New federal regulations took effect June 8 that require tax-exempt organizations, including not-for-profit hospitals, to make their federal tax filings more publicly accessible.
Under the regulations, which have been in the works since 1996, tax-exempt organizations must release their filings, known as Forms 990, to anyone who requests them in person at the organization's main place of business or within 30 days of a written request unless the forms have been made widely available, such as through the Internet (See Outliers, p. 140).
Previous law required organizations to make their tax returns available for public inspection, but tax attorneys said the law was not enforced by the Internal Revenue Service.
The filings disclose an organization's revenue sources and how the organization spends its money, including executive salaries.
The change was mandated by Congress in tax legislation passed in 1996. The IRS published final regulations in the April 9 Federal Register.
Thomas Hyatt, a tax attorney for the Washington firm of Ober, Kaler, Grimes & Shriver, said organizations posting forms on the Internet can save themselves time and money.
"You've satisfied the obligation to provide copies to someone requesting them by mail because you're making them widely available," he explained. "If someone comes to your place of business and asks for a copy, you don't have to give them one. But you still must provide the documents for public inspection."
Penalties for failing to comply can run up to $50,000 per return for organizations with annual revenues of more than $1 million, said tax attorney James McGovern with the Washington office of accounting giant KPMG. He said the new rules will put not-for-profits under greater public scrutiny.
McGovern said under a 1995 IRS ruling, public hospitals and state university medical centers, and their tax-exempt affiliates, may be exempt from the regulations.