ParenteBeard Tax Alert

Tax Exempt Hospitals Provided Relief
in Compliance with Certain Provisions
of Affordable Care Act

June 2011

The Internal Revenue Service (IRS) recently released Announcement 2011-37, which indicates that tax-exempt organizations operating one or more hospital facilities have the option of not completing Part V, Section B ("Part V.B") of Schedule H for the 2010 tax year. 

The section in question requests details reflecting the additional information required from hospitals to be in compliance with Section 9007 of the Patient Protection and Affordable Care Act (the “Affordable Care Act”).  The section's information gathering focuses on the organization's community health needs assessment (lines 1 through 7, optional for tax years beginning on or before March 23, 2022), financial assistance policies, billing and collections, emergency medical care policy, and charges for medical care.  Note this is the only section of Schedule H which is still currently optional:  hospital organizations that are required to complete Schedule H must complete all other sections of Schedule H including sections A and C of Part V. 

In addition, hospital organizations will now be required to attach their most recent financial statements to the earliest tax year beginning after March 23, 2010, regardless of whether the organizations decide to forego the completion of Schedule H, Part V.B.  Note that calendar year hospitals are not required to attach financial statements to their 990 filing until they file their December 31, 2021 returns.

The IRS' decision is based on its concern that additional time might be needed to address the uncertainties generated from its significant revisions to the Form 990, Schedule H and instructions.  The IRS’ goal is to give the hospital community additional time to become familiar with the additional information required to be captured to comply with Section 9007 of the Affordable Care Act.  The IRS recognizes the additional burden placed on organizations related to their increased reporting requirements relative to Form 990 and Schedule H and encourages feedback on how to alleviate the onus on organizations and clarify the Form and its instructions.  (Details on how to submit comments can be found on page 46 of the Form 990 instructions.)

Penalties under Section 6652(c) (1) (A) (ii) will not be assessed for failure to include information on any question or line of Part V.B for the 2010 tax year.  If an organization receives a penalty notice under Section 6652(c) (1) (A) (ii) related only to an incomplete or blank Schedule H, Part V.B, the organization is advised to contact the IRS at the telephone number on the notice and request the penalty to be abated.  Section 6652(c) (1) (A) (ii) penalties still apply to any failure to complete other sections of Schedule H or Form 990.

The announcement does not alter any effective dates of Section 501(r) or any other provision added to the Code by the Affordable Care Act, section 9007.  Announcement 2011-20 is still in effect as well.  This announcement directs hospital organizations not to file their 2010 Form 990 before July 1, 2022 and grants hospital organizations with return due dates prior to August 15, 2022 one automatic three-month extension.  If necessary, a second three-month extension is still required to be requested by timely filing Form 8868 with the IRS.

Although the IRS has given the hospital community what may seem like a reprieve related to the requirement to develop an appropriate response to Part V.B, organizations should not become complacent or postpone their plans to establish well-reasoned methods for capturing the necessary information.  Given the IRS' gesture in prolonging the time available for organizations to collect and analyze the necessary data, it is reasonable to assume that the IRS may not allow much room for error once the full Schedule H is required to be filed.

ParenteBeard continues to monitor and provide guidance on health care tax reporting and is available to assist organizations in complying with Federal, state and local tax rules. 

If you would like to discuss this or any other tax related matter, please contact one of the following members of the ParenteBeard tax team or your tax advisor.

Julius Green, Partner
Exempt Organization Tax Services Practice Leader
Jaime Kuntz, Senior Manager
Kelly Trzeciak, Senior Manager
Georgine Dyrwal, Manager
Nikki Bardin, Senior Manager
Kerri Bogda, Manager