Comment Period on Penalties for Violating IRS 501(r) Closes Tomorrow

Now is the time to get your comments in on proposed penalties on not-for-profit hospitals that violate regulations under Internal Revenue Services 501(r) regulations.

Healthcare providers and other interested parties have been asked by the Treasury Department and the IRS to comment on penalties before they know for certain what the crime will be. IRS has yet to finalize what exactly constitutes a violation under 501(r) regulations, which, among other things, will define what constitutes “extraordinary collection actions” and set time limits on exactly when hospitals can engage in those practices. Comments on the proposed penalties close Friday, March 14.

The proposed regulations, which are still being finalized (although not-for-profit hospitals are required to follow them for this tax year), limit hospital collection practices and impose requirements on how hospitals determine if a patient qualifies for financial assistance. Under the proposed regulations, not-for-profit hospitals will be required to give patients up to 240 days to apply for financial assistance before they can report a patient’s debt to a credit bureau or seek a lien against the patient’s property.

For hospitals that violate the 501(r) regulations the IRS wants to establish penalty tiers based on how egregious the violation is found to be. insidePatientFinance.com columnist, April Wilson, provides an excellent breakdown of the proposed regulations here.

The American Hospital Association has endorsed the IRS tiered approach, but is seeking clarification on several minor points regarding enforcement. In a letter to the IRS issued Wednesday, Melinda Hatton, AHA senior vice president and general counsel, suggests that in cases where a hospital is able to demonstrate “substantial compliance with the policy” that violations be considered “minor and inadvertent.”

The AHA also asks that hospitals be given “safe harbor” while the IRS determines what corrective action is required for violations of 501(r).

Comments on the proposed penalties (which insidePatientFinance.com registrants can download below) should be sent to the following address by Friday, March 14:

Internal Revenue Service
CC:PA:LPD:PR (Notice 2014-3)
P.O. Box 7604
Ben Franklin Station
Washington, D.C. 20044

Submissions may be hand-delivered Monday through Friday between the hours of 8
a.m. and 4 p.m. to:

CC:PA:LPD:PR (Notice 2014-3)
Courier’s Desk
Internal Revenue Service
1111 Constitution Avenue, N.W.
Washington, D.C. 20224

Comments may be submitted electronically via e-mail to the following address: Notice.Comments@irscounsel.treas.gov. Please include “Notice 2014-3” in
the subject line.

insidePatientFinance.com subscribers can download the IRS’s proposed regulations on 501(r) penalties here:  (You must be logged in to download this file. Don't have an account? Register for free and you'll be returned to this page.)