As part of the continuing guidance under Internal Revenue Code section 501(r), the IRS in Notice 2014-3 has proposed a revenue procedure that allows hospitals to retain their tax-exempt status for failures under that section as long as such failures were not willful or egregious and the hospital corrects and disclosures the failures as provided in the proposed revenue procedure. Correction must be promptly made after discovery of the failure at issue, must be reasonable and appropriate, and must retore each affected person to the extent reasonably feasible. Correction may also need to include establishing or modifying practices and procedures to prevent future failures. A hospital makes the required disclosure on Schedule H of its Form 990 for the year in which the failure is discovered.
Lloyd Mayer
