Easement Deduction Denial Affirmed Because of Lack of Mortgage Subordination

• DOI: http://doi.org/10.1002/npc.30042
• Published date: 01 March 2015
• Date: 01 March 2015

Bruce R. Hopkins’ NONPROFIT COUNSEL

March 20152THE LAW OF TAX-EXEMPT ORGANIZATIONS MONTHLY

Bruce R. Hopkins’ Nonprofit Counsel DOI:10.1002/npc

regulations clarify that application of the facility-level tax

will not, by itself, result in operation of the noncompliant

hospital facility being considered an unrelated business.

The final regulations detail the requirements sur-

rounding the rule that a hospital organization’s hospital

facility conduct a community health needs assessment

(CHNA) in a year or in either of the two preceding years

and an authorized body of the facility has adopted an

implementation strategy to meet the community health

needs identified through the CHNA. Much attention is

accorded the definition of the community served, the

assessment and input processes, the documentation in a

CHNA report, and implementation strategies. These reg-

ulations encourage and facilitate collaboration among

hospital facilities by allowing for joint CHNA reports but

clarify that these reports must contain all of the same

basic information required of separate reports.

Hospital organizations are required to establish writ-

ten financial assistance policies (FAPs) and written emer-

gency medical care policies. The regulations detail the

FAP eligibility criteria, the basis for calculating amounts

charged to patients, the method for applying for finan-

cial assistance, actions that may be taken in the event

of nonpayment, the widely publicized requirement, and

the elements of the emergency care policies. Hospital

facilities must limit the amounts charged for any emer-

gency or other medically necessary care it provides to a

FAP-eligible individual to not more than amounts gener-

ally billed (AGB); the regulations devote considerable

attention to determination of the AGB limitation.

The regulations greatly flesh out the rule that a hos-

pital facility may not engage in extraordinary collection

actions (ECAs) against an individual to obtain payment

for care before making reasonable efforts to determine

whether the individual is FAP-eligible for the care. Thus,

the regulations define the phrases extraordinary col-

lection action and reasonable efforts, and describe the

financial assistance application process.

Hospital organizations must provide with their Form

990 a description of how they are addressing the com-

munity health needs identified for each facility they

operate, their audited financial statements, and the

amount of the excise tax on failure to meet the CHNA

requirements (IRC § 4959) during the year. This tax is

in the amount of $50,000, payable if a hospital facility

fails one or a combination of the requirements. The tax

is paid by means of filing Form 4720. [7.6(b)] ◆

EASEMENT DEDUCTION

DENIAL AFFIRMED BECAUSE

OF LACK OF MORTGAGE

SUBORDINATION

The US Court of Appeals for the Tenth Circuit, on

January 6, affirmed a decision of the US Tax Court, holding

that donors of a conservation easement to charity are not

entitled to a charitable contribution deduction because,

at the time of the gift, the easement was subject to an

unsubordinated mortgage (Mitchell v. Commissioner). The

Tax Court opinion is summarized in the June 2012 issue.

Facts

A married couple purchased ranch land, executing

a deed of trust. They later transferred the property to

a family limited partnership, subject to the deed. The

partnership subsequently granted to a land conservatory

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