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®: CRE Regulatory Action of the Week

Treasury and IRS Reviewing Nonprofit Hospital Tax Exemption
In recent years the justification for the federal tax exemption for nonprofit hospitals has come under Congressional and IRS scrutiny to see whether nonprofits provide "community benefits" commensurate with the value of their tax exemption.

In May 2006, IRS began its review by issuing a questionnaire to hundreds of nonprofit hospitals, asking for details on their "community benefits" and executive compensation. IRS is now examining the responses, and might issue further questionnaires.

Recently, the Treasury Inspector General for Tax Administration issued an audit report on IRS progress with its review. At present, IRS plans to prepare an interim report analyzing the responses to its questionnaire by July 2007. It has not yet determined whether this report will be public. A final public report is planned for September 2008, and might be followed by a supplemental report and plans for next steps.

Due to the importance of this issue, CRE has sent IRS its comments on a number of studies pertaining to nonprofit hospitals and community benefits, illustrating Data Quality issues with such studies and urging IRS to exercise caution before relying on them.

  • Click here to read the Report of the Treasury Inspector General for Tax Administration
  • Click here to read the CRE Data Quality comments to IRS