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Will Your CHNA Withstand an Audit?

30 March 2023

Many hospital organizations are faced with conducting an update to their Community Health Needs Assessment (CHNA) as part of completing their 2022 tax returns. With increased funding at the IRS, many industry experts expect increased enforcement of the Internal Revenue Section (“IRC”) 501(r) community needs assessment requirements. 

Section 501(r)(3)(A) requires a hospital organization to conduct a community health needs assessment (CHNA) every three years and to adopt an implementation strategy to meet the community health needs identified through the CHNA.

IRC Section 4959 imposes a $50,000 excise tax on a hospital organization that fails to meet the CHNA requirements for any taxable year, including failing to meet the CHNA requirements for any facility of a hospital organization owning multiple facilities.

Ensure your organization is meeting the requirements:

The final report must include the following to remain in compliance with the regulations under IRC §501(r)(3):

A definition of the community served by the hospital facility and a description of how the community was determined.
A description of the process and methods used to conduct the CHNA, including identification of information gaps that limit the hospital facility's ability to assess the community's health needs
A description of how the hospital facility solicited and took into account input received from persons who represent the broad interests of the community it serves
A prioritized description of the significant health needs of the community identified through the CHNA, along with a description of the process and criteria used in identifying certain health needs as significant and prioritizing those significant health needs
A description of the resources potentially available to address the significant health needs identified through the CHNA
An evaluation of the impact of any actions that were taken, since the hospital facility finished conducting its immediately preceding CHNA, to address the significant health needs identified in the hospital facility's prior CHNA(s)
Board approval, or equivalent

How we can assist:

Our team of qualified experts are available to conduct a thorough and coordinated review of your most recent CHNAs to ensure they are in compliance with the IRS which includes:

Reviewing your most recent CHNAs in conjunction with the IRS requirements
Coordinating a review of the Form 990 Schedule H, focusing on the CHNA questions, answers and applicable disclosures, and ensuring consistency with your CHNA and implementation plan
Designating a responsible person from your organization to lead IRC §501(r)(3) compliance
Forming a community benefit committee
Involving senior management and the Board
Reviewing your organization’s website and make sure the last two required CHNAs are posted on the organization’s website
Checking your organization’s CHNA and other documents website links regularly

Background

In addition to the general requirements for tax exemption under Section 501(c)(3) and Revenue Ruling 69-545 (PDF), hospital organizations must meet the requirements imposed by Section 501(r) on a facility-by-facility basis in order to be treated as an organization described in Section 501(c)(3).

Section 501(r)(3)(B) provides that the CHNA must: 

Consider input from persons who represent the broad interests of the community served by the hospital facility, including those with special knowledge of or expertise in public health, and 
Be made widely available to the public.

A hospital organization meets the requirements of Section 501(r)(3) with respect to a hospital facility it operates:

If the hospital facility has conducted a CHNA in the taxable year or in either of the two immediately preceding taxable years, and
An authorized body of the hospital facility has adopted an implementation strategy to meet the community health needs identified through the CHNA on or before the 15th day of the fifth month after the end of such taxable year.

Contact your FustCharles' experts to review your CHNA requirements.

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