Tavares, FL - Nov. 6, 2011 - The Illinois State government just revoked property tax exemptions for some hospitals there because they were not providing enough indigent care. This New York Times article describes the question why the Federal government is lax and also not doing the same thing regarding Federal tax exemptions.
We had reported in the past about a GAO audit report HERE that questioned the continued tax exempt status of non-profit hospitals that were not providing enough in offsetting indigent care required as a condition of being a non-profit.
Gee, maybe the local two hospitals in Lake County might be shaking over this issue? Ya think? Maybe if the Feds saw the AHCA report that shows the local hospitals do not have much indigent care?
vj
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Here is the article text:
Congress Questions the I.R.S. About Delays in Its Oversight of Nonprofit Hospitals
By STEPHANIE STROM
In August, the Illinois Department of Revenue moved to revoke the property tax exemptions enjoyed by three major nonprofit hospitals after a court ruling determined that a fourth hospital in the state did not provide enough charity care to justify the tax benefit.
Those hospitals, however, remain exempt from federal taxes — a far bigger benefit — because the Internal Revenue Service is not collecting information to assess the extent of the care for poor and uninsured patients that nonprofit hospitals nationwide are supposed to provide. In September, the governor of Illinois suspended the revocation pending legislation that set more definitive guidelines.
An overhauled tax form for nonprofits would give the federal tax agency that data, but complaints from the American Hospital Association and aspects of the new health care law have prompted the I.R.S. to delay requiring hospitals to fill out the portion of the form on charity care. Hospitals may not have to fill it out this year, either, because the agency has yet to make a decision.
Jessica Curtis, project director for the hospital accountability project of Community Catalyst, a consumer advocacy group, said she could not understand why the I.R.S. had not enforced the reporting requirement. The new schedule “asks a good set of questions that are pretty straightforward and easy to answer,” Ms. Curtis said. “Many of them are questions most major hospitals have already been voluntarily answering, anyway.”
She said regulators might not understand the impact such disclosure had on poor patients and their advocates. “In the current environment, more and more patients are trying to figure out what’s available to them, and this schedule would help,” she said.
Sarah Hall Ingram, commissioner of the Tax Exempt and Government Entities Division of the I.R.S., said the new federal health care legislation, not hospital complaints, had influenced the agency’s decision to reconsider the requirement.
Now, Congress has started asking questions about the reporting required of nonprofit hospitals — and a wide range of other issues around the tax agency’s oversight of charities. Last month, Charles W. Boustany Jr., Republican of Louisiana and a member of the House Ways and Means Committee, sent the I.R.S. a letter seeking an explanation of how it conducted nonprofit oversight and what it was doing to tighten compliance with the laws and regulations governing charity and philanthropy.
In particular, Mr. Boustany asked the I.R.S. to explain its plans for monitoring the so-called community benefits that nonprofit hospitals provided. He also wanted the agency to outline how it would comply with requirements for filing annual reports to Congress on the charity care provided by all hospitals.
In the letter, Mr. Boustany, who is chairman of the Ways and Means subcommittee on oversight, wrote that panel members were concerned that “tax exempt organizations may not be complying with the letter or the spirit of the tax-exempt regime, yet continue to enjoy the benefits of tax exemption.”
In a subsequent telephone interview, Mr. Boustany said: “We need to get a general sense of what’s going on in this whole sector of the economy. Ways and Means hasn’t looked at it for some time, and I’m really trying to take the role of oversight very seriously.”
In the last decade, Senator Charles E. Grassley, Republican of Iowa, and Bill Thomas, the former chairman of the House Ways and Means Committee, were the most aggressive among lawmakers trying to exert control over the nonprofit sector. “There is strong bipartisan interest,” Mr. Boustany said, in having Congress be more active in supervising these organizations.
A number of lawyers, accountants and state regulators say Congressional attention is long overdue. They have expressed frustration with what they regard as the I.R.S.’s failure to police nonprofits, which come to life at the rate of roughly one every 10 minutes.
“I thought we had learned from the financial crisis what happens when regulators don’t do their jobs,” said Dean A. Zerbe, national managing director of the tax consulting firm Alliantgroup and formerly a staff lawyer on the Senate Finance Committee. “It’s often the most vulnerable in our society who lose when the I.R.S. refuses to regulate nonprofits.”
The I.R.S. concedes that several regulatory issues have remained unresolved for some time, but it blames Congress for muddy mandates. It also notes that its rules have to apply to museums and homeless shelters alike.
But provisions under the 2006 Pension Protection Act offer an example of lengthy delays in enforcement. For instance, the I.R.S. was supposed to issue rules to force more gifts to be donated from supporting organizations, which are similar to private foundations but do not have a 5 percent payout requirement, and the charitable giving accounts known as donor-advised funds, which similarly have no federal payout rate.
Five years after the pension law was passed, the I.R.S. is still soliciting comments on new rules for supporting organizations, and it has not even begun tackling donor-advised funds.
Senator Grassley, the author of the provisions, said the I.R.S. tells him that the Treasury Department has not signed off on the proposals for supporting organizations — and Treasury officials say the I.R.S. is procrastinating. “Every day that Treasury and the I.R.S. play the blame game is another day that money doesn’t get into the hands of the charities that are the whole reason for the existence of these funds and organizations,” Mr. Grassley said.
Ms. Ingram said the pension legislation imposed such great demands on the agency that it had to engage in triage. Its first priority became the overhaul of the nonprofit database, resulting in the revocation of tax-exempt status for hundreds of thousands of charities. Pending even longer are efforts to impose greater disclosure of the use of management companies and other related businesses that can mask compensation paid to nonprofit executives. The I.R.S. has been seeking comment on that issue for 10 years, said Paul Streckfus, editor of the newsletter EO Tax Journal.
“This is déjà vu all over again, been there, done that, since this issue first came up a decade ago,” Mr. Streckfus said. “Ten years have passed without resolution of this issue, which doesn’t reflect very well on the I.R.S.’s ability to regulate the tax-exempt sector.”
He pointed out that the National Association of State Charity Officials had repeatedly filed objections to the tax agency’s proposals on the issue. State regulators worry that stricter rules “could encourage tax-exempt charities to hide lavish executive compensation by transferring managers to third-party contractors to make such arrangements invisible.”
Ms. Ingram said that the issue had been addressed when the I.R.S. overhauled the tax form nonprofits use.
