SECTION 2. BACKGROUND

Section 9007 of the Affordable Care Act added sections 501(r) and 4959 to the Code and amended section 6033(b). These provisions are applicable to “hospital organizations” described in new section 501(r)(2). Section 501(r)(1) provides that hospital organizations described in section 501(r)(2) will not be treated as described in section 501(c)(3) unless they satisfy the requirements specified in section 501(r), including the CHNA requirements described in section 501(r)(3).

Section 501(r)(2)(A) defines a “hospital organization” as (i) an organization that operates a facility required by a State to be licensed, registered, or similarly recognized as a hospital (“State-licensed hospital facility”), and (ii) any other organization that the Secretary determines has the provision of hospital care as its principal function or purpose constituting the basis for its exemption under section 501(c)(3).

If a hospital organization operates more than one hospital facility, section 501(r)(2)(B)(i) requires the organization to meet all of the section 501(r)(1) requirements, including the CHNA requirements, separately with respect to each hospital facility. Section 501(r)(2)(B)(ii) provides that the organization will not be treated as described in section 501(c)(3) with respect to any hospital facility for which such requirements are not separately met.

Section 501(r)(3)(A) provides that a hospital organization meets the CHNA requirements with respect to any taxable year only if the organization (i) has conducted a CHNA that meets the requirements of section 501(r)(3)(B) in such taxable year or in either of the two taxable years immediately preceding such taxable year, and (ii) has adopted an implementation strategy to meet the community health needs identified through such CHNA. Section 501(r)(3)(B) requires that a CHNA (i) take into account 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 (ii) be made widely available to the public.

Although most of the requirements under section 501(r) are effective for taxable years beginning after March 23, 2010, the CHNA requirements are effective for taxable years beginning after March 23, 2012. See section 9007(f)(2) of the Affordable Care Act.

Section 501(r)(7) provides that the Secretary shall issue such regulations and guidance as may be necessary to carry out the provisions of section 501(r).

Section 4959 imposes a $50,000 excise tax on a hospital organization that fails to meet the CHNA requirements for any taxable year. A hospital organization must report the amount of any excise tax imposed on it under section 4959 on its annual information return ( i.e., Form 990, Return of Organization Exempt From Income Tax, and related schedules) pursuant to section 6033(b)(10)(D). Section 6033(b)(15)(A) requires a hospital organization to report on its Form 990 a description of how the organization is addressing the needs identified in each CHNA and a description of any needs that are not being addressed together with the reasons why the needs are not being addressed.

On May 27, 2010, the IRS released Notice 2010–39, 2010–24 I.R.B. 756, which requested comments regarding the new requirements under section 501(r), including the need, if any, for guidance regarding such requirements. In response to Notice 2010–39, the IRS received numerous comments requesting guidance on the CHNA requirements. In issuing this notice, Treasury and the IRS have considered all of the comments regarding the CHNA requirements received in response to Notice 2010–39.