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October 16, 2023

Senate committee report on non-profit hospitals recommends minimum requirements for meeting community benefit standard

  • A Senate HELP Committee report questions whether major non-profit, tax-exempt hospital systems provide sufficient community benefit to justify their federal tax-exempt status.
  • The Committee recommends that Congress establish minimum community benefit requirements and consider limiting tax breaks to the value of community benefit provided by hospitals.
  • The CEO of the American Hospital Association (AHA) responded that the Committee report did not fully account for the community benefits that hospitals provide.

On October 10, 2023, the Majority Staff of the US Senate's Health, Labor, Education and Pensions Committee (Committee), chaired by Bernie Sanders (I-VT), released a report questioning whether major US hospital systems provide sufficient community benefit to justify their federal tax-exempt status, and calling for tighter regulation by Congress and the IRS.

Community benefit requirement

According to the report, in 2020, the 2,978 tax-exempt hospitals in the United States received approximately $28b in federal, state and local tax benefits.

Federal law requires tax-exempt hospitals to promote the health of the community as a whole by providing sufficient community benefit under the community benefit standard established by Revenue Procedure 69-545. That standard is a facts-and-circumstances test that hospitals can satisfy by meeting multiple criteria, including maintaining a board representative of its community, engaging in research and educational activity, serving Medicaid and Medicare patients, operating an emergency room, devoting surplus funds to facility improvement and patient care, and providing medical care for free or at significantly reduced rates to low-income individuals (charity care). In addition, the Affordable Care Act (ACA) established a parallel set of requirements that hospitals must meet to qualify for federal tax exemption, in addition to meeting the community benefit requirement. These ACA requirements, contained in IRC Section 501(r), require hospitals to establish and promote a financial assistance policy and prohibit hospitals from taking "extraordinary collection actions" against patients who are eligible for charity care before making reasonable efforts to determine those patients' eligibility for financial assistance.


The Committee staff reviewed tax documents for 16 major non-profit, tax-exempt hospital systems that each have reported more than $3b in annual revenue. According to the Committee report, 12 of those systems (including three of the five largest tax-exempt hospital systems) dedicated less than 2% of their total revenue to charity care; of those 12, six dedicated less than 1% of their total revenue to charity care.

The report said one study found that 86% of tax-exempt hospitals spent less on charity care than they received in tax benefits between 2011 and 2018. The Committee cited another study claiming that tax-exempt hospitals spent an estimated $16 billion on charity care in 2020, or about 57% of the value of their tax breaks in the same year. The Committee cited a third study claiming that average charity care spending by tax-exempt hospitals dropped from $6.7m to $6.4m between 2012 and 2019, while their average cash balance held in reserve increased from about $133m to more than $224m.

At the same time, the hospitals allegedly paid "massive" salaries to their top executives. According to the Report, the 16 hospitals' CEOs averaged more than $8 million in annual compensation in 2021.


The Committee noted in its report that a tax-exempt hospital is not currently required to provide a minimum level of charity care or other community benefit to maintain its tax-exempt status, and suggested the IRS consider establishing a minimum level of community benefit. In particular, the Committee suggested that Congress should consider:

  • Limiting hospitals' tax breaks to the value of community benefits they provide
  • Establishing clear, enforceable standards for tax-exempt hospitals' financial assistance, such as requiring hospitals to provide financial assistance to all persons under a certain Federal Poverty Guidelines threshold (e.g., 400%)
  • Requiring hospitals to determine whether patients are eligible for financial assistance, then providing that financial assistance, regardless of whether patients apply for or otherwise request financial assistance
  • Imposing further restrictions on extraordinary debt collection processes
  • Requiring hospitals to address the specific needs identified in their community health needs assessments (CHNAs)

The Committee report also recommended that the IRS consider amending Form 990, Schedule H (completed by tax-exempt hospitals) to:

  • Increase transparency of community benefit data reporting by requiring reporting on a hospital-by-hospital basis, rather than on an organization-by-organization basis
  • Provide more clarity on how tax-exempt hospitals should report community benefit — without making any specific suggestions on how the IRS should do so

AHA report and response

The American Hospital Association (AHA) issued a report in October finding that tax-exempt hospitals provide a broad range of community benefit to the communities they serve. According to the AHA report, community benefit expense comprised an average of 15.5% of tax-exempt hospitals' total annual expenses (See Tax Alert 2023-1695).

Citing the AHA report, Rick Pollack, the President and CEO of the AHA, said the HELP report did not "fully account for the wide range of community benefits that [tax-exempt] hospitals provide," such as health education and housing assistance.


In August of 2023, several senators sent letters to the Treasury Inspector General for Tax Administration (TIGTA) and the IRS urging them to evaluate and increase IRS oversight of tax-exempt hospitals. Specifically, they expressed concerns about the hospitals' compliance with IRC Section 501(r) and the community benefit standard. Now, just two months later, the Senate HELP Committee has further evaluated tax-exempt hospitals' provision of community benefits, drawing similar conclusions and suggesting further legislative changes and regulatory safeguards to ensure tax-exempt hospitals provide sufficient benefit to their communities, particularly charity care.

This continued congressional scrutiny could ultimately lead to new legislation affecting hospitals' tax-exempt status and/or change the way the IRS regulates tax-exempt hospitals. It is doubtful, however, that the IRS will prioritize these community benefit regulation issues over other priorities identified in its Tax-Exempt and Government Entities Fiscal Year 2024 Program Letter and its overall Strategic Plan (see Tax Alert 2023-1677). The IRS has continually declined to implement recommendations from the GAO dating back to 2020 on community benefit reporting. Nor is it likely that Congress will enact any community benefit-related legislation in the near future, given its historic deference to the IRS in establishing and enforcing community benefit standards, its relatively recent enactment of IRC Section 501(r) and other congressional priorities. Also, any congressional initiative to amend the IRC to impose more restrictions on tax-exempt hospitals likely would be preceded by further hearings and requests for information, as the Committee report underscores the need to further educate Congress on the community benefit standard, IRC Section 501(r) requirements and IRS enforcement of these requirements.

Even though Congress and the IRS are not likely to adopt the Committee's recommendations in the near future, tax-exempt hospitals should consider reviewing their community benefit-related and IRC Section 501(r)-related compliance, policies and procedures. The continued congressional scrutiny of tax-exempt hospitals provides those hospitals an opportunity to assuage congressional concerns by more accurately and fully capturing, and more clearly communicating, the myriad ways they benefit their communities.



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Contact Information
For additional information concerning this Alert, please contact:
Exempt Organization Tax Services
   • Stephen Clarke (
   • Melanie McPeak (
   • Austin Bailey (
   • Matt Case (

Published by NTD’s Tax Technical Knowledge Services group; Andrea Ben-Yosef, legal editor