WASHINGTON -- The Internal Revenue Service (IRS) division responsible for tax oversight of

pension plans, tax-exempt organizations and government entities effectively planned for the

implementation of the new health care law, according to a new report from the Treasury

Inspector General for Tax Administration (TIGTA).

"This is the first in a series of reviews we will be conducting on the IRS's implementation of the

new health care law," said J. Russell George, Treasury Inspector General for Tax

Administration. "As TIGTA has noted, implementation of this new law, with its 42 provisions

that will either add to or amend the Internal Revenue Code, represents one of the major

management challenges now facing the IRS. I am pleased that the IRS has begun this first step

effectively," added George.

The IRS's Tax Exempt and Government Entities (TE/GE) Division is responsible for nine

provisions of the Patient Protection and Affordable Care Act (ACA) that could impact entities

such as tax-exempt hospitals. TIGTA's review specifically focused on TE/GE's planning for

the implementation of the Small Employer Health Care Tax Credit and for the additional

requirements for tax-exempt hospitals, two of the nine provisions which took effect in 2010.

TIGTA found that the TE/GE Division has completed most of its initial planning and is

implementing the provisions of the ACA that went into effect in Tax Year 2010. The IRS

revised the Exempt Organization Business Income Tax Return (Form 990-T); made

programming changes to support processing of the credit for tax-exempt organizations; and

created the Credit for Small Employer Health Insurance Premiums (Form 8941) and instructions

to allow small employers, including tax-exempt organizations, to calculate the credit. The

TE/GE Division began performing compliance examinations on selected returns from taxexempt

organizations claiming the Small Employer Health Care Tax Credit.

The Credit is designed to encourage small employers, including tax-exempt organizations, to

offer health insurance coverage for the first time or maintain coverage they already have. The

TE/GE Division began conducting compliance examinations of selected tax-exempt returns

claiming this credit in early 2011 and had initiated compliance examinations on 272 returns from

tax-exempt organizations through May 21, 2011.

The ACA also established additional requirements tax-exempt hospitals must meet in order to

maintain their tax-exempt status. These requirements include implementing a financial

assistance policy, limiting charges for emergency care, complying with new billing and

collection requirements, and conducting community health needs assessments. These

requirements affect approximately 5,100 tax-exempt hospitals.

As required by the law, TE/GE staff began conducting triennial reviews of the community

benefit activities of tax-exempt hospitals. Community benefits activities are tax-exempt hospital

programs and services that promote the health of the community or communities served by the

organizations. As of April 30, 2011, TE/GE staff had completed 570 of the 1,700 reviews

expected to be completed by the end of 2011.

TIGTA did not make any recommendations to the IRS.