IRS Issues Proposed Regulations Regarding Community Health Needs Assessments and Sanctions for Violations of the Section 501(r) Requirements

by King & Spalding

On April 5, 2013, the IRS published a proposed rule in the Federal Register (the Proposed Rule) interpreting Internal Revenue Code section 501(r)’s community health needs assessment (CHNA) requirements applicable to tax-exempt hospitals described by section 501(c)(3) and providing guidance regarding the consequences for failure to meet the requirements of section 501(r).  The Proposed Rule also provides guidance regarding when a section 501(c)(3) hospital organization will be treated for purposes of section 501(r) as "operating" a hospital held in a joint venture.

The Affordable Care Act created a new Internal Revenue Code section 501(r) requiring charitable hospital organizations to comply with new requirements in order to be treated as tax-exempt organizations under section 501(c)(3).  The Proposed Rule provides guidance on one such requirement that a hospital organization conduct a CHNA at least once every three years and adopt an implementation strategy to meet identified community health needs.  The Treasury Department and the IRS previously published proposed rules defining, among other terms, “hospital organization” and “hospital facility,” and providing guidance on the other requirements related to financial assistance and billing and collection efforts.  Other than making minor revisions to the definitions  of “hospital facility” and “hospital organization,” the Proposed Rule generally does not address these other requirements. 

With respect to CHNA requirements, the IRS had previously issued guidance addressing the CHNA requirements in July 2011 in Notice 2011-52 (the Notice), and the IRS believes that the Proposed Rule is generally consistent with the anticipated rules described in the Notice taking into account comments received in response to the Notice.  Among other provisions, the Proposed Rule provides a hospital with flexibility to take into account all relevant facts and circumstances when defining the community it serves and defines the persons who represent the broad interests of the community that the hospital must take into account when conducting its CHNA.  Notably, the Proposed Rule only requires a CHNA to identify, prioritize and assess significant health needs rather than all of the community health needs.  Accordingly, an implementation strategy must only address the significant health needs identified through the CHNA.  A hospital is not required to develop a strategy or plan to address each identified significant health need.  Rather, with respect to each significant health need identified, the hospital must either describe how it plans to address the health need or identify the health need as one the hospital does not intend to address and explain why. 

The IRS’ prior Notice informed hospitals that they could rely on the provisions in the Notice until six months after the date that further guidance is issued on the CHNA requirements.  As this Proposed Rule was published on April 5, 2013, the IRS reminds hospital organizations that they may continue to rely on the guidance in Notice 2011-52 addressing the CHNA requirements “for any CHNA made widely available to the public, and any implementation strategy adopted, on or before October 5, 2013.” 

The Proposed Rule also addresses the consequences for failing to meet the 501(r) requirements, including the requirements relating to financial assistance policies, and billing and collection activities.  If an omission or error is “minor, inadvertent, and due to reasonable cause, and the hospital facility corrects such omission or error as promptly after discovery as is reasonable given the nature of the omission or error,” then the omission or error will not be considered a failure to meet the section 501(r) requirements.  With respect to omissions or errors that rise above the level of minor and inadvertent, but are not willful or egregious, “prompt discovery and correction of such omissions or errors” will be excused if the hospital corrects and provides reasonable and appropriate disclosure.  It is expected that revocation of tax-exempt status for failure to meet section 501(r) will only occur if a hospital’s failures to do so are willful or egregious, based on the facts and circumstances.  The Proposed Rule also addresses the consequences if a hospital organization that operates more than one hospital facility fails to satisfy one or more of the requirements of section 501(r) separately with respect to one hospital facility.

The IRS intends to finalize this most recent Proposed Rule in conjunction with its finalization of the prior proposed regulations issued last summer interpreting section 501(r)’s requirements regarding financial assistance policies, and billing and collection activities.  The IRS continues to review comments received with respect to the prior proposed regulations, and the IRS will accept comments regarding the new Proposed Rule until July 5, 2013.  Click here to view the Proposed Rule.

Reporters, Constance F. Dotzenrod, Atlanta, +1 404 572 3585,, and Kate Stern, Atlanta, +1 404 572 4661,

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© King & Spalding | Attorney Advertising

Written by:

King & Spalding

King & Spalding on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.