Assignment: Committee Panel
In President Bill Clinton’s health reform bill, tax-exempt healthcare organizations would have been required to assess the health needs of the community on an annual basis and develop plans to meet those needs (Blankenau 1994). The Taxpayer Bill of Rights II, which indirectly addresses tax- exempt issues, was signed into law in 1996. The act provides the IRS with intermediate sanctions prior to revoking an organization’s tax-exempt status. According to Wang and Wambsganns (1997), the act also
◆ requires tax-exempt organizations to disclose excess benefit transactions (i.e., unreasonable compensation or any other transaction in which payment or benefit exceeds the value of the transaction) and excise taxes paid for such transactions on Form 990, which requires all not-for-profit organizations to substantiate their tax-exempt status;
subjects executives responsible for an excess benefit transaction, rather than the organization, to a 10 percent tax on the amount of excess benefit if corrected and reported, and a 200 percent tax on the amount of excess benefit if executives fail to correct a transaction in which they personally benefited.
Former Representative Charles B. Rangel (D-NY), who at the time chaired the House Ways and Means Committee’s panel on select revenue measures, held hearings in 2005 on tax-exempt status and voiced concerns that existing law regarding tax-exempt status was too lenient and too difficult to enforce.
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In 2005, Senator Chuck Grassley (R-IA), the ranking member of the Senate Finance Committee, sent letters to the nation’s largest tax-exempt hospitals asking them for clarifica- tion of community benefit reported. In 2006, Senator Grassley convened hearings to release hospital responses to the 2005 letters and to investigate hospital executive compensation. In 2007, he released a draft of legislative reforms for tax-exempt hospitals and held round- tables to discuss the reforms. In 2008, he followed up with more letters to hospitals, and he requested a report from the Government Accountability Office. Partly in response to the community benefit controversy, in 2008 the IRS added Schedule H to Form 990 for tax-exempt hospitals. Schedule H has six parts addressing how tax-exempt hospitals provide community benefit to their communities. Part 1 is the most important part and represents several types of financial assistance. The six parts are as follows (IRS 2016):
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