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In: Nursing

Tax-Exempt status for healthcare institutions provide certain benefits as a not-for-profit enterprise. Discuss the rationale, community...

Tax-Exempt status for healthcare institutions provide certain benefits as a not-for-profit enterprise. Discuss the rationale, community benefits and the Judicial, IRS, and Legislative challenges organizations face today to maintain their ‘tax-exempt” designation.  

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Expert Solution

Tax exempt status of Healthcare Institutions:

Tax is the money paid to the Government otherthan for transaction- specific goods and services . Tax- exempt is the exempt from paying tax. Tax- exempt Health care Organizations are not subject to taxation. They may be not - for - profit organisations.

Rationale and Community benefits :

usually Not - for - profit hospitals are exempted from tax by Federal and State Government , as these hospitals are meant to serve the society and humanity . If a Health care institution should achieve  tax free status, it has to meet certain criteria, laid down by the Federal Government through IRS ( Internal revenue service) and State Governments criterias. It should also have a clearly explained charity services as per IRS's revised criteria .

Benefits for community:

* Delivery of helth promotion activities in the community

* free patient care or reduced cost of care for Patient, who are unable to pay the hospital fee.

* Charity care, eg: delivery of hearing aids or walking aids for Patients, who are not able to afford it.

Challenges: Judicial , IRS and legislative Challenges

To maintain the tax - exempt status , Healthcare organisations has to face certain Challenges in judicial, legal areas and from IRS. Most of the hospitals were in U.S are Not - for - profit hospitals , that were exempted from paying tax. Affordable Care Act (2010) reviewed the criterias for tax exemption and through Internal revenue service , strict monitoring started on organizations to analyse ,  if this reviewed criterias are meeting by institutions or not. These challenging criterias are:

* organizing community health assessment programmes once in every three years , combined with intervention strategies such as promotion of nutritional status/ emergency preparedness/ addressing social or behavioural and environmental factors etc.

* A written financial policy for emergency care or intervention

* specified billing and collection requirements along with limited charges for Patients, whose financial condition is low.

These new criterias invited many criticisms. The Alliance for Advancing Non profit Health care( AANHC) , an organisation for Non- profit hospitals, raised the voice against the new criterias. Till today many controversies are existing on the criterias for Non - profit hospitals tax- exemption status. Hospitals argue that a review in legislation is needed for the criterias for tax exemption status. They even approached Court also for reexamining the criterias, especially to review "community health assessment and strategies" criteria as these criterias are given vague not specified.


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