/ en Fri, 25 Apr 2025 19:26:00 -0500 Wed, 29 Jan 25 16:28:08 -0600 /infographics/2025-01-29-infographic-myth-vs-fact-nonprofit-hospitals-tax-exempt-status <div class="external-link spacer"><a class="btn btn-wide btn-primary" href="/system/files/media/file/2025/01/myth-vs-fact-nonprofit-hospitals-tax-exempt-status-infographic.pdf" target="_blank" title="Click here to download the Infographic: Myth vs. Fact: Nonprofit Hospitals’ Tax-Exempt Status PDF.">Download the Infographic PDF</a></div><p><a href="/system/files/media/file/2025/01/myth-vs-fact-nonprofit-hospitals-tax-exempt-status-infographic.pdf" target="_blank" title="infographic pdf"><img src="/sites/default/files/2025-01/myth-vs-fact-nonprofit-hospitals-tax-exempt-status-infographic-f-880px.png" width="882" height="1121" alt="Myth vs. Fact: Nonprofit Hospitals’ Tax-Exempt Status infographic"></a></p> Wed, 29 Jan 2025 16:28:08 -0600 Tax-exempt Status /fact-sheets/2025-01-24-fact-sheet-nonprofit-hospitals-tax-exempt-status <div class="container"><div class="row"><div class="col-md-8"><h2>The Issue</h2><p>Hospitals and health systems across the country provide 24/7 health care to patients and communities daily.  In addition to access to life-saving care, communities receive benefits and services unique to their location. Nonprofit hospitals are exempt from federal and some state and local taxes. Therefore, in addition to providing that 24/7 care, they must meet the Internal Revenue Service (IRS) Community Benefit Standard and publicly and extensively report the range of benefits and services they provide to their communities. And in fact, nonprofit hospitals offer benefits above and beyond the value of their tax exemption, in part because of the immense value the services, such as education, health screenings and prevention activities, provide to the communities they serve.</p><p>The mission of all community hospitals and health systems, regardless of size and type of ownership, is to care for their patients and communities. Tax-exempt status helps nonprofit hospitals with tight finances to continue providing access to care. In addition, nonprofit hospitals have access to tax-exempt bond financing, a key benefit that makes access to vital hospital services available to communities across America. If nonprofit hospital access to tax-exempt status or financing is limited or eliminated entirely, the result could be devastating for both patients and their communities. </p><h2>AHA Position</h2><ul><li>Protect and maintain nonprofit hospitals’ tax-exempt status and tax-exempt bond financing, including qualified 501(c)(3) private-activity bonds, which are necessary for the continued financial health of hospitals and access to care for the communities they serve.</li><li>Oppose efforts to impose arbitrary minimum charity care levels on nonprofit hospitals to maintain their tax-exempt status.</li><li>Oppose initiatives to require additional one-size-fits-all reporting requirements on the already comprehensive IRS Schedule H form.</li><li>Oppose efforts to eliminate the deduction for charitable contributions to health organizations.</li></ul><h2>Why?</h2><ul><li><span><strong>America’s communities receive a positive return on their investment from the tax exemption of nonprofit hospitals.</strong></span><strong> </strong>The IRS requires extensive reporting by nonprofit hospitals of benefits provided to communities in a form called the IRS 990 Schedule H. An <a href="/press-releases/2023-10-10-tax-exempt-hospitals-provided-nearly-130-billion-total-benefits-their-communities"><strong>AHA analysis</strong></a> shows that the value of total benefits to the community averaged 15.5% of the hospitals’ total expenses. Direct benefits to patients, which include free care, financial assistance and spending to fill gaps in Medicaid underpayments, averaged nearly 7% of expenses.  Overall, the benefit tax-exempt hospitals provided to their communities, as reported on Form 990 Schedule H, is estimated to be $129 billion, 10 times greater than the value of their federal tax exemption.<br> </li><li><span><strong>Nonprofit hospitals and health systems recognize that their tax-exempt status comes with the responsibility to deliver on their mission to care for the communities they serve.</strong></span> This includes improving community health by addressing key needs like housing and transportation, conducting medical research and educating health care providers, and subsidizing high-cost and often negative margin essential services, such as wound care and behavioral health. The programs improve community health in the long term, which is why it’s critical to focus not only on financial assistance but also on other categories of community benefit and the broader efforts to enhance public health outcomes.</li><li><span><strong>Hospitals play a key role in the nation’s emergency preparedness and response as part of America’s health care infrastructure.</strong></span> In times of disaster, communities look to hospitals not only to mobilize resources to care for the ill and injured but also to provide food and shelter and coordinate relief and recovery efforts. As part of this role, hospitals are pivotal to disaster response activities, whether rural, critical access hospitals or Level 1 trauma centers.</li><li><span><strong>Hospitals are community mainstays.</strong></span> Every year, hospitals provide vital health care services to hundreds of millions of people in thousands of communities. However, the importance of hospitals to their communities extends far beyond health care. Hospitals directly employed over 6.6 million people in 2023 and supported 25.9 million total jobs across the economy. The over $1.3 trillion in goods and services hospitals purchased in 2023 from other businesses created additional economic value for their communities.</li><li><span><strong>Tax-exempt financing helps lower health care costs for patients.</strong></span> Tax-exempt bonds reduce hospitals’ borrowing costs because they normally can be sold at a lower interest rate than taxable debt of comparable risk and maturity. Nonprofit hospital borrowers save, on average, an estimated 2 percentage points on their borrowing compared to taxable bonds or bank financing. Lower borrowing costs translate into lower health care costs for patients. The lower cost of tax-exempt financing also makes possible necessary upgrades and modernizations that would not be possible for hospitals with weaker balance sheets. Further, more costly alternatives, such as taxable bonds and bank loans, are out of reach for many community hospitals.</li></ul></div><div class="col-md-4"><a href="/system/files/media/file/2025/01/fact-sheet-nonprofit-hospitals-tax-exempt-status.pdf"><img src="/sites/default/files/inline-images/fact-sheet-nonprofit-hospitals-tax-exempt-status.png" data-entity-uuid="036e4374-ecc7-4437-8043-5abb33c66f9a" data-entity-type="file" width="682" height="882" alt="Fact Sheet: Nonprofit Hospitals’ Tax-exempt Status page 1."></a><hr><p> </p></div></div></div> Fri, 24 Jan 2025 13:38:03 -0600 Tax-exempt Status /legal-documents/2024-11-06-american-hospital-association-2023-irs-form-990 <div class="container"><div class="row"><div class="col-md-8"><h2 class="text-align-left">Public Disclosure Copy</h2><h3 class="text-align-left">���������� Association IRS Form 990</h3><div class="external-link spacer"><a class="btn btn-wide btn-primary" href="/system/files/media/file/2024/11/2023-AHA-Form-990-Public-Disclosure-Copy.pdf" target="_blank" title="���������� Association 2023 IRS Form 990 Public Disclosure Copy PDF">Download the Complete AHA 2023 IRS Form 990</a></div></div><div class="col-md-4"><div class="panel module-typeC"><div class="panel-heading"><h3 class="panel-title">AHA IRS Form 990 from Previous Year</h3></div><div class="panel-body"><ul><li><a href="/system/files/media/file/2023/11/American-Hospital-Association-2022-IRS-Form-990.pdf">2022</a></li></ul></div></div></div></div><div class="row"><div class="col-md-8"><p> </p></div></div></div> Wed, 06 Nov 2024 16:00:00 -0600 Tax-exempt Status /news/perspective/2024-09-27-hospitals-are-community-cornerstones-and-advance-health-many-ways <p>All of America’s hospitals and health systems are cornerstones of their communities. They not only deliver around-the-clock care and essential services to patients, but they also provide a broad range of critical health, social and other programs that advance the health and well-being of individuals and communities.</p><p>Nonprofit hospitals have special obligations to their communities in exchange for being tax-exempt. These hospitals report the amounts they spend on community benefits yearly and conduct a community health needs assessment in conjunction with their community at least every three years.</p><p>According to a <a href="/2024-09-23-estimates-value-federal-tax-exemption-and-community-benefits-provided-nonprofit-hospitals-2020" target="_blank" title="a new analysis">new analysis</a> for the AHA by the international accounting firm EY (also known as Ernst and Young), nonprofit hospitals and health systems are meeting — and exceeding — the requirements and expectations that are attached to the privilege of tax exemption. </p><p>The EY study shows that tax-exempt hospitals and health systems delivered $10 in benefits to their communities for every dollar’s worth of federal tax exemption in 2020, the most recent year for which comprehensive data is available. This represents an increase from $9 in benefits the prior year despite serving on the front lines of a once-in-a-century pandemic.</p><p>Breaking it down, in 2020, the estimated federal tax revenue forgone due to the tax-exempt status of nonprofit hospitals was $13.2 billion. However, the <em>benefit</em> that tax-exempt hospitals provided to their communities, as reported on the Form 990 Schedule H, was estimated to be $129 billion, almost 10 times greater than the value of tax revenue forgone. That’s a tremendous return on investment by any standard.</p><p>Those benefits take many forms that improve the lives and health of individuals, families and communities.</p><p>For example, $57 billion was for financial assistance for patients in need, including charity care, unreimbursed Medicaid, and other unreimbursed costs from means-tested government programs.</p><p>Other benefits include a range of programs and services designed to meet the health needs of their communities. These  include help with housing, accessing healthy food, providing educational programs and health screenings, transportation to needed medical appointments, vaccination clinics and other programs to address the needs that affect their community’s health and well-being.</p><p>In addition, hospitals and health systems support emergency preparedness for all types of disasters, provide education and training for the next generation of caregivers, and invest in cutting-edge technology and medical equipment to ensure access to high-quality care.</p><p>As part of <a href="/tellingthehospitalstory" target="_blank" title="Telling the Hospital Story Webpage">AHA’s Telling the Hospital Story</a> efforts, we continue to highlight the incredible work being done by all hospitals and health systems across the country. You can see examples of inspirational stories, innovative programs and community partnerships that are making a real difference in people’s lives.</p><p>Advancing health for patients and communities will always be at the heart of the mission of hospitals and health systems. They demonstrate it every day in many ways.</p> Fri, 27 Sep 2024 08:21:38 -0500 Tax-exempt Status /news/headline/2024-09-24-report-nonprofit-hospitals-value-communities-10-times-their-federal-tax-exemption <p>An EY <a href="/2024-09-23-estimates-value-federal-tax-exemption-and-community-benefits-provided-nonprofit-hospitals-2020">report</a> prepared for the AHA shows that tax-exempt hospitals and health systems delivered $10 in benefits to their communities for every dollar’s worth of federal tax exemption in 2020, the most recent year for which comprehensive data is available. It represents an increase from $9 in benefits from the prior year despite efforts in battling the COVID-19 pandemic.  <br>  <br>In 2020, the estimated federal tax revenue forgone due to the tax-exempt status of nonprofit hospitals was $13.2 billion, according to the report. In comparison, the benefit tax-exempt hospitals provided to their communities, as reported on the Form 990 Schedule H, was estimated to be $129 billion, nearly 10 times greater than the value of tax revenue forgone.   <br>  <br>“All of America’s hospitals and health systems are cornerstones of their communities — delivering not only around-the-clock care and essential services but a broad range of critical health, social and other programs that advance community health,” <a href="/press-releases/2024-09-24-new-ey-analysis-nonprofit-hospitals-value-communities-ten-times-their-federal-tax-exemption">said</a> AHA President and CEO Rick Pollack. “Nonprofit hospitals have a special obligation to those they serve and this new analysis from EY shows these efforts are more than a worthy investment and that improving the health of their communities remains at the heart of the mission of the hospital field.”</p> Tue, 24 Sep 2024 09:07:38 -0500 Tax-exempt Status /press-releases/2024-09-24-new-ey-analysis-nonprofit-hospitals-value-communities-ten-times-their-federal-tax-exemption <p><strong>WASHINGTON </strong>(September 24, 2024) – <a href="https://nam11.safelinks.protection.outlook.com/?url=https%3A%2F%2Flink.mediaoutreach.meltwater.com%2Fls%2Fclick%3Fupn%3Du001.7kr010ACWZRfM3MOuCoTb-2BWULATRfm2vZ57qiWoDMPlkkQIxgTnQ-2B-2BUcPq5N8uUD1Lc2t-2FQTKkqSztl6ATLtrdXDQ6UebuxYEOrsLJNJa9qRtVsiPJSlUcEHTuEnCSiP5sVKN8fuFhDWWW-2B-2F0PI6RYrQSxnidIFnikCzyqKMkGCui2zgVTaemGBwY7shrvvllcPgSlh3mA-2FDh-2BT2dXhZoLEuYDjKCyFq78VMrGn-2F4-2Bc-3DEu_t_d2RbcZIH1cPr8T71lfy9-2Baax-2F-2BEajmJ1xBQdwzrxSfXYrczhBuOKN0y9-2Fz7LWn8-2BDbxbRMmISA8VWYgeVYMYLehFbJjjJrsDU061vryWib5OgupGu7XbukALgR8dzkZgi-2FEXA7E9J48ISlZ3gSxqAK-2Fy-2B6TpumE2uGDB361GtHvWcTy5FtyLx2WHNNNaDUMjrmwfew4nsFQkK3Yj-2BNkuJjl9WhvAYOR7abdvQgDzjjk4jFOPkbm38jhnz2ZttHoFRWwehpDGmh3zEFd-2FNsr4pDXuHaP7YHl14nikkiXDHwi8ftyk-2FM-2FbS5oE05zwjN587pxpCh2KW-2F8I-2Fy958XdhsNmK-2BZEEV8g24CtdKud8i4qVhCcsyW6rmmavdwxxSNXD&data=05%7C02%7Cbteicher%40aha.org%7C36864cd014624dc5da4d08dcdc9e42c9%7Cb9119340beb74e5e84b23cc18f7b36a6%7C0%7C0%7C638627819518075143%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C0%7C%7C%7C&sdata=k3HPYiwR26p%2FYPJYJT2%2B7JRASVmpy0V2x%2F9Sr0V%2Bj68%3D&reserved=0">A new analysis</a> by the international accounting firm EY (also known as Ernst and Young) for the AHA shows that tax-exempt hospitals and health systems delivered <u>$10 in benefits to their communities for every dollar’s worth of federal tax exemption</u> in 2020, the most recent year for which comprehensive data is available. This represents an increase from $9 in benefits the prior year despite serving on the front lines of a once-in-a-century pandemic. The full analysis can be found <a href="https://nam11.safelinks.protection.outlook.com/?url=https%3A%2F%2Flink.mediaoutreach.meltwater.com%2Fls%2Fclick%3Fupn%3Du001.7kr010ACWZRfM3MOuCoTb-2BWULATRfm2vZ57qiWoDMPlkkQIxgTnQ-2B-2BUcPq5N8uUD1Lc2t-2FQTKkqSztl6ATLtrdXDQ6UebuxYEOrsLJNJa9qRtVsiPJSlUcEHTuEnCSiP5sVKN8fuFhDWWW-2B-2F0PI6RYrQSxnidIFnikCzyqKMkGCui2zgVTaemGBwY7shrvvllcPgSlh3mA-2FDh-2BT2dXhZoLEuYDjKCyFq78VMrGn-2F4-2Bc-3DEBfv_d2RbcZIH1cPr8T71lfy9-2Baax-2F-2BEajmJ1xBQdwzrxSfXYrczhBuOKN0y9-2Fz7LWn8-2BDbxbRMmISA8VWYgeVYMYLehFbJjjJrsDU061vryWib5OgupGu7XbukALgR8dzkZgi-2FEXA7E9J48ISlZ3gSxqAK-2Fy-2B6TpumE2uGDB361GtHvWcTy5FtyLx2WHNNNaDUMjrmwfew4nsFQkK3Yj-2BNkuJk2JiUz24CYFk4s5FRIx4WMhRIwk-2BWx8dE3EL0u40XOTbiKLrsQXX2zWiWix85vyC-2BKr3k4IIACZD6rDEmCzUKDfR5SzCji1brRjG8Z8QE4glDr6A-2BoM1RVWB5VjJEGrQYMXH11krM8secfRRlBOqsEt4ciXcNC7rgQwCOQohvgl&data=05%7C02%7Cbteicher%40aha.org%7C36864cd014624dc5da4d08dcdc9e42c9%7Cb9119340beb74e5e84b23cc18f7b36a6%7C0%7C0%7C638627819518097383%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C0%7C%7C%7C&sdata=paEv%2B%2FfYpKjlxYWojpyjmpYBLNJJgdCtw7vq5DG0v4A%3D&reserved=0">HERE</a>.</p><p>In 2020, the estimated federal tax revenue forgone due to the tax-exempt status of nonprofit hospitals was $13.2 billion.In comparison, the benefit tax-exempt hospitals provided to their communities, as reported on the Form 990 Schedule H, was estimated to be $129 billion, almost 10 times greater than the value of tax revenue forgone. </p><p><strong>“All of America’s hospitals and health systems are cornerstones of their communities — delivering not only around-the-clock care and essential services but a broad range of critical health, social and other programs that advance community health,”</strong> said AHA President and CEO Rick Pollack. <strong>“Nonprofit hospitals have a special obligation to those they serve and this new analysis from EY shows these efforts are more than a worthy investment and that improving the health of their communities remains at the heart of the mission of the hospital field.”   </strong></p><p>Nonprofit hospitals are required by law to identify the range of challenges faced by their communities through input from residents, support programs and services aimed at addressing these issues, and to publicly report data on these community investments. This includes reporting on the provision of financial assistance (charity care and Medicaid shortfall) for those in need, and a wide range of tailored programs, initiatives and services designed to meet the current and future health needs of all they serve. In addition, hospitals and health systems support emergency preparedness for all types of disasters, provide education and training for the next generation of caregivers, and invest in cutting-edge technology and medical equipment to ensure access to high-quality care. </p><p>For more information on how the entire hospital field is providing for their communities visit <a href="https://nam11.safelinks.protection.outlook.com/?url=https%3A%2F%2Flink.mediaoutreach.meltwater.com%2Fls%2Fclick%3Fupn%3Du001.7kr010ACWZRfM3MOuCoTb40WAMgnqkvYNn5QeXMbwlcSdDLSlsMoDcLkTpYnPlZqUnuo_d2RbcZIH1cPr8T71lfy9-2Baax-2F-2BEajmJ1xBQdwzrxSfXYrczhBuOKN0y9-2Fz7LWn8-2BDbxbRMmISA8VWYgeVYMYLehFbJjjJrsDU061vryWib5OgupGu7XbukALgR8dzkZgi-2FEXA7E9J48ISlZ3gSxqAK-2Fy-2B6TpumE2uGDB361GtHvWcTy5FtyLx2WHNNNaDUMjrmwfew4nsFQkK3Yj-2BNkuJhhLrkCiQp3yLQleHTzwory56yQVun7F16xvF6gW2hrLZ3YjHVKFhrPx1WTuzxKkF5ArnPF8VwSZgw-2Bk5shev3d90maab1F3Kzu0-2B6cfaJuX4DAoHVcZVpFqTCO7gpwA-2FmM5MM4y7FdiHQERUmQPUo5izXxWW5EQDxAAfMD-2B2Xwl&data=05%7C02%7Cbteicher%40aha.org%7C36864cd014624dc5da4d08dcdc9e42c9%7Cb9119340beb74e5e84b23cc18f7b36a6%7C0%7C0%7C638627819518114710%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C0%7C%7C%7C&sdata=XoPacxHKDDY%2F8yg%2BabSsxy9WcreNPEib1SZGk0SdJaw%3D&reserved=0">HERE</a>.</p><p class="text-align-center">###</p> Tue, 24 Sep 2024 08:47:42 -0500 Tax-exempt Status /2024-09-23-estimates-value-federal-tax-exemption-and-community-benefits-provided-nonprofit-hospitals-2020 <div class="container"><div class="row"><div class="col-md-8"><p>EY was commissioned by the ���������� Association to analyze the federal revenue forgone due to the tax exemption of nonprofit hospitals relative to the community benefits they provide<sup>1</sup>. This study presents estimates for 2020, the most recent year for which complete comparable community benefit information is available for nonprofit hospitals. The study is based on Medicare hospital cost reports for approximately 2,500 nonprofit general hospitals. The analysis does not account for other nonprofit specialty hospitals, such as psychiatric or long-term acute care.<sup>2</sup></p><p>In 2020, the estimated tax revenue forgone due to the tax-exempt status of nonprofit hospitals is $13.2 billion. In comparison, the benefit tax-exempt hospitals provided to their communities, as reported on the Form 990 Schedule H, is estimated to be $129 billion, almost 10 times greater than the value of tax revenue forgone.</p><h4>Federal revenue forgone from tax-exempt nonprofit hospitals in 2020 </h4><p>Three tax provisions that provide a federal exemption for nonprofit hospitals are analyzed here:</p><ol><li>) Federal corporate income tax exemption; </li><li>) Tax-exempt bond financing; and </li><li>) Federal unemployment tax exemption.</li></ol><p>Based on the data and methodology described below for nonprofit general hospitals, the value of the federal revenue forgone due to these three tax exemptions in 2020 is estimated to be $13.2 billion. This estimate reflects the upper bound of the potential value of the federal tax exemption for two reasons:</p><ol><li>) Some hospitals may be exempt due to their educational or religious nature, rather than their charitable nature. In the absence of a tax exemption for charitable hospitals, certain organizations could continue to be exempted for other reasons. </li><li>) Certain features of the federal tax code are not reflected in this analysis due to a lack of necessary information, such as potential tax credits and accelerated depreciation.</li></ol><p>Additionally, potential taxpayer behavioral changes may occur if hospitals were subject to tax. These effects would likely reduce taxable income but have not been reflected in this analysis.</p><h4>Total community benefit provided by tax-exempt nonprofit hospitals in 2020 </h4><p>Four items are included in tax-exempt hospitals’ total benefit to communities reported on Form 990 Schedule H:</p><ol><li>) Financial assistance and means tested government programs and other benefits (Part I, line 7k of the Form 990 Schedule H); </li><li>) Community-building activities (Part II of the Form 990 Schedule H); </li><li>) Medicare shortfall (Part III, line 7 of the Form 990 Schedule H); and </li><li>) Bad debt attributable to charity care (Part III, line 3 of the Form 990 Schedule H).</li></ol><p>The total community benefit provided by tax-exempt hospitals is estimated to be $129 billion in 2020.</p><p>Figure 1 offers a comparison of the federal tax revenue forgone due to the tax benefits available to tax-exempt hospitals with the value of hospital-provided financial assistance and other community benefits. Total community benefits are calculated at cost for private nonprofit hospitals from the IRS Form 990 Schedule H.<sup>3</sup></p><img src="/sites/default/files/inline-images/EY-Estimates-of-the-value-of-federal-tax-exemption-2020-fig1.png" data-entity-uuid="82437c0a-bebd-453b-bf49-54d401a78f93" data-entity-type="file" alt="Figure 1. Federal tax revenue forgone compared to US nonprofit hospital community benefits provided by hospitals, 2020" width="961" height="750" class="align-left"><p><img src="/sites/default/files/inline-images/EY-Estimates-of-the-value-of-federal-tax-exemption-2020-fig2.png" data-entity-uuid="db94b01b-2e70-4d2a-a0d4-4e7bee93a15d" data-entity-type="file" alt="Figure 2. Federal tax revenue forgone from US nonprofit hospitals, 2020" width="972" height="577"></p><p>Figure 2 shows the makeup of the federal tax revenue forgone for 2020. Of the $13.2 billion of federal revenue forgone, $10.1 billion reflects federal corporate income taxes. Meanwhile, $2.9 billion reflects the reduced cost of tax-exempt financing, the direct benefits of which accrue to taxexempt bond holders. In return, these holders provide financing to the tax-exempt hospitals at a reduced interest rate. The revenue forgone due to federal unemployment tax exemption is $0.2 billion.</p><p><img src="/sites/default/files/inline-images/EY-Estimates-of-the-value-of-federal-tax-exemption-2020-fig3.png" data-entity-uuid="266098a9-ebd1-4242-81dd-c9ded6e3ad37" data-entity-type="file" alt="Figure 3. Community benefits provided by US nonprofit hospitals, 2020" width="937" height="497"></p><p>Figure 3 shows the makeup of the community benefits provided by tax-exempt hospitals in 2020. Of the $129 billion of community benefits, $57.4 billion reflects financial assistance, unreimbursed Medicaid, and other unreimbursed costs from means-tested government programs. In addition, $36.6 billion reflects community health improvement services, health professions education, subsidized health services, research, and cash and in kind contributions. $35.0 billion reflects community building activities, unreimbursed Medicare, and bad debt attributable to financial assistance.</p><h4>Overview of approach for estimating federal tax revenue forgone</h4><p>This analysis estimates federal tax revenue forgone as a result of three federal tax provisions, relying on data from the Medicare hospital cost reports filed by hospitals that receive Medicare reimbursements. The hospital cost reports are not audited financial reports, but they are filed by hospitals with the federal government. In 2020 – the year on which this analysis is based – 2,432 private, nonprofit, general hospitals filed Medicare hospital cost reports.<sup>4</sup> The results are then grossed up to the entire field using data from the 2020 AHA Annual Survey of Hospitals and from the AHA Schedule H Community Benefit Reporting study.<sup>5</sup></p><p>In this analysis, we apply the general federal tax rules to the levels of tax-exempt activities reported by nonprofit hospitals. Not all aspects of the detailed federal tax rules can be applied to the available financial data in the hospital cost reports, however, so certain estimates of revenue forgone require additional data and/or assumptions, which are described below.</p><h4>Adjustments to reported income incorporated in the estimate of revenue forgone from corporate income tax exemption</h4><p>The estimate of corporate taxable income starts with the positive net income before adjustments for each hospital as reported in the Medicare hospital cost reports. The cost reports, similar to financial reports, do not include the entire income and expense detail necessary to reconstruct a corporate income tax return. In estimating the interest deduction, the 50% limitation was used.<sup>6</sup> Adjustments for positive and negative differences between book and tax accounting are not made due to insufficient detail in the Medicare hospital cost reports. For example, the provision for bad debt is likely to reduce financial statement income as compared with taxable income, while accelerated tax depreciation is likely to reduce taxable income as compared with financial statement income.</p><ul><li>Bonus depreciation not reflected. In 2020, federal tax law allowed bonus depreciation that provided additional first-year tax write-offs of capital investments as part of fiscal stimulus. Bonus depreciation applied to only certain qualifying property, and some state tax systems did not conform to this provision. Due to this complexity and data constraints, bonus depreciation was not considered in this analysis. Had bonus depreciation been reflected in the estimates, it would have reduced the federal corporate income tax forgone in 2020. </li><li>Consolidation with affiliates. The analysis assumes that nonprofit hospitals would take advantage of tax consolidation rules with affiliated hospitals if they were subject to tax. Thus, a hospital with a taxable loss could offset positive taxable income of a consolidated hospital in the current year.7 Using an affiliation listing provided by the ���������� Association, consolidated taxable income of all nonprofit hospitals was estimated. On net, consolidation of hospitals reduces overall taxable income. </li><li>Contributions excluded from income. The analysis reduces hospitals’ taxable income by the amount of contributions received. If contributions constitute gifts for federal income tax purposes, such gifts are not included in taxable income but may be subject to gift tax. Restricted gifts used for capital improvements may not be included in taxable income if certain conditions are met, in which case they would reduce the taxable basis of the capital improvements. Further, if contributions to hospitals are not eligible for a tax deduction, it is assumed that most donors would choose other qualified organizations. For these reasons, the contributions are excluded from the estimate of corporate taxable income. </li><li>State and local taxes. Many hospitals would automatically pay higher state and local taxes in the absence of the federal tax exemption. Thus, estimates on a state-by-state basis of the potential sales tax on business inputs and of potential property taxes on nonprofit hospitals were incorporated in the federal tax calculations as deductions from taxable income.<sup>8</sup> Increased state corporate income taxes also would be deductible against federal taxable income, and this factor also is reflected in the analysis.</li><li>Prior year losses. Finally, the federal corporate income tax does not tax businesses only on their net positive income in each year, but instead allows for net operating losses to offset taxable income to be carried forward offsetting positive taxable income in future years.<sup>9</sup> For tax loss carryforwards, financial statement income losses from 2009 through 2019 were applied against positive taxable income for each year, with any remaining losses applied to positive income from 2020. The tax loss carryover rules, similar to the tax consolidation rules, result in taxable income being lower than positive financial net income in all years analyzed.</li></ul><h4>Tax-related items not considered for analysis</h4><p>Several items were not included in the analysis due to information constraints. The items below would reduce the estimate of federal revenue forgone had they been included.</p><ul><li>Potential federal tax credits. The analysis does not include federal credits such as enterprise zone and work opportunity tax credits, and special deductions, such as accelerated depreciation, are not included in this analysis due to lack of necessary information. </li><li>Routine tax planning. Taxable companies routinely plan their operations and structures to minimize tax, which could result in hospitals reporting lower taxable income than suggested by financial statements for exempt entities. </li><li>Tax net operating losses. Losses that remained at the end of 2020 could be used by some hospitals to offset future taxable income, which have not been considered in this analysis. </li><li>Unrelated business income tax. Some nonprofit hospitals already pay income tax on a small portion of their income.<sup>10</sup> Had current payments of this tax been considered, the estimate of the value of foregone federal taxes would be reduced.</li></ul><h4>Impacts of the COVID-19 pandemic</h4><p>Given the year of analysis was 2020, the financial information used in this analysis reflects the impacts of the COVID-19 pandemic. Due to the pandemic, the estimates of the value of tax exemption for 2020 may not be representative of past or future years.</p><h4>Estimate of federal revenue forgone from tax-exempt bond financing</h4><p>The analysis calculates the revenue forgone from tax-exempt bond financing to nonprofit hospitals. The estimate assumes the total amount of notes payable and other long-term liabilities outstanding as reported in the Medicare cost reports were issued as federally tax-exempt bonds. The analysis assumes that the average marginal tax rate applicable to investors in tax-exempt bonds is approximately 30 percent.<sup>11</sup> Applying this tax rate to the 10-year average taxable yields of Aaa and Baa corporate bonds and tax-exempt debt outstanding in each of the years, the revenue forgone from tax-exempt bonds of nonprofit hospitals was $5.0 billion in 2020. To the extent that nonprofit hospitals are using short-term financing with lower yields, the revenue forgone would be lower.</p><p>It should be noted that the benefit received by the hospital issuer is likely smaller than the federal revenue forgone, as the amount of revenue forgone is dependent on all the marginal tax brackets of the investors, whereas the market-clearing interest rate may be for a lower marginal tax bracket than many of the other bondholders. Furthermore, investors may not convert the entire tax benefit they receive into a lower cost of financing for the hospital.</p><h4>Estimate of the revenue forgone from federal unemployment tax</h4><p>The value of the revenue forgone from the federal unemployment tax is calculated assuming an effective federal unemployment tax rate of 0.5 percent and a maximum wage base of $7,000 per employee. Based on the 4.7 million employees of private nonprofit hospitals, the value of the exemption from federal unemployment tax is estimated to be $165 million in 2020.<sup>12</sup></p><hr><p><strong>Endnotes</strong></p><p>1 The methodology used in this report is consistent with Ernst & Young studies previously completed on behalf of the ���������� Association (released February 2013, October 2017, and May 2020).</p><p>2 AHA’s 2020 Annual Hospital Statistics Survey indicates there are 6,154 registered hospitals in the US. This includes community, federal government, psychiatric, long term care, and other hospitals. There are 5,194 community hospitals, which include non-governmental nonprofit (2,966 hospitals), investor-owned for-profit (1,258 hospitals), and state and local government (970 hospitals). The remaining 960 hospitals are made up of the federal government, psychiatric, long-term care, and other hospitals (e.g., prison hospitals).</p><p>3 Community Benefit from ‘Results from 2020 Tax-Exempt Hospitals’ Schedule H Community Benefit Reporting' ���������� Association, October 2023</p><p>4 Hospitals were identified based on AHA’s 2020 Annual Hospital Statistics Survey. The Survey defines a general medical hospital as follows: “Provides acute care to patients in medical and surgical units on the basis of physicians’ orders and approved nursing care plans.” In terms of the hospitals used for this analysis, there were 2,432 hospitals in the 2020 Medicare hospital cost reports.</p><p>5 This gross up is done by taking the federal revenue forgone as a percent of total hospital expense for the 2,432 hospitals in the CMS data. The community benefit data from the IRS Form 990 Schedule H already includes a percent of total hospital expense calculation. The total hospital expense number from the AHA Survey of Hospitals for 2020 for nonprofit general medical hospitals is used to calculate the total revenue forgone and community benefits dollars. This makes comparable the tax savings and community benefits calculations.</p><p> </p></div><div class="col-md-4"><div><a class="btn btn-wide btn-primary" href="/system/files/media/file/2024/09/EY-Estimates-of-the-value-of-federal-tax-exemption-community-benefits-provided-by-nonprofit-hospitals-2020.pdf" target="_blank" title="Click here to download the Estimates of the value of federal tax exemption and community benefits provided by nonprofit hospitals, 2020 PDF.">Download the Report PDF</a></div> <a class="btn btn-wide btn-primary" href="#" target="_blank" title="Click here to see the Estimates of the value of federal tax exemption and community benefits provided by nonprofit hospitals, 2020 report press release.">View the Press Release</a> </div>--><div><a class="btn btn-wide btn-primary" href="/community-benefit" target="_blank" title="Click here to visit the AHA Community Benefit landing page.">Learn More About Hospital Benefits to Communities</a></div><hr><p><a href="/system/files/media/file/2024/09/EY-Estimates-of-the-value-of-federal-tax-exemption-community-benefits-provided-by-nonprofit-hospitals-2020.pdf" target="_blank" title="Click here to download the Estimates of the value of federal tax exemption and community benefits provided by nonprofit hospitals, 2020 PDF."><img src="/sites/default/files/2024-09/EY-Estimates-of-the-value-of-federal-tax-exemption-community-benefits-provided-by-nonprofit-hospitals-2020.png" data-entity-uuid data-entity-type="file" alt="Estimates of the value of federal tax exemption and community benefits provided by nonprofit hospitals, 2020 page 1." width="695" height="897"></a></p></div></div></div> Mon, 23 Sep 2024 12:50:50 -0500 Tax-exempt Status /news/headline/2024-07-09-op-ed-nonprofit-hospitals-need-positive-margins <p>An op-ed published July 9 in Modern Healthcare written by AHA President and CEO Rick Pollack and Catholic Health Association President and CEO Sr. Mary Haddad discusses why nonprofit hospitals need positive margins. The commentary piece seeks to add important context and education to the conversation around nonprofit hospitals’ community benefit, tax-exempt status and other issues, arguing that positive margins are necessary to maintain basic services and advance care for all patients and communities 24/7. "Barely making ends meet or operating at a financial loss should never be the goal or an acceptable status quo for any nonprofit healthcare organization," Pollack and Haddad write. "It’s not just bad economics; it also impedes institutions’ ability to deliver services and improve health outcomes." <a href="https://www.modernhealthcare.com/opinion/nonprofit-hospitals-margin-charity-care-mary-haddad-rick-pollack-aha">READ MORE</a><br> </p> Tue, 09 Jul 2024 15:38:14 -0500 Tax-exempt Status /news/headline/2024-04-23-ftc-issues-final-rule-banning-most-noncompete-clauses-employer-agreements <p>The Federal Trade Commission April 23 voted 3-2 to issue a <a href="https://www.ftc.gov/system/files/ftc_gov/pdf/noncompete-rule.pdf">final rule</a> that would ban as an unfair method of competition contractual terms that prohibit workers from pursuing certain employment after their contract with an employer ends. The final rule does not apply to existing agreements with executives earning more than $151,164 annually who are in policymaking positions. In addition, although the Commission recognized that it does not have jurisdiction over not-for-profit entities, it reserved the right to evaluate an entity’s non-profit status and noted that some “entities that claim tax-exempt nonprofit status may in fact fall under the Commission’s jurisdiction.” Specifically, it stated that “some portion of the 58% of hospitals that claim tax-exempt status as nonprofits and the 19% of hospitals that are identified as State or local government hospitals in the data cited by AHA likely fall under the Commission’s jurisdiction and the final rule’s purview.”<br><br>The rule takes effect 120 days after publication in the Federal Register and includes <a href="https://www.ftc.gov/legal-library/browse/rules/noncompete-rule">model language</a> that employers can use to communicate to workers.  The United States Chamber of Commerce has already indicated that it will file suit to challenge the final rule.<br><br>AHA had <a href="/news/headline/2023-02-22-aha-urges-ftc-withdraw-proposed-rule-would-ban-noncompete-clauses-employer-agreements">urged</a> the agency to withdraw the proposed regulation or exempt the hospital field.<br><br>In a statement shared with the media today, Chad Golder, AHA general counsel and secretary, said, “For all of the reasons the AHA <a href="/system/files/media/file/2023/02/aha-comments-on-ftc-proposed-non-compete-clause-rule-letter-2-22-23.pdf">explained in its comment letter</a>, the FTC’s final rule banning non-compete agreements for all employees across all sectors of the economy is bad law, bad policy, and a clear sign of an agency run amok.  The agency’s stubborn insistence on issuing this sweeping rule — despite mountains of contrary legal precedent and evidence about its adverse impacts on the health care markets — is further proof that the agency has little regard for its place in our constitutional order.  Three unelected officials should not be permitted to regulate the entire United States economy and stretch their authority far beyond what Congress granted it--including by claiming the power to regulate certain tax-exempt, non-profit organizations. The only saving grace is that this rule will likely be short-lived, with courts almost certain to stop it before it can do damage to hospitals’ ability to care for their patients and communities.”</p> Tue, 23 Apr 2024 15:30:21 -0500 Tax-exempt Status /news/blog/2023-11-30-article-misleads-hospitals-charity-care-spending <p>A recent <a href="https://www.modernhealthcare.com/providers/nonprofit-hospital-charity-care-spending-2020-2022" target="_blank"><em>Modern Healthcare</em> article</a> misleadingly suggests that hospitals and health systems provided less charity care between 2020 and 2023. The truth is much different. In fact, the author’s own data tells a very different story, and it is important to set the record straight.</p> <p><strong>In reality, hospitals’ overall charity care <em>increased</em> over the last three years.</strong> According to the data cited in the article from Merritt Research Services, median charity care spending for all hospitals grew by 13% between 2021 and 2022 alone.</p> <p><strong>Hospitals’ expenses also increased during this period — at a far greater pace.</strong> The AHA has documented — <a href="/costsofcaring">again</a> and <a href="/guidesreports/2023-04-20-2022-costs-caring">again</a> — how operating expenses have skyrocketed. Costs grew 17.5% between 2020 and 2022, driven by increases in labor expenses, drug costs, and spending on medical supplies and equipment. These expenses created historic financial headwinds, with record numbers of hospitals incurring negative operating margins. This massive growth in expenses has pushed many hospitals and health systems to the brink.</p> <p>These twin realities contradict the article’s disingenuous headline, as well as its lead quotation from a professor whose research agenda has been funded by an anti-hospital dark money organization. <strong>Put simply, <em>Modern Healthcare</em> is able to break the entirely unremarkable news of a “proportional” decrease in the ratio of charity care and hospital expenses <u>only because</u> hospital expenses grew so precipitously.</strong></p> <p>It’s basic math: When the denominator (expenses) increases as much as it has over the past three years, but the numerator (charity care) does not increase as much, then of course the overall proportion will look different. But rather than reporting that “news,” and rather than reporting the truly newsworthy fact that hospitals provided increasing levels of financial assistance despite facing historic growth in expenses, <em>Modern Healthcare</em> misleads readers into thinking that hospitals were not adequately providing care to the patients and communities they serve.</p> <p>That journalistic defect alone would be enough to undermine <em>Modern Healthcare</em>’s misleading thesis. But its math is doubly flawed because the author leaves out many of the total benefits that hospitals and health systems provide to their communities. Put another way, by erroneously focusing on just one metric of how hospitals support their communities (charity care), the numerator is actually far smaller than reality reflects.</p> <p>For example, benefits to communities include things like financial assistance for patients, other community programs to advance health and wellness, and perhaps most important, significant Medicaid and Medicare underpayments (i.e., the difference between what those programs pay for care and what it costs to provide care and treatment to Medicare and Medicaid patients). And according to a recent AHA study, <a href="/system/files/media/file/2023/10/Results-from-2020-Tax-Exempt-Hospitals-Schedule-H-Community-Benefit-Reports.pdf">total hospital benefits to communities</a> were $130 billion in 2020 alone (the most recent year for which comprehensive data is available). This was a nearly $20 billion <em>increase</em> from 2019.</p> <p><strong>It is reckless and wrong to allege that hospitals are somehow deliberately “squeez(ing) their charity care spending to maintain financial viability” without presenting any evidence to back up this outrageous assertion. It is equally wrong for <em>Modern Healthcare</em> to offer that quote without reporting that the speaker is funded by Arnold Ventures — a shadowy organization with an obvious bias against hospitals.</strong></p> <p><strong>The truth is that hospitals have been rocked by wave after wave of external financial challenges over the last three years, but that has not stopped them from providing critical care to the most vulnerable and needy patients and communities. This is the important news that <em>Modern Healthcare</em> should be reporting.</strong></p> Thu, 30 Nov 2023 09:31:08 -0600 Tax-exempt Status