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IRS Issues Proposed Regulations Providing Guidance for Charitable Hospitals

Reprinted from Exempt Organizations Advisory

The IRS has issued proposed regulations under section 501(r) for charitable hospitals. These proposed regulations provide guidance for the definition of hospital facilities, financial assistance policies, limitations on charges, and billing and collections.

Section 501(r) was enacted by the Patient Protection and Affordable Care Act. It adds requirements for hospital organizations that are exempt under section 501(c)(3). The proposed regulations provide guidance in four areas.

  • The proposed regulations provide definitions for hospital facilities and hospital organizations, and provide guidance on hospital facilities located outside of the United States, hospitals operated through a disregarded entity or partnership, and government hospital organizations.
  • The proposed regulations require hospital organizations to establish written financial assistance policies and written emergency care policies.
  • Hospital organizations covered by section 501(r) may not charge an individual eligible for a financial assistance policy more than the amount generally billed to individuals with insurance covering their health care. The proposed regulations provide further guidance on the calculation of an amount generally billed, and on the prohibition of gross charges.
  • The proposed regulations provide guidance on the billing and collection requirements of section 501(r)(6). A hospital organization may not engage in extraordinary collection efforts against an individual before it determines if that individual is eligible for a financial assistance policy.

The proposed regulations that relate to financial assistance policies and billing and collections will be effective for taxable years beginning after the date the rules contained in the proposed regulations are published as final regulations. Section 501(r), with the exception of section 501(r)(3), applies to taxable years beginning after March 23, 2010. Section 501(r)(3) applies to taxable years beginning after March 23, 2012.

The IRS has requested comments on the regulations, and added a list of specific questions on which it requests comments. Comments are due 60 days after the Federal Register publication of the proposed regulations. The proposed regulations can be found here.

Catherine W. Wilkinson and Suzanne Ross McDowell, Steptoe & Johnson
© 2012, Steptoe & Johnson LLP, 1330 Connecticut Ave., N.W., Washington, D.C. 20036. All rights reserved. Reprinted from Exempt Organizations Advisory, June 22, 2012.

Catherine W. Wilkinson is a certified public accountant, practicing in the Tax group of the Washington-based law firm of Steptoe & Johnson LLP. Suzanne Ross McDowell is a partner in the Washington office, where she focuses on the law of tax-exempt organizations with particular emphasis on tax, corporate governance, and commercial transactions. Exempt Organizations Advisory summarizes legal developments of interest to Steptoe & Johnson's exempt organization clients and friends of the firm. It is published on a periodic basis as developments warrant.

Topics: Legal