A report prepared by EY's Quantitative Economics and Statistics (QUEST) group on behalf of the American Hospital Association (AHA) analyzes the forgone federal tax revenue resulting from tax-exemption for nonprofit hospitals for the 2022 tax year. The analysis focuses on revenue foregone from the federal corporate income tax, the lower cost of tax-exempt bond financing, and the federal unemployment tax. For the first time, the report also includes additional information related to the tax revenue forgone by state and local governments.

Key findings

• Federal tax revenue foregone due to the tax-exempt status of nonprofit hospitals for the 2022 tax year was approximately $13.2 billion.
• For the 2022 tax year, those hospitals provided approximately $148.9 billion of community benefit (based on Form 990, Schedule H reporting), over 11 times the federal tax revenue foregone during the same period.
• Approximately $65.1 billion of community benefit provided by those hospitals for the 2022 tax year came from financial assistance, unreimbursed Medicaid costs, and other unreimbursed costs from means-tested government programs.
• State and local tax revenue forgone due to tax-exempt status of nonprofit hospitals for the 2022 tax year was approximately $41.1 billion.

A companion report prepared by QUEST on behalf of the AHA details the broad range of programs provided by tax-exempt nonprofit hospitals benefiting the health of the communities they serve for the 2022 tax year. (See Tax Alert 2025-1968).

Implications

Tax-exempt hospitals continue to be closely scrutinized at the federal, state and local levels for the amount and type of benefits they provide to their communities. Accordingly, tax-exempt hospitals should continue to focus on completely and accurately reporting and explaining the benefits they provide to their communities on their Schedule H, which will help to differentiate them from their for-profit, taxable counterparts and support their federal tax exemption. In preparation for continued community benefit scrutiny, tax-exempt hospitals should also consider determining the value of their tax exemption and/or benchmarking their community benefit spending against that of their peers.