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Tax-Exempt Healthcare Organizations Brace for Impact as Senate Tax Reform Bill Passes

Update. We described in a previous blog post major changes that tax-exempt hospitals and other tax-exempt organizations in the healthcare industry face in the tax reform proposals working their way through Congress. In the early hours of Saturday, December 2, 2017, the Senate narrowly passed its tax reform bill. Although the Senate’s bill has much in common with the bill passed by the House of Representatives, there are significant differences. Accordingly, the House voted yesterday, December 4, 2017, to proceed with a conference committee to reconcile the two bills. A reconciled bill would still need to be approved by both the House and Senate. The Republicans are pushing hard to enact a final bill before year end.

What’s at stake? 

  • Hospitals and other tax-exempt healthcare organizations face significant potential challenges under both the House and Senate bills, including loss of low-cost funding from qualified 501(c)(3) bonds, higher costs relating to the repeal of the individual mandate, decreased revenues from charitable contributions and increased costs for paying competitive executive compensation.

  • Many proposed changes would take effect for tax years beginning in 2018.

  • Significant concern has been expressed in the charitable sector about the proposals, particularly about decreasing charitable giving incentives and politicizing charities, including by a coalition of nonprofit sector organizations.

  • The adverse effects on tax-exempt organizations would be exacerbated by mandatory cuts to Medicare and other government programs that could result under pay-as-you-go rules if either bill is passed, unless Congress separately prevents such cuts.

Here are highlights on how the bills passed by the Senate and House could impact tax-exempt organizations (including changes to the Senate bill), particularly in the healthcare industry:

Tax-Exempt Chart

 

Copyright © 2017, Sheppard Mullin Richter & Hampton LLP.

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About this Author

Tamer Rosenberg, Tax and Employee Benefit Lawyer, Sheppard Mullin
Associate

Tamar Rosenberg is an associate in the Tax, Employee Benefits, and Trust & Estates Practice Group in the firm's New York office.

Areas of Practice

Ms. Rosenberg focuses on non-profit corporate and tax-exempt matters. Ms. Rosenberg has experience with a wide range of not-for-profit organizations, including hospitals, health plans, professional entities and other health care organizations as well as universities, private foundations, religious organizations, performing arts organizations, museums, community foundations, pension funds, and many other not-for...

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