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Partial Relief for Tax-Exempt Hospitals on Form 990 for 2010

June 14, 2011

Authors: Alan E. Lieberman

On June 9, 2011, in IRS Announcement 2011-37, the Internal Revenue Service (the "IRS") announced that tax-exempt hospitals will not be required to complete Part V, Section B ("Section B") of the Schedule H, Hospitals, of the 2010 Form 990, Return of Organization Exempt From Income Tax.  A tax-exempt hospital will be required to complete the remainder of Schedule H, but Section B will be optional for the tax year beginning in 2010.  In addition, if the hospital's tax year began after March 23, 2010, the hospital will be required to attach its most recent audited financial statements to its 2010 Form 990.

The relief afforded by IRS Announcement 2011-37 relates to the new requirements imposed on tax-exempt hospitals pursuant to the Patient Protection and Affordable Care Act (the "Affordable Care Act").  In general, the Affordable Care Act requires that a tax-exempt hospital:  (i) conduct a community health needs assessment every three years; (ii) establish a qualified financial assistance policy; (iii) limit certain charges for emergency and medically necessary care provided to individuals who are eligible for assistance under the qualified assistance policy; and (iv) abstain from engaging in certain extraordinary billing and collections activities (the “Requirements”).  Section B of the Form 990's special Schedule H for tax-exempt hospitals was drafted for the express purpose of determining whether a hospital was in compliance with these new requirements. 

Although Schedule B will be optional for purposes of the Form 990 for the 2010 fiscal year, tax-exempt hospitals should be aware that the reporting relief does not affect or delay the effective dates of the new exemption requirements (most of which are already in effect).  Thus, tax-exempt hospitals are advised to review Schedule B to confirm that the hospital is in compliance with the new Requirements.

If you have any questions, please contact Alan Lieberman at 860-251-5801 or alieberman@goodwin.com.

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