In discussions about the increased and expanded compliance and enforcement efforts of the IRS, most of the attention has been directed towards wealthy individuals, high-income earners, partnerships and large corporations. These moves were prompted by the funding provided under the Inflation Reduction Act[i]. However, another sector that is under increased scrutiny, albeit less talked about, is the healthcare industry, particularly, non-profit hospitals.
Non-profit hospitals enjoy tax-exempt status on the understanding that they would invest a certain percent of their income back into the community in the form of community benefits. Such benefits could range from low-cost or free care to low-income individuals, to health education and research.
Interestingly, a number of senators have expressed concern about a perceived shortfall in the delivery of these expected community benefits by non-profit hospitals. Senators argue that these organisations may not be living up to their commitments. As the saying goes, if the price of tax exemption is community benefit, some senators think these hospitals are not providing enough change.
The legislation covering the delivery of these benefits by non-profit hospitals is, in the opinion of many legal experts, ambiguous and could benefit from reforms.
In light of these recent discussions, it will be interesting to see how this scrutiny of non-profit hospitals by the IRS, and by the legislature, will play out. Legal professionals within these organizations and expert legal guidance to these hospitals should keep a keen eye on any changes in this area.
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