Monday

Not-For Profit Tax Exemptions in Peril?

Ther's a lot of buzz around the Government's scrutiny of not-for-profit enterprises. Not surprising tax exemption is being looked at, given the Federal and State budget deficits. A recent article published on the Healthcare Financial Management Association website, entitled  Tax Exempt Status: Additional Scrutiny on the Horizon?, stated "Regardless of (healthcare) reform’s ultimate fate, providers should anticipate increased federal scrutiny in this area. Given the fiscal difficulties currently being experienced at all levels of government, it’s not hard to see challenges to tax-exempt status on the horizon for many providers."  I feel certain such challenges won't be limited to healthcare organizations. The revised Form 990 has a Schedule H, to be filed by non-profit hospitals. A good summary of the shortcomings of this form in assessing a hospital's charitable works is presented on page 54 of this month's issue of Hospitals and Health Networks magazine. "Fix Schedule H Shortcomings", by Bradford H. Gray and Ashley Palmer, makes the point the expenditures measured on the form are, at best, a crude measure of community benefit. For example, they say, how does one use expenditures to assess programs to reduce teeenage pregnancy? As another example, is the value of sustaining a money-losing program that provides needed services best measured by the amount of services it requires? And, if you're industry is not healthcare, get ready for similar scrutiny. It will be up to the not-for-profit industries to convince the government as well as the public of their charitable or educational mission and the appropriateness of continued tax exemption. I'm interested in anyone's thoughts about dealing with this critical issue.

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