IRS revokes hospital's tax-exempt status for failure to comply with ACA rule

The Internal Revenue Service has revoked the tax-exempt status of an unnamed nonprofit hospital for failure conduct a community health needs assessment, adopt an implementation strategy and make it widely available to the public.

In a letter dated Feb. 14, 2017, and released earlier this month, the IRS said it revoked the hospital's tax-exempt status for failure to comply with section 501(r) of the Internal Revenue Code. 

The ACA added new requirements that hospitals must meet to qualify as a tax-exempt facility under section 501(c)(3) of the Internal Revenue Code. Specifically, the ACA added section 501(r), which imposes four new requirements, one of which requires hospitals to conduct a community health needs assessment at least once every three years and adopt an implementation strategy to address community health needs identified in the assessment.

The IRS revoked the tax-exempt status of the unnamed hospital for what the agency referred to as "egregious failures when reviewed in the context of [section] 501(r)." Although the name of the hospital is not included in the letter from the IRS, previous correspondence from the agency identified the facility as a disproportionate share hospital and a critical care access facility.

The IRS noted a revenue agent met with the hospital's CEO, CFO and COO during the audit, and the administrators made it clear the organization "had neither the will, the financial resources, nor the staff to follow through with the CHNA process."

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