IRS Praised For Tax Oversight Of Health Care Law

by Mike Godfrey, Tax-News.com, Washington

28 September 2011

The division of the United States Internal Revenue Service (IRS) responsible for tax oversight of tax-exempt organizations has made effective plans for the implementation of the new health care law, according to a report from the Treasury Inspector General for Tax Administration (TIGTA).

“This is the first in a series of reviews we will be conducting on the IRS’s implementation of the new health care law,” said J. Russell George, the TIGTA. “As TIGTA has noted, implementation of this new law, with its 42 provisions that will either add to or amend the internal revenue code, represents one of the major management challenges now facing the IRS. I am pleased that the IRS has begun this first step effectively.”

The IRS’s Tax Exempt and Government Entities (TE/GE) Division is responsible for the nine provisions of the Patient Protection and Affordable Care Act (ACA) that could impact entities such as tax-exempt hospitals. TIGTA’s review specifically focused on TE/GE’s planning for the implementation of the Small Employer Health Care Tax Credit (SEHCTC) and for the additional requirements for tax-exempt hospitals, two of the nine provisions which took effect in 2010.

TIGTA found that the TE/GE Division has completed most of its initial planning and is implementing the provisions of the ACA that went into effect in 2010. For example the IRS has revised the relevant tax return, made programming changes to support processing of the credit for tax-exempt organizations, and created instructions to allow small employers, including tax-exempt organizations, to calculate the SEHCTC.

The SEHCTC is designed to encourage small employers, including tax-exempt organizations, to offer health insurance coverage for the first time or maintain coverage they already have. The TE/GE Division began conducting compliance examinations of selected tax-exempt returns claiming this credit in early 2011, and had initiated compliance examinations on 272 returns from tax-exempt organizations by May 21, 2011.

The ACA also established additional requirements tax-exempt hospitals must meet in order to maintain their tax-exempt status. These requirements include implementing a financial assistance policy, limiting charges for emergency care, complying with new billing and collection requirements, and conducting community health needs assessments. These requirements affect approximately 5,100 tax-exempt hospitals.

As required by the law, TE/GE Division staff commenced triennial reviews of the community benefit activities of tax-exempt hospitals. Community benefits activities are tax-exempt hospital programmes and services that promote the health of the community or communities served by the organizations. As at end-April 2011, the Division’s staff had already completed 570 of the 1,700 reviews it is expected to complete by the end of the year.

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