Sponsors
Last progress April 24, 2025 (10 months ago)
Introduced on April 24, 2025 by Victoria Spartz
Requires tax-exempt hospitals to meet a new, measurable “community benefit” standard: create community-based boards, accept and not limit patients covered by public programs, and spend at least the value of their tax exemption on specified community-benefit activities while limiting how much capital purchases count. It also expands federal oversight by requiring annual TIGTA reviews of hospital financial assistance policies and periodic GAO reviews of IRS enforcement.
Amends the Internal Revenue Code of 1986 (section 501(r)) to require that a hospital organization “meets the community benefit standard described in paragraph (7).”
Redesignates the existing paragraph (7) as paragraph (8).
New paragraph (7)(A)(i): The hospital organization must have a board of directors drawn from the community in which the organization is located.
New paragraph (7)(A)(ii): The hospital organization must (I) treat patients who pay their bills through public programs, including Medicare (Title XVIII) and Medicaid (Title XIX), and (II) not limit the number of such patients served at any clinical site owned or controlled by the organization.
New paragraph (7)(A)(iii): The hospital organization must spend an amount that meets or exceeds the expenditure threshold for the taxable year on any combination of (I) training, education, or research to improve patient care; (II) improvements to facilities and equipment (subject to special rules in (C)); and (III) free or discounted care under a financial assistance policy.
Primary effects fall on tax-exempt hospital organizations, which must change governance (community-based boards), patient intake practices (no limiting public-program patients at clinical sites), and financial accounting (track and demonstrate community-benefit spending equal to the value of their tax exemption). Hospitals will face limits on counting facility/equipment spending and cannot count purchases of other care organizations toward the requirement. Patients covered by Medicare, Medicaid, and other public programs could see stronger protections against site-level caps and potentially expanded community services if hospitals reallocate resources. Low-income and underserved communities are likely to be targeted beneficiaries of the required community-benefit spending, but outcomes will depend on how hospitals interpret allowable activities. The IRS will need new guidance, audit procedures, and resources to enforce the standard; TIGTA and GAO will perform new oversight and reporting duties that increase federal scrutiny. Compliance costs, administrative burdens, and possible legal disputes over definitions and valuation methods are likely. Federal revenue effects are uncertain and depend on whether enforcement reduces tax-exempt status or changes hospital behavior.
Referred to the House Committee on Ways and Means.