On December 20, 2007, the Internal Revenue Service released a revised Form 990, which is the annual information return filed by tax-exempt organizations, including hospitals and other healthcare providers. Calendar-year organizations will be required to file the new Form 990 during 2009, while fiscal year organizations must use the new form in 2010 (for fiscal years commencing in 2008). A copy of the revised Form 990 can be found at the IRS website.
The new Form 990 is based on a discussion draft the IRS released in June 2007, which generated many written comments. The format of the new Form 990 is similar to the June 2007 discussion draft with an 11-page "core" form and 16 schedules. The core form includes a summary page with a "snapshot" of information regarding the organization's mission and activities, governance and financial information. The core form also includes additional sections gathering information on program service accomplishments, other IRS filings, governance, management and disclosure, compensation, revenue, functional expenses, balance sheet, and financial statements and reporting. The various schedules must be completed based on responses to questions in the core form.
Two schedules are of particular interest to hospitals and other healthcare providers. Schedule H must be completed by facilities that are licensed or certified as hospitals under state law and is designed to provide information on (1) charity care and other community benefits at cost, (2) community building activities, (3) bad debt, Medicare and collection practices, (4) management companies and joint ventures, (5) facility information, and (6) supplemental information regarding how the facility furthers the exempt purposes of the organization, including assessing the health needs of the community, educating patients about charity care or public assistance, and how an organization's hospitals or other healthcare facilities promote the health of the community. Schedule K must be completed by organizations issuing tax-exempt bonds with an outstanding principal amount of more than $100,000 as of the last day of the year and that were issued after December 31, 2002.
In response to comments from healthcare organizations, the IRS will phase in Schedules H and K. Specifically for the 2008 tax year, hospitals will only be required to complete on Schedule H identifying information about hospital facilities. The remaining questions on Schedule H providing information on the other items noted above are optional for the 2008 tax year. Similarly, on Schedule K only identifying information about bond issues is required for the 2008 tax year. The remaining questions on Schedule K about proceeds, private use and arbitrage are optional for the 2008 tax year. After the 2008 tax year, organizations will be required to answer all questions on Schedules H and K.
Many of the questions on the new Form 990 are self-explanatory. However, the new Form 990 was released without instructions, which will be important to understand the scope of questions and include definitions. The IRS indicates that it will release draft instructions for the new Form 990 early in 2008. We will address such instructions and provide practice pointers and discuss issues and concerns with the redesigned Form 990 in subsequent issues of the Health Law Update.