The Affordable Care Act contains numerous new requirements for exempt hospitals. One of them is the requirement for an exempt hospital to conduct a community health needs assessment (CHNA) every three years and to adopt implementation strategies to meet the needs that the assessment identifies.
The clock is already ticking. The assessment is required every three years for tax years beginning after March 23, 2012 and the first CHNA should have been completed no later than the first tax year beginning after March 23, 2013.
It’s that time again! Three years has quickly come and gone. It is time to update your CHNA. Failure to do so can result in a $50,000 penalty and possible revocation of exempt status.
The IRS recently issued regulations on how and when to report the failure to comply with this requirement and pay the resulting excise tax. Exempt hospitals that do not meet the CHNA requirements must file Form 4720 by the fifteenth day of the fifth month after the end of the tax year in which the failure occurs – the same date as the initial due date of its Form 990. IRS has reiterated that it can revoke the exempt status of a hospital that fails to meet all of the requirements of section 501(r) and has indicated that due consideration would be given to all of the facts and circumstances, including whether or not there were previous failures, the size, scope, and significance of the failures, and the reasons behind the failures. Minor and inadvertent errors that are due to reasonable cause generally will not be considered failures for purposes of revocation of exempt status so long as action is taken to correct them as soon as they are discovered, although the $50,000 excise tax may still apply.
Contact Adam Shewmaker at email@example.com if you have questions or would like our assistance compiling and updating your CHNA.