IRS puts spotlight on tax-exempt status

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In a move that could signal more scrutiny of not-for-profits in the long-term care industry, the Internal Revenue Service recently launched a wide-ranging investigation of nonprofit hospitals in an effort to see if any are breaking the rules for tax-exempt status.

Specifically, the agency is focusing on whether the nonprofit healthcare facilities are denying care to people without insurance and if they provide significant amounts of charity care.

More than 550 tax-exempt hospitals were sent an IRS questionnaire, which seeks detailed information about their operations and billing practices, as well as specifics about the compensation of top hospital executives.

It is possible responses to the questionnaires will be used to change or clarify standards for nonprofits, according to Lois G. Lerner, director of the exempt organizations division with the IRS. Current tax-exempt standards have changed very little since 1969.

Formal audits also may result from a review of questionnaires, according to the IRS. Nearly 7,000 entities are listed as nonprofit hospitals and health care organizations with the IRS. In the past 10 years, only 375 of them have been audited.
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