Congress Considers Expanded Schedule H Reporting Requirements for Tax-Exempt Hospitals

Key Takeaways

• Congress is considering expanded Schedule H reporting requirements for certain tax-exempt hospital organizations required to file Form 990 to require more detail on community benefit, charity care, 340B activity and tax-exemption value.
• The proposal reflects growing scrutiny of whether tax-exempt hospitals provide sufficient community benefit to justify their favorable tax status. More granular public reporting could increase regulatory, congressional and watchdog attention on hospital spending, allocation methods and documentation.
• Tax-exempt hospitals should assess whether current systems can support the data Congress may expect in future Schedule H reporting. Key areas include charity care, CHNA-related spending, financial assistance applications, facility-level financial data and 340B program information.

Tax-exempt hospitals and health systems have faced increasing scrutiny from Congress, state regulators and industry watchdogs on whether they provide sufficient community benefit to justify their tax-exempt status. A recent House Ways and Means discussion draft would significantly expand federal reporting obligations for certain tax-exempt hospital organizations required to file Form 990, Schedule H. Although the proposal has not been enacted and may change, it signals continued Congressional interest in using Form 990 disclosures to evaluate hospital community benefit, charity care, 340B revenue and the value of tax exemption.

The proposal would not necessarily apply to every hospital with a nonprofit or public character. For example, governmental hospitals and certain governmental affiliates may be outside the scope if they are not required to file Form 990. Organizations should evaluate applicability based on their tax status, filing obligations and hospital facility structure. In general, organizations should pay attention to such proposed changes if they are recognized as tax-exempt under Section 501(c)(3); operate one or more facilities that are licensed, registered or otherwise recognized as hospitals under state law; and are required to file Form 990 under Section 6033(a).

What Changed and Why It Matters

Beginning with the 2009 filing cycle, Schedule H was added to the Form 990 as part of the IRS's broader effort to increase transparency among tax-exempt organizations and became mandatory for hospital organizations. The Affordable Care Act of 2010 later added Section 501(r) to the Internal Revenue Code of 1986, imposing several operational requirements on tax-exempt hospitals, including: performing Community Health Needs Assessments (CHNAs) every three years; adopting and publicizing Financial Assistance Policies (FAPs); limited amounts charged to patients eligible under a hospital’s FAP; and restricted collections actions.¹  

As currently drafted, the proposal would apply to hospital organizations described in Section 501(r)(2) that are required to file an annual information return under Section 6033(a). Under the proposal, covered hospital organizations described in Section 501(r)(2)² would be required to report additional information, including:

1. Centers for Medicare and Medicaid (CMS) certification numbers for the organization and each hospital facility it operates;
2. The amount of spending on community benefits, charity care, advertising, quality improvement and nonclinical programming;
3. The three highest-priority needs identified in the hospital's CHNA and expenditures associated with addressing each need;
4. The number of financial assistance applications received, approved and denied;
5. For hospitals participating in the 340B Drug Pricing Program, information regarding the number of individuals dispensed or administered covered outpatient drugs subject to 340B pricing and aggregate net revenue associated with those drugs, reduced by certain program-related participation and compliance costs;
6. The amount of federal income tax the organization would owe if it were not exempt from taxation; and
7. Information regarding subsidized service lines, including descriptions of subsidized health service lines, the amount of revenue of each such service line and the costs of each of these service lines as reported to CMS. ³

The discussion draft follows a series of House Ways and Means Committee hearings between 2023 and 2026 examining whether tax-exempt hospitals are providing sufficient community benefit in exchange for their favorable tax status. During one such hearing in September 2025, Representative David Schweikert specifically suggested that Schedule H reporting requirements could be revisited to increase disclosed information available to policymakers and researchers, signaling increased Congressional interest in using Form 990 disclosures to evaluate charitable activities and community benefit spending.⁴

Notably, to the extent any final legislation requires hospitals to report hypothetical federal income tax liability, comparing charity care expenditures to that amount may not fully reflect the overall tax burden borne by hospitals or the full scope of benefits they provide to their communities. Many tax-exempt hospitals continue to pay substantial employment taxes and, depending on state law, may also pay property taxes, personal property taxes, sales and use taxes, provider taxes and other state or local assessments. In addition, focusing solely on charity care may understate other community benefit activities, including unreimbursed Medicaid costs, health professions education, subsidized health services, research and community health improvement activities

Taken together, these hearings, government studies and watchdog reports reflect growing pressure on tax-exempt hospitals to demonstrate that they are operating consistently with the charitable principles outlined in Revenue Ruling 69-545 and complying with the requirements of Section 501(r). Importantly, current law does not impose a minimum dollar amount or percentage threshold of charity care that tax-exempt hospitals must provide. 

How the Proposal Could Affect Hospital Reporting and Compliance

If enacted, the proposed reporting requirements would significantly expand the amount of information tax-exempt hospitals must collect, track and disclose. The proposed reporting requirements may impact hospitals by:

1. increasing scrutiny of spending decisions, operational priorities and community benefit reporting;
2. increasing administrative and cost burdens associated with tracking expenditures tied to specific CHNA-identified community needs;
3. requiring the development or refinement of facility-level allocation methodologies for shared expenses and systemwide programs;
4. imposing enhanced comparisons between reported charity care and the estimated value of the hospital's tax exemption;
5. imposing additional scrutiny of 340B revenue, expenses and patient-level reporting data; and
6. raising additional examination or inquiry risk arising from more detailed public disclosures. 

Recommended Next Steps for Tax-Exempt Hospitals

The discussion draft would apply to taxable years beginning more than six months after legislation is enacted. Accordingly, no immediate reporting change is required unless and until legislation is enacted, but the proposal provides a useful indication of the types of data Congress may expect tax-exempt hospitals to maintain and disclose in the future.

Although no immediate action is required, tax-exempt hospitals should consider evaluating whether their current compliance and reporting systems adequately capture:

• Charity care and financial assistance activities. Track charity care services provided, financial assistance determinations and related documentation to support reporting and compliance efforts.
• Community benefit spending. Maintain clear records of community benefit expenditures and the programs those expenditures support.
• CHNA-related investments. Document spending tied to identified priority needs.
• Financial assistance application data. Monitor the volume of applications received, approved and denied.
• Facility-level financial information. Capture revenue and expense data at the facility level, including allocation methodologies for shared services and systemwide programs.
• Operational and programmatic expenses. Track advertising, quality improvement and nonclinical programming expenses that could become relevant to future disclosure requirements.
• 340B program data. Maintain records related to 340B utilization, revenue, expense and compliance data.
• Other operational metrics. Evaluate whether additional operational data may warrant tracking as policymakers and regulators continue to assess hospital reporting requirements.

Even if the discussion draft does not advance in its current form, it reflects a broader policy trend: Congress, regulators and watchdog organizations are increasingly focused on whether tax-exempt hospitals can substantiate the community benefit they provide in exchange for tax exemption.

Hospitals that rely on multiple internal systems, systemwide cost centers or manual processes to complete Schedule H may wish to assess whether their current data infrastructure would support more granular public reporting. Organizations that establish robust tracking, allocation and documentation processes now will be better positioned to respond to evolving reporting obligations and demonstrate the full scope of their charitable activities.

How We Can Help

Polsinelli's Nonprofit and Tax-Exempt Organizations Group assists hospitals, health systems and other exempt organizations with:

• Section 501(r) compliance reviews;
• Financial assistance policy and CHNA compliance assessments;
• Form 990 and Schedule H reporting reviews;
• Community benefit reporting and documentation processes;
• 340B-related governance and reporting considerations;
• Mock IRS examinations and compliance audits; and
• IRS audit defense and controversy matters.

If you have questions regarding the proposed reporting requirements or would like assistance evaluating your organization's Schedule H reporting, Section 501(r) compliance or community benefit documentation framework, please contact Michael Kuczynski, Maverick Flowers or any member of Polsinelli's Nonprofit and Tax-Exempt Organizations Group.