Tax-exempt reporting too burdensome, nonprofit hospitals say

The Internal Revenue Service guidance, particularly the Schedule H amendment, on reporting for tax-exempt organizations is too burdensome and overly prescriptive, the national collaborative for nonprofit healthcare organizations VHA testified at yesterday's House Ways and Means Committee Oversight Subcommittee hearing.

Among other nonprofit issues, Ways and Means looked at reporting requirements for tax-exempt hospitals. VHA urged Congress not to go beyond the original intent and to work with charitable hospitals to reduce governmental burden.

Under the Patient Protection and Affordable Care Act, Schedule H mandates a community health needs assessment every three years and requires health systems to issue separate reports for each hospital instead of a system-wide report, among other excessive documentation, according to VHA.

"Even tax-exempt organizations spend millions of dollars to comply with IRS documentation and filing requirements. It's imperative to find that 'sweet spot' where the IRS can effectively perform its important oversight function while not requiring unnecessary paperwork," Michael Regier, senior vice president of legal and corporate affairs, general counsel and compliance officer for VHA Inc., said in a statement.

Both sides of the aisle agree that oversight for tax-exempt entities require greater attention, Ways and Means Chairman Charles W. Boustany Jr., M.D. (R-La.) explained yesterday, to avoid giving non-qualifying organizations a free pass on taxes. As of 2008, 1.85 million organizations qualified for tax-exempt status, and 1.18 million qualified as charitable organizations under section 501(c)(3); they had $2.5 trillion in assets. The goal is "to ensure that the tax-exempt sector is operating in an efficient manner and that the laws governing tax-exempt organizations are being applied fairly and evenly," Boustany said.

The American Hospital Association in its April report found that nonprofit hospitals put an average of 11.3 percent of their total spending toward community benefits, including free care, community health improvement programs and subsidized services.

For more information:
- see the hearing announcement
- see the announcement from VHA

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