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PLR 202521025

Religious, Charitable, etc., Institutions and Community Chest

Official textIRS Written Determinations (PLR · TAM · CCA)irs.gov
Summarize

# ISSUE

Does Authority meet the requirements of Internal Revenue Code (IRC) Section 50l(r)(3) and retain its status as a 50l(c)(3) organization?
FACTS: , creating the
Authority (the ), established a
Authority. dated
The filed Form 1023 signed , requesting exempt status as a 50l(c)(3) organization as a described in IRC Sections 509(a)(l) and l 70(b)(l )(A)(iii). The application stated the operated a . The stated on its application that attention is never refused or reduced based upon the patient's ability to pay.
The application stated that the and , controls all aspects of the authority's existence.
The Internal Revenue Service granted the exempt status, from federal income tax under Section 50l(c)(3) of the Internal Revenue Code, effective . The was identified as a 509(a)

(1) & l 70(b) (1) (A) (iii) . The local county established a to operate under control of the county meeting community benefit standards of Rev Rul. 69-545.
The is a" "entity receiving status as a tax-exempt IRC 50l(c)(3) organization. It also qualifies as a governmental unit or as an affiliate of a governmental unit as described in Revenue Procedure 95-48, 1995-2C.B. 418.
The was not required to file Form 990 because The was selected for examination for possible deficiencies relative to IRC Section 50l(r) which imposes additional requirements on s identified as tax-exempt under IRC Section 501(c)(3) per provisions of the Affordable Care Act (ACA). The does not have a Form 990 filing requirement by virtue of its status as a governmental entity; however, that does not preclude its adherence to statutes enacted in response to the ACA for IRC Section 501(c)(3) s. The tax year examined ended The was issued a written request by mail to provide copies of its Community Health Needs Care Assessment (CHNA) and written implementation strategy to meet the community health needs identified in the CHNA in accordance with IRC Section 501(r)(3).
Page _1 _ www.irs.gov
Form 886-A
(May 2017)
Explanations of Items or exhibit
Name of taxpayer Tax Identification Number (last 4 digits) Year/Period ended The provided the following records:
1.
2.
A copy of the 's policy regarding charity care for indigent patients and billing policies.
A copy of the 's 'community needs assessment'.
3. A copy of the 's collections policy.
4. A copy the 's emergency department admission protocol
5. A letter requesting its 50l(c)(3) status be rescinded.
6. A copy of the 's
7. A copy of the 's
The 's website, contains links to its Community Health Needs Assessment (CHNA), Financial Assistance Policy (FAP), Emergency Room Admissions Protocol, Collections Policy, and Price List.
The CHNA was completed by The refers to the document as a Community Needs Assessment Certification. The listed purpose of the document is to identify and prioritize the needs and resources of a defined community or communities. Data is gathered from target populations and results are analyzed in order to understand the causes and conditions of poverty and changing population demographics. The document lists the uses of the report to provide justification, both to funders and the public, on the need for resources and how resources are being allocated to programs. The report also provides useful data to educate the public and community leaders about issues related to poverty.
( ) was incorporated as a Nonprofit Organization on , when in , and in order to better meet the needs of the residents of . The Board of Directors drafted Articles oflncorporation and By-laws for the newly founded which includes a geographical area covering more than square miles.
On became to embody the organization's of The CHNA listed the following as its prioritized needs:
The Prioritized Needs in ranked order are:
3.
The CHNA used is a shared CHNA for multiple organizations. The document does not list the by name. The document does not contain an implementation strategy.
Catalog Number 20810W Page _2_ www.irs.gov Form 886-A (May 2017) Name of taxpayer

# LAW

Explanations of Items
Tax Identification Number (last 4 digits) or exhibit Year/Period ended Section(§) 50l(c)(3) of the Code describes corporations organized and operated exclusively for charitable purposes no part of the net earnings of which inures to the benefit of any private shareholder or individual.
Treas. Reg.§ 1.50l(c)(3)-l(a)(l) provides that in order to be exempt as an organization described in IRC § 50l(c)(3), an organization must be organized exclusively for one or more exempt purposes.
Treas. Reg. 1.501(c)(3)-l(d)(l)(ii) provides that an exempt organization must serve a public rather than a private interest. The organization must establish that it is not organized or operated to benefit private interests such as "designated individuals, the creator or his family, shareholders of the organization, or persons controlled, directly or indirectly, by such private interests."
IRC § 50l(r)(3)(A) In general. An organization meets the requirements of this paragraph with respect to any taxable year only if the organization:
1) IRC § 50l(r)(3)(A)(i) has conducted a community health needs assessment which meets the requirements of subparagraph (B) in such taxable year or in either of the 2 taxable years immediately preceding such taxable year, and
2) IRC § 50l(r)(3)(A)(ii) has adopted an implementation strategy to meet the community health needs identified through such assessment.
IRC § 50l(r)(3)(B) Community Health Needs Assessment. A community health needs assessment meets the requirements of this paragraph if such community health needs assessment:
1) IRC § 501(r)(3)(B)(i) takes into account input from persons who represent the broad interests of the community served by the facility, including those with special knowledge of or expertise in public health, and
2) IRC § 50l(r)(3)(B)(ii) is made widely available to the public. Treasury Regulations§ 1.50l(r)-2 Failures to satisfy section IRC § 50l(r)-Failures to satisfy IRC §50l(r). (a) Revocation of section IRC §501(c)(3) status. Except as otherwise provided in paragraphs (b) and (c) of this section, a organization failing to meet one or more of the requirements ofIRC § 50l(r) separately with respect to one or more facilities it operates may have its section IRC § 50l(c)(3) status revoked as of the first day of the taxable year in which the failure occurs.
In determining whether to continue to recognize the status of a organization that fails to meet one or more of the requirements ofIRC § 501(r) with respect to one or more facilities, the Commissioner will consider all relevant facts and circumstances including, but not limited to, the following:

(1) Whether the organization has previously failed to meet the requirements of IRC § 50l(r), and, if so, whether the same type of failure previously occurred.
Catalog Number 2081 OW
Page _3_ www.irs.gov
Form886-A
(May 2017)
Explanations of Items or exhibit
Name of taxpayer Tax Identification Number (last 4 digits) Year/Period ended

(2) The size, scope, nature, and significance of the organization's failure(s).

(3) In the case of an organization that operates more than one facility, the number, size, and significance of the facilities that have failed to meet the requirements relative to those that have complied with these requirements.

(4) The reason for the failure(s).

(5) Whether the organization had, prior to the failure(s), established practices or procedures (formal or informal) reasonably designed to promote and facilitate overall compliance with the section 501(r) requirements.

(6) Whether the practices or procedures had been routinely followed and the failure(s) occurred through an oversight or mistake in applying them.

(7) Whether the organization has implemented safeguards that are reasonably calculated to prevent similar failures from occurring in the future.

(8) Whether the organization corrected the failure(s) as promptly after discovery as is reasonable given the nature of the failure(s).

(9) Whether the organization took the measures described in paragraphs (a)(7) and (a)(8) of this section before the Commissioner discovered the failure(s).

(b) Minor omissions and errors
( 1) In general. A facility's omission of required information from a policy or report described in § 1.501(r)-3 or§ 1.S0l(r)-4, or error with respect to the implementation or operational requirements described in § 1.501 (r)-3 through 1.501 (r)-6, will not be considered a failure to meet a requirement of Section 501(r) if the following conditions are satisfied:

(i) Such omission or e1Tor was minor and either inadvertent or due to reasonable cause.

(ii) The facility corrects such omission or error as promptly after discovery as is reasonable given the nature of the omission or error. Such correction must include establishment (or review and, if necessary, revision) of practices or procedures (formal or informal) that are reasonably designed to promote and facilitate overall compliance with the requirements of Section 50l(r).

(2) Minor. In the case of multiple omissions or errors, the omissions or errors are considered minor for purposes of this paragraph (b) only if they are minor in the aggregate.

(3) Inadve11ent. For purposes of this paragraph (b), the fact that the same omission or error has been made and corrected previously is a factor tending to show that an omission or error is not inadvertent.
Page _4_ www.irs.gov
Form 886-A
(May 2017)
Explanations of Items or exhibit
Name of taxpayer Tax Identification Number (last 4 digits) Year/Period ended ( 4) Reasonable cause. For purposes of this paragraph (b ), the fact that a facility has established practices or procedures (fo1mal or informal) reasonably designed to promote and facilitate overall compliance with the Section 50l(r) requirements prior to the occurrence of an omission or error is a factor tending to show that the omission or error is due to reasonable cause.

(c) Excusing certain failures if facility corrects and discloses. A facility's failure to meet one or more of the requirements described in§ l.S0l(r)-3 through§ l.S0l(r)-6 that is neither willful nor egregious shall be excused for purposes of this section if the facility c01Tects and makes disclosure in accordance with rules set forth by revenue procedure, notice, or other guidance published in the Internal Revenue Bulletin. For purposes of this paragraph (c), a "willful'' failure includes a failure due to gross negligence, reckless disregard, or willful neglect, and an "egregious" failure includes only a very serious failure, taking into account the severity of the impact and the number of affected persons. Whether a failure is willful or egregious will be determined based on all of the facts and circumstances. A facility's correction and disclosure of a failure in accordance with the relevant guidance is a factor tending to show that the failure was not willful.
Treas. Reg. § l.50l(r)-2(a) provides that, in determining whether to continue to recognize the§ 501(c)(3) status of a organization that fails to one or more of the requirements of§ 501(r) with respect to one or more facilities, the Commissioner will consider all relevant facts and circumstances.
Treas. Reg. § l.501(r)-3(a) In General. With respect to any taxable year, a organization meets the requirements of section 501(r)(3) with respect to a facility it operates only if Treas. Reg. § 1.50l(r)-3(a)(l) The facility has conducted a community health needs assessment (CHNA) that meets the requirements of paragraph (b) of this section in such taxable year or in either of the two taxable years immediately preceding such taxable year (except as provided in paragraph (d) of this section); and Treas. Reg.§ l.50l(r)-3(a)(2) An authorized body of the facility (as defined in §l.50l(r)- l(b)(4)) has adopted an implementation strategy to meet the community health needs identified through the CHNA, as described in paragraph (c) of this section, on or before the 15th day of the fifth month after the end of such taxable year.
Treas. Reg.§ 1.50l(r)-3(b) Conducting A CHNA Treas. Reg. §.50l(r)-3(b)(l) In General. To conduct a CHNA for purposes of paragraph (a) of this section, a facility must complete all of the following steps:
Treas. Reg.§ l.50l(r)-3(b)(l)(i)Define the community it serves.
Treas. Reg.§ l.50l(r)-3(b)(l)(ii) Assess the health needs of that community.
Treas. Reg. § 1.50l(r)-3(b)(l)(iii) In assessing the health needs of the community, solicit and take into account input received from persons who represent the broad interests of that community, including those with special knowledge of or expertise in public.
Page _5_ www.irs.gov
Form886-A
(May 2017)
Name of taxpayer
Explanations of Items
Tax Identification Number (last 4 digits) or exhibit Year/Period ended Treas. Reg.§ 1.50l(r)-3(b)(l)(iv) Document the CHNA in a written report (CHNA report) that is adopted for the facility by an authorized body of the facility.
Treas. Reg. § 1.50l(r)-3(b)(l)(v) Make the CHNA report widely available to the public.
Treas. Reg.§ 1.50l(r)-3(b)(2) Date A CHNA Is Conducted.
Treas. Reg.§ l.50l(r)-3(b)(4) Assessing Community Health Needs. To assess the health needs of the community it serves for purposes of paragraph (b )( 1 )(ii) of this section, a facility must identify significant health needs of the community, prioritize those health needs, and identify resources (such as organizations, facilities, and programs in the community, including those of the facility) potentially available to address those health needs. For these purposes, the health needs of a community include requisites for the improvement or maintenance of health status both in the community at large and in particular parts of the community (such as particular neighborhoods or populations experiencing health disparities). These needs may include, for example, the need to address financial and other barriers to accessing care, to prevent illness, to ensure adequate nutrition, or to address social, behavioral, and environmental factors that influence health in the community. A facility may determine whether a health need is significant based on all of the facts and circumstances present in the community it serves. In addition, a facility may use any criteria to Treas. Reg.§ l.50l(r)-3(b)(6)(v)(A) A facility that collaborates with other facilities or other organizations (such as state or local public health departments) in conducting its CHNA will satisfy paragraph (b )(l)(iv) of this section if an authorized body of the facility adopts for the facility a joint CHNA report produced for the facility and one or more of the collaborating facilities and organizations, provided that the following conditions are met:

(1) The joint CHNA report meets the requirements of paragraph (b )( 6)(i) of this section.

(2) The joint CHNA report is clearly identified as applying to the facility.

(3) All of the collaborating facilities and organizations included in the joint CHNA report define their community to be the same.
Treas. Reg. §1.50l(r)-3(c)(4) Joint Implementation Strategies. A facility may develop an implementation strategy in collaboration with other facilities or other organizations, including, but not limited to, related and unrelated organizations and facilities, for-profit and government s, governmental departments, and nonprofit organizations. In general, a facility that collaborates with other facilities or organizations in developing its implementation strategy must still document its implementation strategy in a separate written plan that is tailored to the particular facility, taking into account its specific resources. However, a facility that adopts a joint CHNA report described in paragraph (b)(6)(v) of this section may also adopt a joint implementation strategy that, with respect to each significant health need identified through the joint CHNA, either describes how one or more of the collaborating facilities or organizations plan to address the health need or identifies the health Page _6_ www.irs.gov Form 886-A (May 2017) Name of taxpayer
Explanations of Items
Tax Identification Number (last 4 digits) or exhibit Year/Period ended need as one the collaborating facilities or organizations do not intend to address and explains why they do not intend to address the health need. For a collaborating facility to meet the requirements of paragraph (a)(2) of this section, such a joint implementation strategy adopted for the facility must:
Treas. Reg. §1.50l(r)-3(c)(4)(i) Be clearly identified as applying to the facility.
Treas. Reg. §1.50l(r)-3(c)(4)(ii) Clearly identify the facility's particular role and responsibilities in taking the actions described in the implementation strategy and the resources the facility plans to commit to such actions; and Treas. Reg. § 1.501 (r)-3(c )( 4)(iii) Include a summary or other tool that helps the reader easily locate those portions of the joint implementation strategy that relate to the facility.
Treas. Reg. §1.501(r)-3(c)(5) When the Implementation Strategy Must Be Adopted.
Treas. Reg. § l .50l(r)-3(c)(5)(i) In General. For purposes of paragraph (a)(2) of this section, an authorized body of the facility must adopt the implementation strategy on or before the 15th day of the fifth month after the end of the taxable year in which the facility completes the final step for the CHNA described in paragraph (b)(l) of this section, regardless of whether the facility began working on the CHNA in a prior taxable year.
Rev. Proc. 95-48 provides an exception from filing for governmental units or affiliates of governmental units that are exempt from federal income tax under Section 50l(c)(3).
Rev. Proc. 95-48 Section 4.02 provides that an organization will be treated as an affiliate of a governmental unit if it is described in Section 501 ( c) and either ( a) It has a ruling from the Service that: (1) its exempt purpose income is excluded under Section 115; (2) it is entitled to receive deductible contributions under Section l 70(c )( 1) because the contributions are the for the use of a governmental unit, or (3) it is a wholly owned instrumentality of a state or political subdivision for employment tax purposes; or (b) it meets the requirements of Section 4.02(b ).
TAXPAYER'S POSITION:
At the start of the examination, the organization expressed that they would like to give up their tax-exempt status.
GOVERNMENT'S POSITION:
The failed to adequately meet all the requirements of Treas. Reg. §l.50l(r)-3. The did not adopt an Implementation Strategy as required by IRC § 50l(r)(3)(A)(ii).
Catalog Number 2081 OW Page _7_ www.irs.gov Form 886-A {May 2017) Explanations of Items or exhibit Name of taxpayer Tax Identification Number (last 4 digits) Year/Period ended The CHNA repmt produced for the failed to meet the requirements of Treas. Reg.§ 1.501(r)-3(b)(6)(v)(A) because the assessment does not clearly identify it applied to the as required. The failures noted are significant.
It is the government's position that the resulting in its exempt status being revoked. failed to adequately meet the requirements ofIRC l.50l(r)-3

# CONCLUSION

The failed to meet all the requirements of the Internal Revenue Code under Section 501(r). The failed to adopt an Implementation Strategy as required by the Internal Revenue Code Section 50l(r)(3)(A)(ii). The failed to clearly identify the reporting requirements of the CHNA, under Treas. Reg.§ l.50l(r)-3(b)(6)(v)(A).
Because of the failures listed above, Authority's tax-exempt status under Internal Revenue Code Section 501(c)(3) has been revoked, effective Catalog Number 2081 OW Page _8_ www.irs.gov

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