IRS Revokes Hospital’s Tax Exemption for Failure to Conduct Community Health Assessment

August 30, 2017 | Strategic Insights for Health System


​The Internal Revenue Service (IRS) has revoked a hospital's tax exemption because it failed “to conduct a community health needs assessment, adopt an implementation strategy and make it widely available to the public," according to a letter posted on the IRS website. The hospital had failed to comply with Internal Revenue Code section 501(r), which requires hospitals to conduct a community health needs assessment and post it on their website—neither of which was done by the hospital. According to an August 21, 2017, article in Accounting Today, the unidentified hospital appears to be a government hospital that had decided that the community health needs assessment was unnecessary. The article states that the IRS's greater focus on section 501(r) may pose wider implications for other tax exempt organizations, and warns such organizations not to overlook IRS's regulations. “The IRS is surfing the web and finding out whether a hospital is in compliance or not in compliance," said Laura Kalick, tax consulting director for BDO's Healthcare and Nonprofit & Education practices. “There are many hospitals out there that are not completely in compliance with the rules.

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