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Polsinelli - Nonprofit Organizations Polsinelli - Nonprofit Organizations


January 2015


IRS Issues Long-Awaited Final Regulations for Charitable Hospitals







For more information about this alert, please contact:


Thomas J. Schenkelberg

Practice Area Chair



Douglas K. Anning

Practice Area Vice Chair



Jonathan S. Blum



John F. Crawford



Virginia C. Gross



Bruce R. Hopkins



Alicia M. Kirkpatrick




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To learn more about our Nonprofit Organizations practice, click here.



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The IRS has published final amended regulations that are consistent with previous guidance but provide additional clarity and rules specific to charitable hospitals under Section 501(r) of the Internal Revenue Code of 1986. The regulations, which may be accessed here, were published on Dec. 31, 2014, and become effective for tax years beginning after Dec. 29, 2015.

To see previous Polsinelli Updates on Section 501(r) click here and here.

What You Should Do

Charitable hospitals should carefully review the final regulations and ensure that they will be in compliance by the tax year beginning after Dec. 29, 2015. For tax years beginning before Dec. 29, 2015, charitable hospitals may continue to rely on a reasonable, good faith interpretation of Section 501(r), which includes compliance with the previously issued proposed regulations or with the final regulations.


The Patient Protection and Affordable Care Act added Section 501(r) to the Code, introducing new requirements for charitable hospitals to be described in Section 501(c)(3), and adding new reporting requirements and excise taxes. Specifically, Section 501(r) requires charitable hospitals that operate one or more hospital facilities to perform the following on a facility-by-facility basis:

  • Conduct a community health needs assessment ("CHNA") and adopt an implementation strategy to meet the community needs identified by the CHNA at least once every three years;
  • Establish a written financial assistance policy ("FAP") and emergency medical care policy;
  • Limit amounts charged for emergency or other medically necessary care provided to individuals eligible for assistance under the FAP; and
  • Make reasonable efforts to determine whether an individual is eligible for assistance under the FAP before engaging in an extraordinary collection action ("ECA").

Final Regulations

While the final regulations are generally consistent with previous IRS guidance, the final regulations make several changes and clarifications to the proposed regulations, including the following highlights:

To download or print this alert, click here.

For More Information

While this update is intended to highlight notable changes and clarifications provided in the final regulations, it is not intended to serve as a complete summary and analysis. If you have questions regarding the final Section 501(r) regulations or how they may affect your hospital, please contact:












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* Law360, March 2014
** The American Lawyer 2013 and 2014 reports







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