The Impact of IRS Tax Policy on Hospital Community Benefit Activities

Abstract

The Internal Revenue Service (IRS) recently introduced tax code revisions requiring stricter oversight of community benefit activities (CBAs) conducted by tax-exempt, not-for-profit hospitals. We examine the impact of this tax requirement on CBAs among these hospitals relative to for-profit and government hospitals that were not subject to the new policy. We employed a quasi-experimental, difference-in-difference study design using a longitudinal observational approach and used secondary data collected by the American Hospital Association (years 2006-2010 including 20,538 hospital year observations). Findings show a significant increase in the reporting of 7 of the 13 CBAs among tax-exempt, not-for-profit hospitals compared with other hospitals after the policy change. Examples include partnering to conduct community health assessments ( b = 0.035, p = .002) and using capacity assessments to identify unmet community health needs ( b = 0.041, p = .001). Recent tax revisions are associated with increases in reported CBAs among tax-exempt, not-for-profit hospitals. As the debate continues regarding tax exemption status for not-for-profit hospitals, policy makers should expand efforts for enhanced accountability.

Nonprofit Hospital Community Benefit in the U.S.: A Scoping Review From 2010 to 2019

“…And another study by Coyne and colleagues showed that in Washington state, in 2011, among non-profit hospitals, church-owned hospitals provided more charity care as a percentage of gross revenues than did government or other voluntary hospitals (85). These conclusions align with studies that asked similar questions before the new regulations (86,87).…”

Institutional factors associated with hospital partnerships for population health: A pooled cross-sectional analysis

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