Tax-exempt hospitals have incurred significant additional costs in responding to the COVID-19 pandemic and have lost revenue due to government-mandated suspension of non-essential services. Some costs of responding to the pandemic may be reportable as financial assistance or other community benefit expenses on the Hospitals Schedule H of Form 990, Return of Organization Exempt From Income Tax. Grants. Hospitals should consider whether COVID-19 relief funding received from donors and governmental agencies, including the Federal Emergency Management Agency (FEMA) and the Department of Health and Human Services (HHS), is reportable as direct offsetting revenue.
Questions arise around how to report expenses and offsetting revenue on Schedule H. Timing of when funding is received and how the corresponding expenses are identified should be considered.
Coordination between the responsible parties in a hospital’s tax function and its community benefit reporting team continues to be important. In addition to filing a complete and accurate Form 990, a tax exempt also may wish to balance the picture of its response to the pandemic with additional transparency in its CHNA or community benefit report. Methodologies employed in previous years to gather and report the information may not fully capture the community benefit during the pandemic.
Health Services Tax Leader, PwC US