Grassley, Warren Call for IRS to Crack Down on Hospitals Abusing Nonprofit Status

Grassley, Warren Call for IRS to Crack Down on Hospitals Abusing Nonprofit Status

Many hospitals benefit from tax exemptions while failing to fulfill their charitable mission.

WASHINGTON - Sens. Chuck Grassley (R-Iowa), a senior member and former chairman of the Senate Finance Committee, and Elizabeth Warren (D-Mass) are calling on the Internal Revenue Service (IRS) to strengthen and enforce tax code regulations on noncompliant nonprofit hospitals.

"While the promotion of health is an exempt purpose, not every entity that promotes health is entitled to a tax exemption," the senators wrote. "To qualify for a federal tax exemption based on the promotion of health, an organization must 'primarily benefit the community.' We are concerned that some nonprofit hospitals may fall short on this measure."

"To ensure that nonprofit hospitals uphold their charitable missions, we further urge the IRS to strengthen and enforce regulations under Section 501(c)(3) and 501(r) of the tax code that pertain to nonprofit hospitals," they concluded.

The senators are urging the IRS to:

• Increase oversight of tax-exempt hospitals, ensuring internal revenue code noncompliance is met with real consequences.
• Clarify standards for nonprofit hospitals' financial assistance policies and practices.
• Prohibit aggressive collection practices before hospitals determine patient eligibility for financial assistance.
• Reinstate policies requiring nonprofit hospitals provide charity care to the extent of their financial ability.

Read the senators' letter HERE.

Background

Under IRS rules, nonprofit hospitals may qualify for tax exemptions by providing charity care and community benefits. Reports show over 1,900 nonprofit hospitals, which qualify for tax-exempt status as "charitable" organizations, receive more money in tax breaks than they give back to their communities.

Amid reports hospitals were using their tax status to restrict care and increase patient costs, Grassley last year called on the IRS and the Treasury Inspector General for Tax Administration (TIGTA) to evaluate hospitals' compliance with tax-exempt requirements. In 2020, Grassley updated his Senate Finance and Judiciary Committees colleagues about the need for new attention to the tax laws governing non-profit hospitals following a probe into non-profit, tax-exempt hospitals in Missouri and Virginia. Grassley also helped secure $16.9 million in debt forgiveness for over 3,000 low-income patients who were wrongly sued by a Missouri nonprofit medical center.

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