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Treasury Inspector General for Tax Administration

Press Release


June 27, 2012
TIGTA - 2012-26
Contact: David Barnes
(202) 622-3062
David.barnes@tigta.treas.gov
TIGTACommunications@tigta.treas.gov

Affordable Care Act: While Much Has Been Accomplished, the Extent of Additional Controls Needed to Implement Tax-Exempt Hospital Provisions of ACA Is Uncertain, TIGTA Finds

WASHINGTON – The Internal Revenue Service (IRS) has made progress establishing controls to determine whether tax-exempt hospitals comply with provisions of the Affordable Care Act (ACA) and has already opened reviews of the community benefit activities of approximately 1,700 health care organizations.

However, it is difficult to determine at this point how much additional work will be required of the Exempt Organizations function to fully implement controls because legal guidance has not been published, according to a new report publicly released today by the Treasury Inspector General for Tax Administration (TIGTA).

The Patient Protection and Affordable Care Act (ACA) contains provisions that impact the IRS and tax-exempt hospital organizations. TIGTA initiated its audit as part of its efforts to evaluate the IRS’s plans for implementing the various ACA tax provisions. The overall objective was to evaluate the IRS’s progress in establishing controls to determine whether tax-exempt hospitals comply with select provisions of the ACA.

“While the IRS has made progress establishing controls to assess tax-exempt hospital organization compliance, additional work will be required once legal guidance is published,” said J. Russell George, Treasury Inspector General for Tax Administration. “Until such guidance is published, the public cannot be assured that the IRS has implemented all controls to ensure compliance with ACA provisions designed to protect those served by tax-exempt hospitals.”

The legal guidance, which is currently under review, would provide the Exempt Organizations function with a basis for identifying additional controls needed to determine whether tax-exempt hospitals comply with the ACA.

In addition, the Department of the Treasury will be required in the near future to send its first annual report to Congress regarding tax-exempt hospitals. The IRS is responsible for working with the Department of Health and Human Services to gather the data for this report. While communication has been established, the format and timing of receipt of data have not been formalized.

TIGTA recommended that IRS management work with the Department of the Treasury to establish a Memorandum of Understanding with the Department of Health and Human Services. The

Memorandum of Understanding should take into consideration when information for the annual report to Congress should be received by the IRS and the proper format of the data to ensure it will be timely and usable for the report to Congress.

In response to TIGTA’s report, IRS management agreed with the recommendation. The IRS plans to work with the Department of the Treasury to establish a Memorandum of Understanding with the Department of Health and Human Services that takes into consideration when information for the annual report to Congress should be received and the proper format of the data to ensure it will be timely and usable for the report to Congress..

Read the report.

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Note: The difference between the date TIGTA issues an audit report to the Internal Revenue Service and the date TIGTA publicly releases the report is due to TIGTA's internal review process to ensure that public release is in compliance with Federal confidentiality laws.

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