On July 14, 2020, the Internal Revenue Service (“IRS”) released Notice 2020-56, which provides additional relief to tax-exempt hospital organizations.
Due to the burden the current pandemic has placed on hospitals, Notice 2020-56 further extended the deadline for hospital organizations to conduct their Community Health Needs Assessment (“CHNA”) and adopt their implementation strategy to December 31, 2020.
Background
Internal Revenue Code (“IRC”) §501(r)(3) requires a hospital organization to conduct a CHNA at least once every three years. In addition, hospital organizations must adopt an implementation strategy to meet the needs identified through its CHNA.
Conducting a CHNA is a comprehensive and cumbersome process which requires hospital organizations to do the following: (1) define the community served; (2) assess the health needs of the community; (3) solicit and consider input received from persons who represent the broad interests of the community, including those with special knowledge of or expertise in public health; (4) document the CHNA in a written report that is adopted by an authorized body of the hospital facility and (5) make the CHNA report widely available to the public.
In addition, a hospital organization’s implementation strategy must be a written plan that, for each significant health need identified, either: (1) describes how the hospital facility plans to address the health need, or (2) identifies the health need as one the hospital facility does not intend to address and indicates why it does not intend to address the particular health need. An authorized body of the hospital facility must adopt the implementation strategy. Typically, this must be done on or before the 15th day of the fifth month after the end of the taxable year in which the hospital facility finishes conducting the CHNA.
Notice 2020-56
IRS Notice 2020-23 originally postponed the deadline for performing any CHNA requirement that is due to be completed on or after April 1, 2020, and before July 15, 2020, to July 15, 2020. Notice 2020-56 further postpones this deadline until December 31, 2020.
Form 990
The IRS Notice provides that hospitals that file Form 990 prior to December 31, 2020, should state in the narrative of Part V.C. of Schedule H (Form 990) that they are eligible for and are relying on the relief provided in Notice 2020-56, and should not be treated as failing to meet the requirements of IRC §501(r)(3) prior to December 31, 2020.
Conclusion
IRC §4959 imposes a $50,000 excise tax on a hospital organization that fails to meet either or both of the section 501(r)(3) CHNA requirements with respect to any taxable year. Additionally, tax-exempt hospital organizations that do not comply with these requirements may even jeopardize their tax-exempt status. Therefore, the IRS Notice 2020-56 extension provides much-needed relief to hospitals in the midst of the current pandemic.
Authors: Hayley Shulman, CPA | [email protected] and Johanna Orellana | [email protected]
Healthcare Services
