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Treasury Inspector General for Tax Administration

Press Release

September 26, 2011
TIGTA - 2011-60
Contact: Karen Kraushaar
(202) 622-6500

TIGTA Issues Report On the IRSís Planning for the New Health Care Law Impacting Tax-Exempt Organizations

WASHINGTON -- The Internal Revenue Service (IRS) division responsible for tax oversight of pension plans, tax-exempt organizations and government entities effectively planned for the implementation of the new health care law, according to a new report from the Treasury Inspector General for Tax Administration (TIGTA).

ďThis is the first in a series of reviews we will be conducting on the IRSís implementation of the new health care law,Ē said J. Russell George, Treasury Inspector General for Tax Administration. ďAs 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,Ē added George.

The IRSís Tax Exempt and Government Entities (TE/GE) Division is responsible for nine provisions of the Patient Protection and Affordable Care Act (ACA) that could impact entities such as tax-exempt hospitals. TIGTAís review specifically focused on TE/GEís planning for the implementation of the Small Employer Health Care Tax Credit 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 Tax Year 2010. The IRS revised the Exempt Organization Business Income Tax Return (Form 990-T); made programming changes to support processing of the credit for tax-exempt organizations; and created the Credit for Small Employer Health Insurance Premiums (Form 8941) and instructions to allow small employers, including tax-exempt organizations, to calculate the credit. The TE/GE Division began performing compliance examinations on selected returns from taxexempt organizations claiming the Small Employer Health Care Tax Credit.

The Credit 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 through 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 staff began conducting triennial reviews of the community benefit activities of tax-exempt hospitals. Community benefits activities are tax-exempt hospital programs and services that promote the health of the community or communities served by the organizations. As of April 30, 2011, TE/GE staff had completed 570 of the 1,700 reviews expected to be completed by the end of 2011.

TIGTA did not make any recommendations to the IRS.

Read the report.


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