Health Law Update

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	All rights reserved, Phelps Dunbar LLP Health Law Update is published as a service to clients and friends of Phelps Dunbar LLP, and should not be construed as legal or professional advice or as opinion on specific fact.
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: http://www.irs.gov/charities/article/0,,id=181091,00.html. IRS RELEASES FINAL EXCESS BENEFIT REGULATIONS On April 2, 2008, the IRS released final regulations listing the factors it will consider in determining whether to revoke the tax-exemption of an organization involved in one or more excess benefit transactions. Generally, an excess benefit transaction is any transaction in which an economic benefit is provided by a tax-exempt organization directly or indirectly to or for the use of certain persons if the value of the economic benefit provided exceeds the value of the consideration (including the performance of services) received for providing such benefit. In addition to the particular facts and circumstances of each situation, the IRS will consider the following factors: The size and scope of the organization’s regular and ongoing activities that further exempt purposes before and after the excess benefit transaction or transactions occurred; The size and scope of the excess benefit transaction or transactions (collectively, if more than one) in relation to the size and scope of the organization’s regular and ongoing activities that further exempt purposes; Whether the organization has been involved in multiple excess benefit transactions with one or more persons; Whether the organization has implemented safeguards that are reasonably calculated to prevent excess benefit transactions; and Whether the excess benefit transaction has been corrected, or the organization has made good faith efforts to seek correction from the disqualified person(s) who benefited from the excess benefit transaction. The final regulations make clear that the IRS has the discretion to assign different weights to the forgoing factors based on the particular situation. The regulations note that factors d. and e. will be given greater weight if (i) the organization discovers the excess benefit transaction and (ii) takes action before the IRS itself discovers the excess benefit transaction. The final regulations may be found at http://www.irs.gov/pub/irs-tege/td9390.pdf. If you have questions regarding the new Form 990’s draft instructions or the final regulations addressing revocation of tax-exempt status in connection with excess benefit transactions, please contact one of the Phelps Dunbar tax or health care attorneys listed below.


Inquiries concerning topics addressed in the Health Law Update may be directed to any of our Health Law attorneys. Your comments, questions, and suggestions are encouraged.
TUPELO Bush III, F. M. Milam, James T. Moore, Jeffrey S. Newman, Dinetia M. Pirkle, Gregory D. Atkinson, E. Payne* Cappleman, Kimberly L. Garner, Andrew V. Pierce, Rachel M. NEW ORLEANS Gordon, Cecile L. Manard, Jr., John P. BATON ROUGE Koonce, Jeffrey W. Trainor, Virginia Y. Barham, Rebecca Wilder-Doomes, Erin J. *Contributing Author	(662) 690-8136 (662) 690-8141 (662) 690-8137 (662) 690-8156 (662) 690-8135 (662) 690-8166 (662) 690-8113 (662) 690-8177 (662) 690-8176 (504) 584-9317 (504) 584-9253 (225) 376-0217 (225) 376-0269 (225) 376-0246 (225) 376-0245	bushm@phelps.com milamj@phelps.com moorej@phelps.com newmand@phelps.com pirkleg@phelps.com atkinsop@phelps.com capplemk@phelps.com andrew.garner@phelps.com piercer@phelps.com gordonc@phelps.com manardj@phelps.com kooncej@phelps.com trainorg@phelps.com rebecca.barham@phelps.com wildere@phelps.com
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