On March 10, 2015, the Internal Revenue Service (IRS) released Revenue Procedure 2015-21 (Revenue Procedure), which will be officially published on March 30, 2015, in Internal Revenue Bulletin 2015-13. The Revenue Procedure provides guidance for charitable hospital organizations to correct and disclose certain failures to comply with Section 501(r) of the Internal Revenue Code (Code). It also finalizes, with minor changes, the proposed revenue procedure issued in Notice 2014-3 (Notice).

BACKGROUND -

As described in a January 2015 edition of the Health Law Pulse, Section 501(r) requires that a hospital organization organized under 501(c)(3) of the Code conduct a community health needs assessment (CHNA), adopt financial assistance and emergency medical care policies, and limit the charges for emergency or medically necessary care to patients eligible for financial assistance. Failure to comply with all of the Section 501(r) requirements may result in the revocation of a hospital organization’s Section 501(c)(3) status, and failure to conduct a CHNA in accordance with Section 501(r)(3) will subject the hospital organization to an excise tax of $50,000. Regulations under Section 501(r) (Section 501(r) Regulations) allow a hospital organization to maintain its tax-exempt status by correcting and disclosing certain failures to comply with Section 501(r) requirements. The Revenue Procedure outlines the procedures that a hospital organization must follow to correct and disclose its failure to comply in accordance with the Section 501(r) Regulations.