Summer 2006
Responding To The New IRS Compliance Check Questionnaire
Have you received IRS Form 13790? In response to requests from Congress for increased scrutiny of non-profit organizations including hospitals, the Internal Revenue Service last month sent approximately 600 non-profit hospitals a 9-page Form 13790, entitled “Compliance Check Questionnaire: Tax-Exempt Hospitals.” The form was accompanied by a letter from the IRS explaining the difference between a ‘compliance check’ and an ‘audit’ (also referred to as an ‘examination’). The instructions state that while completion of the questionnaire is voluntary, failure to return the form by the deadline given will result in the hospital being referred for examination consideration.
We recommend that any hospital receiving Form 13790 complete and return it by the stated deadline. Proper completion is critical due to the potential consequences, i.e. IRS audit and review of tax-exempt status. If you are a non-profit hospital and have not received Form 13790, an internal review of those operational areas that are of particular concern to the IRS may be advisable.
According to the IRS, a Compliance Check is a review by the IRS of information voluntarily provided by the subject hospital to determine whether the hospital’s activities are in accordance with the rules for tax-exempt organizations, and whether the hospital is in compliance with certain record-keeping and reporting requirements. Form 13790 includes sections requesting information about:
- patients and insurance coverage
- emergency room operations
- board of directors and staff
- compensation practices
- research, education and training
- community programs
- billing practices
- uncompensated care data
To justify tax-exempt status, the IRS will be looking specifically for whether the hospital is satisfying the community benefit standard described in IRS Revenue Ruling 69-545. Revenue Ruling 69-545 examined two different hospital operations to determine whether a public rather than a private interest was being served. Issues such as management control, emergency room operations, indigent care and accessibility were evaluated to determine whether the particular hospital was serving a public purpose. The Compliance Check Questionnaire is designed to elicit information to help the IRS compare a hospital’s operations against the standards set in Revenue Ruling 69-545. If you have questions regarding how your hospital compares to the community benefit standards described in Revenue Ruling 69-545, we can help evaluate your operations to determine areas that may invite additional review.
For copies of Form 13790, Revenue Ruling 69-545 or other questions, please contact Spencer G. Nauman , Jr. or Suzanne S. Becker at Nauman, Smith, Shissler & Hall, LLP.
Disclaimer and IRS Circular 230 Notice:
The material on our website and in this newsletter has been prepared for informational purposes only. It does not constitute legal advice, and transmission of information from this site is not intended to create, nor does its receipt constitute, an attorney-client relationship between Nauman Smith Shissler and Hall, LLP and the visitor to this site. The information contained in this newsletter is not intended as tax advice. As required by IRS Circular 230, we inform you that any information contained in this newsletter is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code or for the purpose of promoting, marketing or recommending to another party, any tax-related matter addressed herein.
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