2023 Marcum Year-End Tax Guide

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The committee is considering whether the amount of community benefit is sufficient to support the enormous tax benefit provided to tax-exempt organizations. Stories such as aggressive billing practices and high executive compensation in hospitals continue to run in the media. The committee report cited during the hearing estimates the potential tax benefit of tax exemption for hospitals is approximately $28 billion. With $28 billion in estimated tax savings and $100 billion in COVID-19 government funding, have tax-exempt organizations kept pace with their charity care and community benefit? Are they giving back to their communities? In speaking with tax-exempt hospitals, organizations feel they are working hard to support their communities. The cost of supplies and compensation has increased, and all revenue is needed to provide care to those with and without means in the community. Additionally, the House Ways and Means Committee is considering the compensation given to executives, aggressive collection practices, and, more importantly, that the amount of community benefit reported on Form 990, Schedule H has not substantially changed from when reporting began in 2008. Should community benefit percentages have gone up if the hospital was given extra

COVID funding? There is also concern about the lack of uniformity in the method to calculate the charitable care percentage. Besides the community benefit figure reported on Schedule H, Part 1, Line 7, there are also community building activities reported on Schedule H, Part II. While these activities do not increase a hospital’s community benefit figure, they do provide additional information on how the organization is supporting the community in such areas as physical improvements and housing, economic development, community support, environmental improvements, leadership development and training for community members, coalition building, community health improvement advocacy, workforce development, and other activities that protect or improve the community’s health or safety. This area is often overlooked on the form because the time involved in quantifying the information is significant, and it does not impact the community benefit percentage. It may be worth showing the depth of services your hospital provides and your commitment to the community. Now is the time to scrub your community benefit analysis to make sure you are maximizing your community benefit percentage. The calculation of means-tested

programs is mathematical. However, time should be taken to analyze it. The best approach is to meet with some individuals from operations, development, and finance to think through activities that meet the community benefit criteria. Some items to consider: • Could your previously reported community-building activities be considered community health improvement services? • Have you reviewed your subsidized health services? Care should be given to determine both departments that generate a loss and a need in the community to maintain the activity. • Do you have any sort of health professions education? Do you have student nurses, residents, student therapists, etc.? • Are your employees participating in any charitable activities? Have you quantified the time involved? • Does your organization make any charitable donations? With the increased scrutiny of the amount of community benefit and charitable care provided compared to the tax benefit received, your organization should make sure it is quantifying your total community benefit.

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