IRS revokes tax-exempt status of dual-status hospital | KPMG | GLOBAL
close
Share with your friends

IRS revokes tax-exempt status of dual-status hospital, section 501(r) noncompliance

IRS revokes tax-exempt status of dual-status hospital

The IRS—for the second time in less than year—has revoked the tax-exempt status of a “dual status” hospital for failure to meet the requirements of section 501(r).

1000

Related content

Read LTR 201829017 [PDF 827 KB] (released July 20, 2018, and dated April 20, 2018)

A dual-status organization is one that is recognized as described in section 501(c)(3) and excludes income under section 115(1).  As was the case in last year’s revocation—LTR 201731014 (August 4, 2017) [PDF 8.3 MB]—the IRS revoked the hospital’s section 501(c)(3) status after the hospital informed the IRS exam agent that it no longer wanted or needed the status. 

In the recent ruling, interestingly, the hospital represented that it was not even aware that it had section 501(c)(3) status. Other than acknowledging the hospital’s concern regarding potential penalties, the revocation letter makes no mention of any excise taxes under section 4959 for failure to meet the community health needs assessment (CHNA) requirements of section 501(r)(3).

KPMG observation

These two revocations are the only ones that KPMG professionals are aware of, that are attributable to an organization’s failure to meet the requirements of section 501(r). Though neither addresses potential section 4959 exposure, the IRS lacks the statutory authority to abate section 4959 taxes. To avoid such excise taxes, dual-status hospitals that have determined they do not want and have no need for section 501(c)(3) status, and that do not intend to comply with the requirements of section 501(r), may want to consider voluntarily relinquishing such status pursuant to section 3.01(12) of Rev. Proc. 2018-5, 2018-1 I.R.B. 233.  

 

For more information, contact a tax professional with KPMG’s Washington National Tax practice:

Alexandra Mitchell | +1 202 533 6078 | aomitchell@kpmg.com

Preston Quesenberry | +1 202 533 3985 | pquesenberry@kpmg.com 

Randall Thomas | +1 202 533 3786 | randallthomas@kpmg.com

© 2018 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.KPMG International Cooperative (“KPMG International”) is a Swiss entity.

Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.

The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us

 

Request for proposal

 

Submit