Tax-exempt organizations have new guidance to follow as they fall under increased scrutiny by lawmakers. On September 30, 2025, the Internal Revenue Service (IRS) and U.S. Treasury Department released the 2025–2026 Priority Guidance Plan, outlining projects aimed at clarifying regulations and tightening compliance in areas such as executive compensation, donor-advised funds, digital assets and retirement plan updates under the SECURE 2.0 Act.
At the same time, a recent House Ways and Means Oversight Subcommittee hearing focused on concerns over whether tax-exempt hospitals are delivering sufficient community benefits central to their tax advantages, signaling potential audits, enforcement actions and even revisions to Form 990. Together, these developments underscore a clear message: transparency and proactive compliance are essential for maintaining tax-exempt status and public trust.
IRS 2025-2026 Priority Guidance Plan
The IRS Priority Guidance Plan is released annually to prioritize and identify tax issues addressed via regulations, revenue rulings, revenue procedures, notices and other guidance.
The 2025-2026 Priority Guidance Plan outlines 105 tax guidance projects the IRS and Treasury Department aim to address from July 1, 2025, to June 30, 2026. Of the 105 tax guidance projects, 11 have been released or published as of August 31, 2025. The Priority Guidance Plan reflects the Treasury Department’s and the IRS’s focus on 5 key areas: implementation of the One Big Beautiful Bill Act, commonly referred to as the OBBBA or OB3, deregulation and burden reduction along with guidance addressing tribal tax issues, digital assets and the SECURE 2.0 Act.
Outlined below are tax guidance projects for tax-exempt organizations.
One Big Beautiful Bill Act
The new guidance outlines priorities for regulations under section 4968 regarding excise tax based on investment income of certain private colleges and universities.
It also broadened guidance under Section 4960 regarding excess compensation paid by applicable tax-exempt organizations, notably expanding the definition of a “covered employee.” The OBBBA expands the 21% excise tax on compensation over $1M to all employees of a tax-exempt organization who provide administrative services.
Deregulation and Burden Reduction
The new guidance also addresses deregulation and burden reduction, with updates to regulations under Section 4945. These regulations have to do with proposed updates to expenditure responsibility requirements. Tax-exempt organizations that pay grants to other tax-exempt organizations or public charities will need to be aware of these updates.
There is continued work towards final regulations under Section 4966 regarding donor-advised funds, including excise taxes on sponsoring organizations and fund management. Proposed regulations were published in November 2023.
Tribal Tax Issues
The new priority guidance includes final regulations under Section 7701 regarding the federal tax treatment of an entity wholly owned by one or more Indian Tribal governments.
Digital Assets
Guidance is also included addressing the tax treatment of transactions involving digital assets. Tax-exempt organizations must report receipt of digital assets on their annual Form 990.
SECURE 2.0 Act
The IRS and Treasury Department published final regulations implementing changes made by the SECURE 2.0 Act, specifically when it comes to updates on catch-up contributions to retirement plans.
In addition, the Priority Guidance Plan includes recommendations on the application and interpretation of the fundamental public policy against racial discrimination, with the consideration of recent caselaw, when determining the eligibility of private schools for tax-exempt status under Section 501(c)(3).
Finally, the implementation plan proposes guidance on the “Johnson Amendment,” which is the statutory prohibition in Section 501(c)(3) barring the participation or intervention in political campaigns.
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House Ways and Means Oversight Subcommittee Hearing
On September 16, 2025, at a House Ways and Means Oversight Subcommittee hearing, several witnesses warned that tax-exempt hospitals are failing to provide their necessary healthcare benefits to their communities on which their tax-exempt status rests. The hearing referenced the following key focus areas:
- Key findings from recent studies: The hearing covered multiple studies that indicate tax-exempt hospitals provide less charity care and community investment than the estimated value of their tax breaks.
- One study cited during the hearing found that between 2020 and 2022, the gap averaged $11.5 billion per year and fewer than half of tax-exempt hospitals gave back to their communities in excess of their tax breaks.
- Issues with current reporting: Tax-exempt hospitals utilize Form 990, Schedule H to report community benefit. The studies found that this reporting is often vague and ambiguous.
- The studies referenced broad categories in this reporting, like money spent on “community health improvement services” and “education,” without specifying what services or education were provided.
- Use of funds: While tax-exempt hospitals received $37.4 billion in tax benefits in 2021, the studies found that instead of prioritizing healthcare benefits to their communities, some hospitals spent funds on:
- Stadium naming rights
- Real estate investments
- Green energy initiatives
- Political activism
- Structural concerns: The hearing also addressed the current structure of Schedule H, which benefits large hospital chains because they are not required to disaggregate benefits provided by individual facilities.
- Regulatory outlook: Tax-exempt hospitals reporting on Schedule H can expect increased audits and enforcement. This comes in the wake of studies suggesting tax-exempt hospitals count activities that are unrelated to healthcare toward meeting the community benefit standard. This is due to vague legal requirements in reporting.
- Future changes: The IRS is expected to release a completely revised Form 990 within the next 12-36 months. This updated form would incorporate greater transparency on Schedule H reporting for tax-exempt hospitals.
Conclusion
The landscape for tax-exempt organizations is shifting rapidly, with the IRS and Treasury Department prioritizing new guidance alongside increased scrutiny of community benefits reporting by tax-exempt hospitals. Tax-exempt entities should take proactive measures to safeguard their status and reinforce public trust in their mission-driven work. Withum’s Healthcare Services Team can help walk you through these updates and answer questions about how to remain compliant amidst evolving expectations.
Authors: Nick Perkins | [email protected] and John Smith | [email protected]
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