For tax-exempt hospitals, the penalty is steep for non-compliance with Section 501 (r) of the Affordable Care Act (ACA). Failure to comply could result in an organization’s loss of tax-exempt status.
The Internal Revenue Service has released two Notices designed to help §501(c)(3) hospitals comply with Internal Revenue Code (IRC) § 501(r).
Notice 2014-2 confirms that tax-exempt hospitals can rely on proposed regulations under section 501(r) published on June 26, 2012, and April 5, 2013, pending the publication of final regulations or other applicable guidance.
Notice 2014-3 contains a proposed revenue procedure that provides correction and disclosure procedures under which certain failures to meet the requirements of section 501(r) will be excused for purposes of sections 501(r)(1) and 501(r)(2)(B). The IRS has requested comments concerning this proposed revenue procedure; comments must be submitted by March 14, 2014.
Under Section 501(r), each tax-exempt hospital is required to satisfy these four §501(r) requirements, or risk losing its §501(c)(3) tax-exempt status:
PYA is available to assist your organization with compliance and healthcare tax guidance.
WE ARE REQUIRED BY IRS CIRCULAR 230 TO INFORM YOU THAT THE FOLLOWING DISCUSSION WAS NOT INTENDED OR WRITTEN TO BE USED, AND IT CANNOT BE USED, NOR RELIED UPON, BY ANY TAXPAYER FOR THE PURPOSE OF AVOIDING ANY PENALTIES THAT MAY BE IMPOSED UNDER FEDERAL TAX LAW. THE ADVICE WAS WRITTEN TO SUPPORT THE PROMOTION OR MARKETING OF THE TRANSACTIONS OR MATTERS ADDRESSED IN THE DISCUSSION. EACH TAXPAYER SHOULD SEEK ADVICE BASED ON ITS PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.