Section 4. LIMITATION ON CHARGES

Section 501(r)(5) requires a hospital organization to limit amounts charged for emergency or other medically necessary

1 A related bill, the Health Care Education Affordability Reconciliation Act of 2010 (H.R. 4872) (the “Reconciliation Act”), was signed into law on March 30, 2010 (Pub. L. No. 111–152). The Reconciliation Act amends the Affordable Care Act and related laws.

2010–24 I.R.B. 756 June 14, 2010

regarding this notice, contact Mr. Gluth at (202) 283–9485 (not a toll-free call).

Prevention of Over-Withholding and U.S. Tax Avoidance With Respect to Certain Substitute Dividend Payments

Notice 2010–46

I. SUMMARY AND MODIFICATION AND WITHDRAWAL OF NOTICE 97–66

A. Background

On October 14, 1997, final regulations were published in the Federal Register (T.D. 8735, 1997–2 C.B. 72, 62 FR 53498 (1997)) (the “final regulations”) that source substitute interest and substitute dividend payments made pursuant to a securities lending transaction described in § 1058 of the Internal Revenue Code (“Code”) or a substantially similar transaction or a sale-repurchase transaction (a “Securities Lending Transaction”) by reference to the income that would be earned with respect to the underlying transferred debt security or stock. The final regulations also provide that substitute interest and dividend payments that are from sources within the United States under the regulations are characterized as interest and dividends for purposes of determining the fixed or determinable annual or periodical income of nonresident alien individuals and foreign corporations subject to tax under §§ 871(a), 881, 4948(a) and Chapter 3 of the Code and for purposes of granting tax treaty benefits with respect to interest and dividends. As promulgated, the final regulations were made applicable in all respects for substitute interest payments (as defined in § 1.861–2(a)(7)) and substitute dividend payments (as defined in § 1.861–3(a)(6)) made after November 13, 1997.

Some taxpayers expressed concern that the total U.S. gross-basis tax paid with respect to a series of Securities Lending Transactions (that is, a chain of related Securities Lending Transactions with respect to identical securities) could be excessive under the final regulations. For example, a

care that is provided to individuals eligible for assistance under the organization’s financial assistance policy to not more than the amounts generally billed to individuals who have insurance covering such care. Section 501(r)(5) also prohibits the use of gross charges.

The Technical Explanation states that “[i]t is intended that amounts billed to those who qualify for financial assistance may be based on either the best, or an average of the three best, negotiated commercial rates, or Medicare rates.” Technical Explanation at 82.