SECTION 3. PRINCIPAL CHANGES

FROM DRAFT REVENUE PROCEDURE

.01 In Notice 2014–3, 2014–3 I.R.B. 408 (Dec. 31, 2013), the Treasury Department and the IRS invited comments regarding the procedures set forth in a proposed revenue procedure regarding correction and disclosure of failures to meet the requirements of § 501(r), including what additional examples, if any, would be helpful to include and whether hospital organizations should be required to make disclosure in ways other than reporting on their Forms 990, Return of Organization Exempt From Income Tax, such as on their Web sites. The Treasury Department and the IRS received six comments in response to Notice 2014–3.

.02 In response to the comments regarding Notice 2014–3 and to conform this revenue procedure with the final regulations under § 501(r) (TD 9708), this revenue procedure includes the following changes to the revenue procedure proposed in Notice 2014–3:

(1) Section 3.02 of Notice 2014–3 (section 4.02 of this revenue procedure) has been modified to conform with § 53.4959–1(b)(1), which makes clear that a hospital organization failing to meet the requirements of § 501(r)(3) will be subject to the excise tax under § 4959.

(2) Section 5.03 of this revenue procedure has been added in response to a comment requesting clarification that certain minor omissions and errors that are described in and corrected in accordance with § 1.501(r)–2(b) are not considered failures to meet a requirement of § 501(r) and are therefore outside the scope of this revenue procedure. Section 5.03 also includes two examples of minor errors suggested by a commenter that the Treasury Department and the IRS agree are the type of minor errors that are described in and may be corrected in accordance with § 1.501(r)–2(b). These are not the only kinds of omissions or errors that may be described in § 1.501(r)–2(b).

(3) Section 4.02 of Notice 2014–3 (section 5.04 of this revenue procedure) has been modified to conform with § 1.501(r)–2(c), which states that an egre

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gious failure includes only a very serious failure, taking into account the severity of the impact and the number of affected persons, and that a hospital facility’s correction and disclosure of a failure is a factor tending to show that the failure was not willful.

(4) Section 5.01(1) of Notice 2014–3 (section 6.01(1) of this revenue procedure) has been modified to provide that the correction principle requiring restoration of affected individuals applies only to failures to meet the requirements of § 501(r)(4)(A), (r)(5), or (r)(6). This section also has been modified to conform with §§ 1.501(r)–5(d)(3) and 1.501(r)– 6(c)(6)(i)(C)( 2 ) by specifying that restoration of FAP–eligible individuals does not require a refund of excess payments if the excess payment was less than $5.

(5) Section 5.01(4) of Notice 2014–3 (section 6.01(4) of this revenue procedure) has been modified to conform with the language in § 1.501(r)–2(a)(5), (b)(1)(ii), and (b)(4), which refer to the establishment of practices or procedures (formal or informal) reasonably designed to promote and facilitate overall compliance with the § 501(r) requirements.

(6) Section 5.02(4) of Notice 2014–3 (section 6.02(3) of this revenue procedure) has been modified to conform with § 1.501(r)–4(b)(1)(ii), which requires a hospital facility to widely publicize its FAP.

(7) Section 6(1) of Notice 2014–3 (section 7.01(1) of this revenue procedure) has been revised to require an “estimate of” the number of persons affected and the dollar amounts involved and to eliminate the requirement to describe the practices and procedures (if any) that were in place prior to the occurrence of the failure to detect or prevent the type of failure that occurred. Section 7.01(1) and (2) of this revenue procedure also clarify that information about multiple errors of the same type and corrections of those errors should be aggregated in a summary.

(8) Section 6(2) of Notice 2014–3, which required a description of the discovery of the failure, was deleted.

(9) Section 7.02 of this revenue procedure has been added to provide that hospital organizations that do not have a Form 990 filing requirement may disclose their failures and corrections on a Web site.

.03 In addition to the aforementioned changes, this revenue procedures makes other minor revisions to the revenue procedure proposed in Notice 2014–3 that are not intended to have substantive effect, such as updating section numbers and making corresponding changes to cross-references.