Recognizing the increased burdens that the COVID-19 pandemic has placed on hospitals, the IRS has relaxed its deadline for meeting the Community Health Needs Assessments (CHNA) requirements per Internal Revenue Code Section 501(r)(3). See Notice 2020-56. To maintain their tax-exempt status, non-profit entities that operate hospitals must meet additional requirements, one of which relates to the conduct of a Community Health Needs Assessment and the adoption of an implementation strategy to meet the community health needs identified in the CHNA.
The new deadline is December 31, 2020—previously, the IRS extended it to July 15, 2020.
Tax-exempt hospital organizations filing Forms 990 are ordinarily required to indicate on Schedule H if they have conducted a CHNA in the current taxable year or in either of the two immediately preceding taxable years and if they have adopted an implementation strategy to meet the significant health needs identified through the most recently completed CHNA. Failure to do so may affect the hospital’s tax-exempt status and the IRS may impose a $50,000 tax on a hospital organization for each hospital facility that fails to meet either or both of these requirements.
IRS requires that hospitals using the relief in Notice 2020-56 that file Form 990 prior to December 31, 2020, should state in the narrative of Part V.C. of Schedule H (Form 990) that they are eligible for and are relying on the relief provided in the Notice 2020-56, and should not be treated as failing to meet the requirements of section 501(r)(3) prior to December 31, 2020.
In practice this means, “for example, if a [tax exempt hospital] was required to conduct a CHNA by April 30, 2020 (the end of the third taxable year) and was required to adopt an implementation strategy by September 15, 2020, the [tax exempt hospital] now has an extension until December 31, 2020, to complete both steps.” Notice 2020-56. The tax exempt hospital cannot perform either step in a later tax year after December 31, 2020.
If you have any questions or would like more information, please contact Emily L. Burdick in the Detroit office at (313) 223-3127 or any other member of the Dickinson Wright Tax Team.