45 Pages Posted: 11 Aug 2013
Date Written: April 16, 2013
Tax-exempt hospitals receive millions of dollars worth of tax breaks each year, yet there is little evidence that they operate much differently than their for-profit counterparts. When a hospital does not meet the federal standard for exemption, the IRS currently has two enforcement options: (1) do nothing or (2) move to revoke a hospital’s tax-exempt status. Revocation is a harsh option that is not appropriate for every circumstance of a hospital failing to meet one ore more of the requirements for exemption. Therefore, many tax-exempt hospitals fail the exemption standard but are not subjected to revocation of status. Commentators have recommended modifying the qualifying standard for hospital tax exemption to address this problem. Alternatively, this Note argues that Congress should give the IRS statutory authority to impose excise tax intermediate sanctions on underperforming hospitals as an enforcement tool short of revocation. Intermediate sanctions would provide the IRS with flexibility to regulate the boundaries of tax-exempt status and ensure that communities continue to benefit from the services of tax-exempt hospitals.
Keywords: hospital, intermediate sanctions, tax, IRS, health, tax-exempt, tax exemption
Suggested Citation: Suggested Citation
Weisblatt, Rachel, Uncharitable Hospitals: Why the IRS Needs Intermediate Sanctions to Regulate Tax-Exempt Hospitals (April 16, 2013). Boston College Law Review, 2014 Forthcoming. Available at SSRN: https://ssrn.com/abstract=2308561