SECTION 4. SCOPE

.01 In general . A hospital organization may rely upon this revenue procedure to correct and disclose any failure to meet a requirement of § 501(r) that is not willful or egregious, provided that the hospital organization has begun correcting the failure in accordance with section 5 and that it has disclosed the failure in accordance with section 6 before the hospital organization is first contacted by the IRS concerning an examination of the organization. If the annual return for the tax year in which the failure is discovered is not yet due (with extensions), then the hospital organization need only to have begun correcting the failure in accordance with section 5 before the hospital organization is first contacted by the IRS concerning an examination.

.02 Willful or egregious . A failure that is willful includes a failure due to gross negligence, reckless disregard, or willful neglect. A hospital organization’s correction and disclosure of a failure does not create a presumption that the failure was not willful or egregious. However, the fact that correction and disclosure in accordance with this revenue procedure were made will be considered as a factor and

1In addition, § 1.501(r)–2(a)(8) of the 2013 proposed regulations provides that, for purposes of determining whether to continue to recognize the § 501(c)(3) status of a hospital organization, the IRS will consider whether a hospital organization corrected a failure as promptly after discovery as was reasonable given the nature of the failure. A hospital organization that cannot or does not have an error or omission excused by following the correction and disclosure procedures outlined in this revenue procedure may nevertheless use these principles in demonstrating that they satisfy the factor described in § 1.501(r)–2(a)(8).

Bulletin No. 2014–3 409 January 13, 2014

may tend to indicate that an error or omission may not have been willful or egregious.