New Internal Revenue Service guidelines for tax-exempt organizations could generate greater public scrutiny of not-for-profit hospitals, nursing homes and health systems, tax attorneys said. That scrutiny should make the groups more accountable.
The final IRS regulations, proposed several years ago and slated for release any day now, will toughen penalties for organizations that fail to copy and make available Forms 990 and 1023, which are required for 501(c)(3) charitable groups.
Not-for-profit organizations are required to complete Form 990 to comply with their tax-exempt status. On the form they must reveal executive compensation and account for how they spend their income. Form 1023 is the application for tax-exempt status.
The new regulations will take effect 60 days after their publication in the Federal Register.
Since 1987 nonprofits have been required to make their Form 990 available for public inspection, but the IRS has been lax in enforcing the rules.
"There was some criticism about that lack of enforcement," said James McGovern, a tax attorney with the Washington office of KPMG, a research and consulting firm. But stronger penalties should ensure compliance, he said.
The new regulations:
* Require not-for-profits to make completed forms available on demand for public inspection and mandate that organizations provide copies within 30 days of a written request or make copies "widely available" through a medium such as the Internet.
* Require that documents be available at the principal regional offices of hospitals and universities.
* Enforce existing criminal penalties of up to one year in prison with hefty maximum fines.
* Increase civil monetary penalties and the daily fine for organizations that do not file documents or that do not allow the public to inspect documents or get copies of them.