Amid increasing congressional scrutiny of Not-For-Profit (NFP) hospital tax exemptions, Republican leadership of the House Ways and Means (W&M) Committee is introducing legislation that would significantly expand Schedule H reporting requirements for NFP hospitals and health systems. The proposal reflects a broader bipartisan policy debate over whether NFP hospitals provide sufficient community benefit to justify their federal, state, and local tax advantages. The Committee plans to markup and potentially vote on the bill on May 20th. The language currently is only in “discussion draft” form and could change before or during the markup if lawmakers offer amendments. While the bill may advance the Committee, it’s unclear as of yet whether it will pass Congress. 

NFP hospitals are federally required to provide care regardless of a patient’s ability to pay and to demonstrate how they deliver community benefit through annual reporting to the Internal Revenue Service (IRS). That reporting is primarily captured through IRS Form 990, Schedule H, which documents community benefit activities, charity care, and other programs tied to a hospital’s tax-exempt status. 

The discussion draft would require substantially more detailed reporting in several new areas, including hospital advertising expenditures, estimated tax savings, and “net revenues” from the 340B Drug Pricing Program. The proposed effective date would apply to tax years beginning six months after enactment. 

Ways and Means Leadership Takes Aim at Hospitals 

The legislative proposal follows a recent House Ways and Means Committee hearing on healthcare affordability during which several hospital and health system CEOs testified, in part, on hospital accountability and community benefit obligations. 

During the hearing, Committee Chairman Jason Smith (R-MO-8) accused NFP hospitals of contributing to rising healthcare costs while benefiting from significant tax advantages. Chairman Smith specifically cited hospital advertising expenditures, alleged “profits” generated through the 340B Drug Pricing Program, and what he characterized as insufficient investment in charity care and community benefit activities. Following the hearing, Chairman Smith issued the following statement summarizing his concerns: 

“Non-profit health systems benefit from tax-exempt status and the current federal guidelines which fuel a lack of transparency surrounding how much charity care and community benefits are actually being provided to patients in exchange for the tax break. This problem is intensified with larger health systems that are allowed to aggregate community benefit spending across their entire system – making it impossible for the Internal Revenue Service (IRS) or, more importantly, the citizens of any given community where providers in that system operate to know whether or not the tax-exempt facilities are providing community benefits and charity care commensurate with their generous tax benefits.” 

Proposed Expansion of IRS Schedule H Reporting 

The current discussion draft would substantially increase the scope and granularity of NFP hospital reporting requirements. Proposed new reporting categories include: 

  • Community benefit spending 
  • Charity care spending 
  • Advertising spending 
  • Quality improvement spending 
  • Nonclinical programming 
  • Federal taxes that would be owed absent tax-exempt status 
  • 340B Drug Pricing Program “net revenues” 
  • Detailed descriptions and financial reporting for subsidized service lines 
  • Financial assistance application data, including applications received, approved, and denied 
  • Spending and detailed descriptions of programs directed at addressing the top three health priorities identified in hospitals’ Community Health Needs Assessments 

Notably, several core definitions within the draft legislation remain pending. The discussion draft currently includes “TBD” placeholders for key terms, including the ones below. Reaching consensus on how these terms are defined could impact the bill’s passage.  

  • Community Benefits 
  • Charity Care 
  • Advertising 
  • Quality Improvement 
  • Nonclinical Programming

Broader Policy Implications 

The proposal signals increasing Congressional interest to revisit how NFP hospitals demonstrate community value and justify tax-exempt status. If enacted, the legislation could represent one of the most significant expansions of federal NFP hospital reporting requirements since the Affordable Care Act.