September 21, 2009
Senator Grassley Proposes Revoking Rebuttable Presumption, Clarifying IRS Authority to Ask About Governance
Last week, Senate Finance Committee Chair Max Baucus (D-Mont.) introduced a detailed description of his proposed America's Healthy Future Act of 2009. Among its many health care reform provisions was a requirement that all charitable hospitals both adopt a financial assistance policy meeting certain requirements and conduct a community health needs assessment at least once every three years (pages 211-13 of the proposal). Each hospital would have to widely publicize its financial assistance policy and publicly disclose that its community needs assessment to the IRS through the annual Form 990 filing requirement. Finally, the IRS would have to report annually to Congress regarding community benefits reported by charity hospitals (page 213). The proposal would also create tax-exempt health care cooperatives (pages 36-38).
Now the members of the Committee have responded with a lengthy list of amendments. At the bottom of the financing amendments proposed by Senator Chuck Grassley (R-Iowa), ranking member of the Committee, are two that impact ALL tax-exempt organizations. Designated Grassley Amendment #F-7 and #F-8, the first amendment would explicitly authorize the IRS to require such organizations to report about governance practices so as to head off any challenges to the IRS' existing attempts to gather such information through the annual Form 990. The second amendment would eliminate any protection from intermediate sanctions provided by following the "rebuttable presumption of reasonableness" procedures when considering transactions with senior executives, directors, and other insiders, while still requiring due diligence with respect to such transactions. This amendment would also require organizations to report to the IRS the comparable information used to set executive compensation.
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