Healthcare

Under the Tax Cuts and Jobs Act, certain expenditures related to providing employee parking were deemed unrelated business taxable income and resulted in taxable income for nonprofit organizations. This provision was highly unpopular in the tax-exempt sector. It resulted in a tax burden for organizations that typically did not owe income taxes, and an increase in administrative burden, due to complicated and tedious calculations.

We have been monitoring and reporting on tax reform for several months, including one of the most complicated areas of the new law – Section 199A, commonly known as the 20% pass-through deduction.

A recent notice from the Internal Revenue Service has provided additional guidance regarding changes that the Tax Cuts and Jobs Act (TCJA) made to the tax treatment of parking fringe benefits. Previously, employers could generally deduct expenses related to “qualified transportation fringe benefits” that they provided to employees, including parking. The new law disallowed this deduction.

Before passage of the Tax Cuts and Jobs Acts (TCJA), both meals and entertainment for clients and business associates were 50 percent deductible for tax purposes as long as business was discussed before, during or after the meal. Expenses for entertainment, amusement and recreation are no longer deductible starting in 2018. However, the wording in the TCJA was unclear on whether meals are now included in the overall definition of “entertainment.”

Since the passing of the Tax Cuts and Jobs Act (“TCJA”) in December, many healthcare providers started to wonder if there might be a tax advantage to changing their choice of entity. With the new 21 percent corporate flat tax, would C Corporations be a better option? Or would the benefit of the 20 percent pass-through deduction be more beneficial?

The Tax Cuts and Jobs Act (TCJA) made several significant changes to depreciation rules when it became law in December 2017. In the “good news” department, two provisions in the law provided increased opportunities for businesses—including physician practices, hospitals and other medical practices that own or lease buildings—to expense the cost of depreciable assets sooner. On the “not-so-good news” side of things, several types of building improvements will now be depreciated over longer periods when their costs exceed the limits for immediate expensing. In addition to the longer recovery period, the new law and related guidance have created some uncertainty over what improvements may qualify for the same-year recovery provisions.

On August 8^th, the IRS released proposed regulations addressing the Section 199A deduction, commonly known as the 20 percent pass-through deduction. The guidance clarified several aspects of Section 199A that are of particular interest to healthcare providers, including the definition of “specified service trades or businesses” (SSTBs) and restrictions on splitting up existing businesses. At first glance, it appears that these new rules will limit the ability of healthcare professionals to qualify for the deduction. (For a broader look at the general impact of the proposed regulations, see the HORNE article, “Tax Reform: Guidance For Pass-Throughs Is Here.”)

Last week, we provided a high-level overview of components that would directly affect healthcare. With the finalized tax bill passed today, we have updated those components to include results of the final bill.

From lowering corporate taxes to health insurance mandates to the impact on the middle class, there are many headlines out there related to the recently passed House and Senate tax bills.

As discussed in my previous blog post, the IRS is ramping up compliance audits of governmental hospitals who are exempt under 501(c)3. However, the IRS isn’t the only one monitoring your tax-exempt hospital. Other organizations have started policing these requirements.

Is your governmental hospital exempt under Section 501(c)3? If you have a 403(b) plan, the answer is yes; and even if you don’t—you need to check. 

Just days before the end of 2014, the IRS released long-awaited final regulations under Section 501(r) for charitable hospitals exempt under Section 501(c)3. These regulations are in response to requirements enacted under the Affordable Care Act and finalize regulations first proposed in June 2012 to hold tax exempt hospitals to a higher standard.

The final regulations not only clarify language but also make several significant changes that both increase and decrease the burden placed on tax exempt hospitals.

Here are 3 key takeaways from the finalized regulations:

Clarity on Government Hospitals and 501 (c)3 Status

Final regulations confirm government hospitals previously recognized as exempt under 501(c)3 are subject to all of the 501(r) regulations. The IRS notes these hospitals can request to voluntarily terminate their section 501(c)3 recognition to avoid being subject to the regulations.

Non-profit hospitals should take notice of changes the IRS has made in its Draft 2014 Form 990 Schedule H. The IRS is trying to make its Schedule H more closely mirror requirements in the Affordable Care Act, section 501(r). In particular, the updated draft form requires more commentary so that the IRS can get quicker visibility into whether hospitals are living up to the true purpose of the Community Health Needs Assessment (CHNA) regulations. Here are some key points to note in the updated form:
 
More specificity in check-the-box questions
 
501(r) details that a hospital must adopt an implementation strategy to meet the needs identified in the CHNA by the end of the same taxable year in which the CHNA was conducted. The Draft Schedule H now asks for the tax year in which the CHNA was adopted and either a link to or a copy of the implementation strategy. This updated draft also provides clarity to the IRS about allowable exceptions that might be missed in a simple review of previous forms.