SECTION 4. DRAFTING

INFORMATION

The principal authors of this notice are Garrett Gluth of the Tax Exempt and Government Entities Division of the IRS and Amber Mackenzie of the Office of Division Counsel/Associate Chief Counsel (Tax Exempt and Government Entities). However, other personnel from the IRS and Treasury Department participated in developing this notice. For further information regarding this notice, contact Mr. Gluth at (202) 317-8413 or Ms. Mackenzie at (202) 317-5800 (not toll-free numbers).

Proposed Procedures for Charitable Hospitals to Correct and Disclose Failures to Meet § 501(r)

Notice 2014–3

PURPOSE AND BACKGROUND

This notice contains a proposed revenue procedure that provides correction and disclosure procedures under which certain failures to meet the requirements of § 501(r) of the Internal Revenue Code will be excused for purposes of § 501(r)(1) and 501(r)(2)(B).

Section 9007 of the Patient Protection and Affordable Care Act, Public Law 111–148 (124 Stat. 119 (2010)), enacted § 501(r), which imposes additional requirements on charitable hospital organizations. Section 501(r)(1) provides that a hospital organization will not be treated as described in § 501(c)(3) unless the organization meets the requirements of § 501(r)(3) through (r)(6). Similarly, § 501(r)(2)(B)(ii) provides that a hospital organization operating more than one hospital facility will not be treated as described in § 501(c)(3) with respect to any such hospital facility for which the requirements of § 501(r) are not separately met.

On June 26, 2012, the Department of the Treasury (“Treasury Department”) and the Internal Revenue Service (“IRS”) published a notice of proposed rulemaking in the Federal Register (REG– 130266–11, 2012–32 I.R.B. 126 [77 FR

38148]) (“2012 proposed regulations”) that contains proposed regulations regarding the requirements of § 501(r)(4), (r)(5), and (r)(6). On April 5, 2013, the Treasury Department and the IRS published a notice of proposed rulemaking in the Federal Register (REG–106499–12, 2013–21 I.R.B. 1111 [78 FR 20523]) (“2013 proposed regulations”) that contains proposed regulations regarding the requirements of § 501(r)(3) and the consequences for failing to meet any of the § 501(r) requirements.

To provide an incentive for hospital organizations to take steps not only to avoid failures but to remedy and disclose them when they occur, the 2013 proposed regulations specify that, for purposes of § 501(r)(1) and 501(r)(2)(B), a hospital organization’s failure to meet one or more of the requirements described in § 501(r) and § 1.501(r)–3 through § 1.501(r)–6 that is neither willful nor egregious will be excused if the hospital organization corrects the failure and makes disclosure in accordance with the rules set forth in additional guidance to be issued by the Treasury Department and the IRS.

This notice provides a proposed revenue procedure that if adopted would contain that additional guidance.

REQUEST FOR COMMENTS

The Treasury Department and the IRS invite comments regarding the procedures set forth in the proposed revenue procedure, including what additional examples, if any, would be helpful to include and whether hospitals should be required to make disclosure in ways other than reporting on Schedule H, Hospitals, of its Form 990, Return of Organization Exempt From Income Tax, such as on their Web sites.

Comments should refer to Notice 2014–3 and be submitted by March 14, 2014, to:

Internal Revenue Service CC:PA:LPD:PR (Notice 2014–3) P.O. Box 7604 Ben Franklin Station Washington, DC 20044

Submissions may be hand delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to:

CC:PA:LPD:PR (Notice 2014–3) Courier’s Desk Internal Revenue Service 1111 Constitution Avenue, N.W. Washington, D.C. 20224

Alternatively, comments may be submitted electronically via e-mail to the following address: Notice.Comments@irscounsel. treas.gov. Please include “Notice 2014–3” in the subject line. All comments submitted by the public will be available for public inspection and copying.

DRAFTING INFORMATION

The principal author of this notice is Garrett Gluth of the Exempt Organizations, Tax Exempt and Government Entities Division. For further information regarding this notice, contact Garrett Gluth at 202-317-8413 (not a toll-free number).

PROPOSED REVENUE PROCEDURE