading Additional Requirements for Charitable Hospitals; Community Health Needs Assessments for Charitable Hospitals; Requirement of a Section 4959 Excise Tax Return and Time for Filing the Return. With respect to the requirements under section 501(r), the final regulations are effective for tax years beginning after December 29, 2015.
Core Form 990 and Schedule H Revisions for Tax Years 2010 and 2011
Form 990, Return of Organization Exempt From Tax, was redesigned for tax years beginning in 2008 after significant and continued input from the tax-exempt sector, including the tax-exempt healthcare community. Schedule H was developed as part of the redesign of the form.
Form 990, Schedule H, Part V, Section B was added for tax years beginning in 2010. It is intended to provide hospitals with ample opportunities to describe their policies and activities related to compliance with ACA requirements and to explain how they are complying with the new requirements. Further revisions were made in 2011 after public input was considered.
New Questions on Section 501(r) Requirements in Part V, Section B, in general
Form 990, Schedule H, Part V, Section B was revised for tax years beginning in 2010 and 2011 to include new questions relating to the new section 501(r) requirements, and asks for information concerning each hospital facility’s financial assistance, emergency medical care, and billing and collection policies.
New questions relating to CHNAs were also added to Schedule H, Part V, Section B. These questions were optional for tax years 2010 and 2011 because the CHNA requirements of section 501(r) only became effective for tax years beginning after March 23, 2012.
New Questions on 501(r) Requirements on a Facility-by-Facility Basis
Hospital organizations file a single Schedule H with the organization's Form 990. Schedule H, Part V, Facility Information has been expanded to include:
- Section A: The filer will list the hospital facilities it operated during the tax year.
- Section B: The filer will report separately on the activities, policies and practices of each of its hospital facilities listed in Section A by filing a separate Section B for each of its hospital facilities listed in Section A. Since non-hospital healthcare facilities are not required to meet the requirements of section 501(r), hospital organizations do not need to complete Section B for any of its non-hospital health care facilities listed in Part V, Section C.
- Section C: The filer will list its non-hospital health care facilities that it operated during the tax year.
Note: Only Part V, Section B of the Form 990 Schedule H requires separate reporting for each individual hospital facility. All other portions of Schedule H will be completed on an organization-wide basis.
TY 2011, Part 5, Section B - Section B is Required
The IRS considered public input on Part V, Section B and made revisions to Part V, Section B for the 2011 tax year. Notice 2012-4 notifies hospital organizations that are required to file Form 990 for tax year 2011 that they will be required to complete all parts and sections of the Schedule H (except for lines one through seven of Part V, Section B relating to CHNAs, as these are optional for tax year 2011). The IRS anticipates making further revisions in future tax years and welcomes public input as described below.
TY 2012, Part 5, Section B - CHNA Questions May Be Required
Hospital organizations whose 2012 tax years began after March 23, 2012 are required to complete all questions on their 2012 Form 990, Schedule H. Hospital organizations whose 2012 tax years began on or before March 23, 2012 are required to complete all parts and sections of Schedule H for tax year 2012, with the exception of Part V, Section B, lines 1-8 regarding CHNAs.
TY 2013 and beyond, Section B
Completion of all questions contained in Schedule H, Part V is required for all years after 2012
Audited Financial Statements
If a hospital organization is required to file Form 990 Schedule H, the organization is required to attach a copy of its most recent audited financial statements to its return for tax years beginning after March 23, 2010. Organizations that file electronically are requested to submit their financial statements in Adobe PDF format.
Continuing Implementation Efforts
The IRS continues to seek input from the tax-exempt health care community as we work to refine the Form 990 and Schedule H to reflect the new ACA requirements and fully implement the ACA. As we move forward, the IRS will continue to work closely with the tax-exempt health care sector as we develop reporting requirements and guidance necessary to refine the Form 990 and Schedule H for future years and fully implement the ACA. The IRS welcomes additional input on how to improve Forms 990, 990-EZ and their related Schedules, including Schedule H. Input should be submitted to the following address:
Internal Revenue Service
Attn: Geoffrey Campbell (Notice 2012-4)
1111 Constitution Avenue, NW
Washington, DC 20224
For More Information
For more information about the new requirements for tax-exempt hospitals and other provisions of the Affordable Care Act see:
- Current Forms 990, Schedules and Instructions
- Affordable Care Act Tax Provisions
- Affordable Care Act of 2010: News Releases, Multimedia and Legal Guidance