IRS Releases Draft Instructions for New Form 990
April 17, 2008
On April 7, 2008, the Internal Revenue Service released draft instructions for the new Form 990 published on December 20, 2007. The draft instructions pertain to the "core" Form 990 and each of the Form 990's sixteen (16) schedules. Also released were a 176 word glossary and an appendix of special instructions. The IRS also included in the draft instructions "highlights," topics on which the IRS is particularly interested in receiving comments.
Of interest to health care organizations are the following:
- Part VI (Core Form - Governance) - All questions in Part VI are to be answered despite the IRS' acknowledgment that certain governance, management and disclosure policies and procedures are not required for tax-exemption.
- Schedule D (Supplemental Financial Statements) - The FIN 48 footnote for the filing organization must be restated verbatim. A FIN 48 statement not specific to the filing organization may be summarized.
- Schedule H (Hospitals) -
- Charity Care - "Charity care" does not include (i) bad debt or uncollectible charges recorded as revenue, but written off due to failure to pay by patients not qualifying for charity care, or the cost of providing such care; (ii) the difference between the cost of care provided under Medicaid or other means-tested government programs or under Medicare and the revenue derived therefrom; or (iii) contractual adjustments with any third-party payors.
- Worksheets - Use of the worksheets provided for Schedule H reporting are not required, and the worksheets are not to be filed with the Form 990. Organizations may use "alternative, equivalent documentation" provided the worksheet methodology is used.
- Retention of Worksheets - Organizations must retain the worksheets or alternative, equivalent documentation to substantiate Schedule H reporting.
- Disregarded Entities and Joint Ventures - For Schedule H reporting, 100% of the items of each disregarded entity and the proportionate share of each partnership must be included.
- HFMA Statement No. 15 - Although the IRS is not mandating adoption of HFMA Statement No. 15, an organization must report whether it has adopted HFMA Statement No. 15 and provide the footnote text to its audited financial statements describing bad debt expense.
- Management Companies and Joint Ventures (Part IV) - Organizations must list any joint venture or other separate entity of which the organization is a partner or shareholder, or any management company (1) for which current officers, directors, trustees or key employees of the organization, and physicians who have staff privileges with one or more of the organization's hospitals, own in the aggregate more than 10% of such partnership's profits interests or the stock of such corporation, and (2) that either (a) provides management services used by the organization in providing medical care, or (b) provides medical care, or owns or provides real, tangible personal or intangible property used by the organization or by others to provide medical care.
Public comments on the draft instructions, including Schedule H, are due by June 1, 2008. Comments may be e-mailed or mailed to the IRS and will be posted on the IRS' website. The draft instructions and comment addresses may be found at:
