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Byline: Nona Tepper Hospitals are volunteering, sometimes begrudgingly, to pay bigger taxes to help states close Medicaid budget gaps. When fiscal 2025 began in most states July 1, health systems [...]

This article examines the recent significant changes to the Form 990 information return for tax-exempt organizations. Specifically, we address those changes to the return that may impact the health care industry. The Internal Revenue Service (IRS) argues the redesign of the Form 990 is based on the following three principles: enhancing transparency, promoting tax compliance, and minimizing the burden on the filing organization. It has yet to be determined whether the significant reorganization of the informational return will benefit the stakeholders of the health care industry. We argue that these changes are a step in the right direction in providing necessary disclosure for policymakers and federal regulators. Key words: financial reporting, tax return, transparency, regulation, Form 990, hospitals., The most sweeping tax return changes in the last 25 years recently occurred within the Form 990 (Return of Organizations Exempt From Income Tax). Government regulators have finally answered the [...]

The purpose of not-for-profit hospitals has become synonymous in the public's mind with charity care. But the mission and contributions of not-for-profit hospitals are far broader than that. And it's [...]

The Service's attempts to impose quantitative restrictions on whole jospital joint ventures between an exempt organzation and a for-profit partner, such as numerical voting control and a charity care test, was perhaps encouraged by its recent success in the Tax Court. A district court, however, found that these positions had no support in either prior IRS Rulings or case law. The government will appeal.

Issues concerning taxation of nonprofit organizations are examined, focusing on comments made by IRS officials at a May 10, 2002, meeting of the ABA Tax Section. Topics include guidance for corporate sponsorship, asset transfers between private foundations, charitable partners for hospital joint ventures, plans for the IRS to release more revenue rulings regarding exempt organizations, and tax-exempt bonds.

Issues discussed at the October 1999 American Health Lawyers Assn are analyzed, focusing on laws applying to tax-exempt health care organizations. Topics include intermediate sanctions, group exemptions, joint ventures, hospital sales, and the IRS fiscal 2000 EP/EO work plan.

Practitioners have much to be pleased with in the long-awaited update of the Service's guidelines for hospitals and other health care organizations as to how far they can go in providing incentives and benefits when recruiting physicians. The new Ruling clears up many ambiguities and brings new certainty to the area. Even with the emphasis given to case-by-case determinations, the favorable situations in the Ruling indicate how recruitment should be planned and implemented.

Joint ventures in the health care field involving for-profit and tax-exempt providers are becoming increasingly common. However, increased IRS scrutiny of these ventures is unnecessary, since existing tax laws are clearly applicable to many of these seemingly complex arrangements. Appropriate forms of business entities, applicable federal tax principles and laws, and rules governing private foundations, exempt bond financing, and unrelated business taxable income are discussed and analyzed.

The combination of for-profit health care organizations and charitable providers generates tax exemption issues that must be addressed to increase efficiency and lower costs. Health maintenance organizations that integrate physicians into their network must follow the guidelines set by the Internal Revenue Code of 1986 to qualify for exemption. These rules include satisfaction of community benefit standards, compliance with private inurement and adaptation of practice to public policy.

Both the House Ways and Means and Senate Finance committees are considering changes in requirements for tax-exempt health care organizations as part of health care reform. Both would require non-profits to meet new guidelines to maintain their exempt status. These include providing outreach services, making an annual assessment of community health needs and governance by an outside board of governors. Other changes, including the effect of health care reform on HMOs, are discussed.

The move toward managed care has made local governments more predisposed to lease or sell non-profit hospitals to private investors. Under such arrangements, non-profits become taxable, and they are more likely to be staffed by competent financial managers. Seven such deals have already taken place in 1993. The most prolific investors are HealthTrust, the Hospital Co and Columbia Hospital Corp. Another growing trend is the hybrid hospital, owned jointly by for-profit and non-profit companies.

IRS members Marc Owens and T.J. Sullivan spoke to a meeting of the American Academy of Hospital Attorneys on issues for tax-exempt organizations. Owens said that private benefit and inurement will be dealt with in coming legislation. Sullivan spoke about integrated delivery systems, community control, physician recruiting and private practice income guarantees.

In recent years, hospitals exempt from state, local, and federal taxes based on their nonprofit status have been subjected to scrutiny by taxing authorities and members of Congress as to [...]

The cost of capital for hospitals is a topic of continuing interest as Medicare's new capital payment policy is implemented. This study examines the determinants of tax-exempt revenue bond yields, [...]

The IRS has issued GCM 39862 which retroactively revoked three private letter rulings which allowed the sale of a revenue stream of a tax exempt hospital. The IRS has the power to prevent retroactive revocation under IRC section 7805(b), and this GCM implies that revocation should be prospective only instead of retroactive. Fairness requires that when policy changes the IRS should not punish those who followed prior policy.

Tax professionals and officials from the IRS spoke to the National Health Lawyers Ass'n about fund raising, taxation of hospitals and property tax exemptions at a conference in Oct 1992. IRS members said that the IRS is particularly interested in compensation arrangements and tax exempt bonds from hospitals. Future issues predicted by tax practitioners include hospitals' property tax exemption and the employee or independent contractor status of physicians.

The IRS participates in enforcement of health care laws through four practices. Hospitals may have their tax exempt status revoked if they are sanctioned for violating health care laws or if they are not sanctioned yet violate tax rules such as the standard of community benefit. Private letter rulings for hospitals may also be contingent upon no health care law violations, and the IRS may share information with federal inspectors of hospitals.

The specialty hospitals in states such as Louisiana, U.S. raised concerns that if they are left unchecked, they will be threat to the taxpayer-supported facilities. Further, the government at various levels received lot of complaints opposing this kind of specialized operations.

The Tax Court decided in July 1999 in favor of the IRS in Redlands Surgical Services, Inc. v. Commissioner. Redlands Surgical Services, Inc. (RSS) applied for tax exempt status but was rejected due to its partnership with a for-profit organization, Redlands-SCA Surgery Centers, Inc. (SCA Centers). A complicated arrangement existed among Redlands Health Systems, Inc., RSS, and SCA Centers. The court ruled activities of RSS more than incidentally benefited the private interests of SCA Centers.

For-profit and not-for-profit hospitals alike are uneasy about the prospect of tax reform. The merging categories hospital care have suggested a large new revenue source for state and federal government. Some industry players want the boundaries to remain distinct to keep voluntary hospitals pure, while others want loose definitions to allow continuing joint ventures between the two hospital types., For-profit, not-for-profit hospitals face peril of tax reform Representatives of not-for-profit hospitals don't want to talk about it. Investor-owned hospital groups say they aren't going to bring it up unless [...]

ERISA should not preempt NY's health facility assessment (HFA) tax, according to arguments made before the US Supreme Court in late Feb 1997. NY's argument claims HFA is not related to the state's ERISA-governed clinical services fund nor is the issue different from that of a 1995 case ruling which held ERISA did not preempt NY state law. The other side claimed ERISA preemption is appropriate because the HFA taxes payments of benefits and contributions. The Justice Dept's amicus argument and questions asked by various Justices are also described.

Hospitals in Maine convinced legislators to repeal the hospital sick tax. The state could save more it it shifts its Medicaid program into a managed care operation and hospitals are provided with mini block-grants by the federal government.