The Internal Revenue Service (IRS) and The Department of Treasury (Treasury) published a notice addressing the Affordable Care Act (ACA) provisions pertaining to community health needs assessment (CHNA) requirements described in section 501(r)(3) of the Internal Revenue Code and related excise tax and reporting obligations, applicable to hospital organizations that are or want to be exempt under 501(c)(3). Although the CHNA requirements are not effective until taxable years beginning after March 23, 2012, Treasury and the IRS published the notice regarding the requirements because some hospital organizations may choose to start the process of conducting CHNAs and developing implantation strategies in advance of the effective date. A hospital organization may rely on the regulatory provisions described in the notice with respect to any CHNA made available to the public, and any implementation strategy adopted, on or before the date that is six months after the date further guidance on the CHNA requirements is issued.
According to ACA sections 501(r) and 4959, applicable to hospital organizations, these entities will not be treated as described in section 501(c)(3) unless they satisfy the requirements in section 501(r), including those pertaining to CHNA. A hospital organization is (1) one that operates a facility required by a state to be licensed, registered, or similarly recognized as a hospital (state-licensed hospital facility), and (2) any other organization that the Secretary determines has the provision of hospital care as its principal function or purpose constituting the basis for its exemption under section 501(c)(3). Section 4959 imposes a $50,000 excise tax on a hospital organization that fails to meet the CHNA requirements for any taxable year. A hospital organization must report the amount of any excise tax imposed on it under section 4959 of its annual Form 990.
Hospital Organizations Required to Meet CHNA Requirements: According to the notice, hospital organizations must satisfy CHNA requirements. Prior to the effective date of future guidance issued by Treasury and the IRS determining whether any categories of organizations have the provision of hospital care as their principal exempt function or purpose, only organizations operating state-licensed hospital facilities will be considered hospital organizations. The definition of a hospital organization would include any organization described in section 501(c)(3) that operates a state-licensed hospital facility through a disregarded entity, joint venture, limited liability company, or other entity as a partnership for federal income tax purposes.
Hospital Organizations with Multiple Facilities: A hospital organization operating multiple hospital facilities would be required to conduct a CHNA and adopt an implementation strategy for each hospital facility it operates, although these organizations would be able to collaborate with other organizations.
Documentation of a CHNA: Hospital organizations will be required to conduct a CHNA at least once every three taxable years. Treasury and the IRS intend to require that a hospital organization document a CHNA in a written report that includes the following information:
- A description of the community served by the hospital facility.
- A description of the processes and methods used to conduct the assessment.
- A description of how the hospital organization took into account input from persons who represent the broad interests of the community served by the hospital facility.
- A prioritized description of all the community health needs identified through the CHNA, as well as a description of the process and criteria used in prioritizing such health needs.
- A description of the existing health care facilities and other resources within the community available to meet the community health needs identified through the CHNA.
How and When a CHNA Is "Conducted": A CHNA would be considered "conducted" in the taxable year that the written report of its findings is made widely available to the public. A CHNA would satisfy requirements with respect to a hospital facility only if it identifies and assesses the health needs of, and takes into account input from persons who represent the broad interests of, the community served by that specific hospital facility.
Community Served by a Hospital Facility: A hospital organization may take into account all of the relevant facts and circumstances in defining the community a hospital facility serves.
Persons Representing the Broad Interests of the Community: Those who represent the broad interests of the community served by the hospital facility must include those with special knowledge of or expertise in public health. In order to meet this requirement, a CHNA must at a minimum take into account input from:
- Persons with special knowledge of or expertise in public health
- Federal, tribal, regional, state, or local health or other departments or agencies, with current data or other information relevant to the health needs of the community served by the hospital facility
- Leaders, representatives, or members of medically underserved, low-income and minority populations and populations with chronic disease needs in the community served by the hospital facility.
Making a CHNA Widely Available to the Public: A CHNA must be made widely available to the public. A hospital organization will be considered to have made a hospital facility's CHNA widely available to the public by posting the written report of the CHNA findings on the hospital facility's website or, if the hospital facility does not have its own website separate from the hospital organization that operates it, on the hospital organization's website.
Alternatively, the written report may be posted on a website established and maintained by another entity as long as either the hospital organization or facility provides a link to the website on which the report is posted. If neither the hospital organization nor the facility has a website, any individual requesting a copy of the written report must be provided with the direct website address or link where the document can be accessed.
A hospital organization must make a CHNA for a hospital facility widely available to the public until the date on which it makes subsequent CHNA for that hospital facility widely available to the public.
Implementation Strategy: A hospital organization must meet the requirements to adopt an implementation strategy separately with respect to each hospital facility it operates. An implementation strategy for a hospital facility would be defined as a written plan that addresses each of the community health needs identified through a CHNA for the facility. A hospital organization would be required to attach to its annual Form 990 the most recently adopted implementation strategy for each of its hospital facilities. To ensure that the hospital organization meets the CHNA requirements separately with respect to each hospital facility and that the implementation strategy for each hospital facility is clearly presented and easily accessible, Treasury and the IRS would require a hospital organization to document separately the implementation strategy for each of its hospital facilities.
How and When an Implementation Strategy Is Adopted: An implementation strategy would be considered adopted on the date it is approved by an authorized governing body of the hospital organization. Additionally, a hospital organization would be required to adopt an implementation strategy to meet the community health needs identified in a CHNA by the end of the same taxable year in which it conducts that CHNA.
Excise Tax on Failures to Meet CHNA Requirements: Treasury and the IRS intend to impose the $50,000 excise tax on any hospital organization that fails to satisfy the CHNA requirements with respect to a hospital facility in any three-year period. The excise tax would be applied separately with respect to each hospital facility's failure to meet the CHNA requirements.
Reporting Requirements Related to CHNAs: The ACA added two specific reporting requirements for hospital organizations: a hospital organization is required to report on its annual Form 990 the amount of excise tax imposed on the organization, and also provide a description of how the organization is addressing the needs identified in each CHNA, along with a description of any needs that are not being addressed and the reasons why.
In addition to requiring a hospital organization to attach its most recently adopted implementation strategy for each of its hospital facilities to its annual Form 990, Treasury and the IRS intend to allow a hospital organization to attach the same implementation strategy to the form if it only conducts one CHNA and adopts one implementation strategy for a hospital facility in a given three-year period.
Treasury and the IRS intend to require a hospital organization to conduct a CHNA and adopt an implantation strategy for each of its hospital facilities to its annual Form 990, by the last day of its first taxable year beginning in March 23, 2012.
Request for Comments
Treasury and the IRS request for comments regarding the CHNA requirements described in this notice. Comments should be submitted on or before September 23, 2011.
Read notice 2011-52.
Publication Date: Tuesday, September 27, 2011