On July 14, 2020, the Internal Revenue Service (the “IRS”), in response to the ongoing COVID-19 pandemic, issued Notice 2020-56 (the “Notice”) further postponing to December 31, 2020, the deadline for tax-exempt hospital organizations to complete a Community Health Needs Assessment (“CHNA”) and adopt an implementation strategy to meet the community health needs identified through the CHNA. Previously, the IRS had extended the deadline to July 15, 2020.
CHNA Background
Section 501(r)(3) of the Internal Revenue Code (the “Code”) requires a hospital organization to conduct a CHNA at least once every three years and to adopt an implementation strategy to meet the community health needs identified through the CHNA (collectively, “CHNA requirements”). The CHNA must take into account input from persons who represent the broad interests of the community served by the hospital facility, including those with special knowledge of or expertise in public health. In addition, the CHNA must be made widely available to the public. The CHNA must be conducted by the end of the third taxable year (or in either of the two taxable years immediately preceding such taxable year). The implementation strategy must be adopted on or before the fifteenth day of the fifth month after the end of the taxable year in which the hospital facility completes the final step for the CHNA.
Key Takeaways
Tax‑exempt hospitals seeking to take advantage of the Notice should keep the following in mind while preparing to conduct a CHNA:
- The deadline for a tax-exempt hospital organization to comply with any CHNA requirements due to be performed on or after April 1, 2020, and before December 31, 2020, is extended to December 31, 2020.
- A tax-exempt hospital organization filing a Form 990 must indicate on Schedule H if it has conducted a CHNA in the current taxable year or in either of the two immediately preceding taxable years and if it has adopted an implementation strategy to meet the significant health needs identified through the most recently completed CHNA.
- A tax-exempt hospital organization that files a Form 990 prior to December 31, 2020, should state in the narrative of Part V.C. of Schedule H that it is eligible for and is relying on the relief provided in the Notice, and should not be treated as failing to meet the requirements of Section 501(r)(3) prior to December 31, 2020.
- To illustrate the application of this new relief, the IRS provided the following example:
If a hospital organization was required to conduct a CHNA by April 30, 2020 (the end of the third taxable year) and was required to adopt an implementation strategy by September 15, 2020, the Affected Taxpayer now has an extension until December 31, 2020, to complete both steps.
This relief will be extremely helpful to tax-exempt hospital organizations that were previously subject to the earlier deadlines and who had not yet completed all steps under the CHNA requirements. Tax-exempt hospital organizations still working to gather necessary data for the CHNA now also have time to evaluate their typical processes for gathering CHNA data, such as through public gatherings and other group inactions, and consider whether alternative methods should be implemented during these unique circumstances. Such changes should be discussed with tax advisors to ensure compliance with Section 501(r) and its corresponding regulations.
If you have any questions on the issues discussed in or related to this article, please contact:
- Jeff Carmichael at (317) 977-1443 or jcarmichael@wp.hallrender.com;
- Jim Willey at (317) 977-1409 or jwilley@wp.hallrender.com;
- Calvin Chambers at (317) 977-1459 or cchambers@wp.hallrender.com;
- John Bowen at (317) 429-3629 or jbowen@wp.hallrender.com; or
- Your regular Hall Render attorney.
Hall Render’s attorneys and professionals continue to maintain the most up-to-date information and resources at our COVID-19 Resource page, through our 24/7 COVID‑19 Hotline at (317) 429-3900 or by contacting your regular Hall Render attorney.
Hall Render blog posts and articles are intended for informational purposes only. For ethical reasons, Hall Render attorneys cannot—outside of an attorney-client relationship—answer specific questions that would be legal advice.
