On December 31, 2014, the Internal Revenue Service (IRS) and the Department of the Treasury (Treasury Department) published final regulations (Final Regulations) that provide guidance to hospitals regarding compliance with Section 501(r) of the Internal Revenue Code (Code). Section 501(r), enacted by the Patient Protection and Affordable Care Act of 2010, established additional requirements that a hospital must meet to be treated as a tax-exempt organization under Section 501(c)(3) of the Code (501(r) Requirements).

The IRS and Treasury Department previously issued proposed regulations in 2012 and 2013 (collectively, the Proposed Regulations) regarding compliance with the 501(r) Requirements. The Final Regulations amend and adopt the Proposed Regulations and finalize certain other regulations pertaining to financial reporting requirements and an excise tax penalty for failure to comply with the 501(r) Requirements. The Final Regulations apply to a hospital’s taxable years beginning after December 29, 2015. Until that time, hospitals may rely on either the Proposed Regulations or the Final Regulations to comply with the 501(r) Requirements.