January 31, 2018

Housing and Community Benefit: What Counts?” Guidance to Hospitals on Reporting to the IRS

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Recognizing the link between homes and health, hospitals and health systems are increasingly seeking to improve community health through housing-related activities. Similarly, the housing sector is turning to health care partners for guidance in addressing residents’ health needs.  As these two sectors continue to integrate their work and, more important, their shared missions to improve the lives of lower-income people, it is critical that each understands opportunities for alignment within existing regulations and systems.

Today, we’re making available a new resource for tax-exempt hospitals looking for guidance on housing-related activities that they can report as community benefit to the Internal Revenue Service (IRS): Housing and Community Benefit: What Counts? The paper is a useful tool to help hospitals improve health through housing and the latest example of our work at Enterprise to bring health into the national housing conversation and housing into the national health conversation.

Enterprise developed the paper in partnership with the Catholic Health Association, our co-hosts for a Housing and Community Benefit webinar on February 8 from 1 to 2 p.m. EST. Julie Trocchio, senior director of community benefit and continuing care at the Catholic Health Association, and I will speak about the connection between health and housing and then dig into the specifics of the guidance.

First, a little context. Starting in 1956, hospitals could claim tax-exempt status if they provided care to patients who were unable to pay. Over the years, the IRS has tightened regulations surrounding the tax-exempt status of hospitals, replacing the previous “charity care” requirement with “community benefit” requirements. In 2009, the IRS clarified the definition of “community benefit activity” and added an additional form to hospitals’ tax documents to report on these activities.

Tax-exempt hospitals now report their community benefit activities to the IRS each year on Part I of IRS Form 990 Schedule H. “Physical improvements and housing,” along with other social, environmental and economic activities, are listed separately in Part II as “Community Building,” implying that housing-related activities should not be reported as community benefit. However, with the clear connection between certain housing activities and health, in recent years the IRS has clarified that some housing activities and other activities addressing determinants of health are to be reported as community benefit. In 2011, the IRS amended instructions to Schedule H to say:

“Some community building activities may also meet the definition of community benefit. Don't report in Part II community building costs that are [reportable] … as a community health improvement service…”

The IRS further clarified this topic in a December 2015 Executive Order Update, which stated:


"...some housing improvements and other spending on social determinants of health that meet a documented community health need may qualify as community benefit for the purposes of meeting the community benefit standard."
 

Based on these clarifications, housing-related activities provided primarily to address an identified community health need should qualify as a reportable community benefit, and the purpose of the activity should be to improve health. Community need may be identified through a community health needs assessment (CHNA), or by a request from or partnership with government or community organizations.  The IRS instructs hospitals to report qualifying activities as community benefit and not as community building.

Here are some examples from the paper of what should and should not be included on Part I of IRS Form 990 Schedule H, where hospitals report community benefit. These examples can serve both to guide tax-exempt hospitals on their current activities and highlight additional opportunities hospitals could pursue to improve the health of their community through housing-related activities.

Examples of What Counts and What Does Not Count

The following provides examples of housing-related activities by hospitals and an explanation of whether they count as a community benefit. This is not an exhaustive list; other activities may also address community health needs and meet the definition of community benefit.

Activity

Does it Count?

Explanation

Holding a monthly health clinic in an affordable housing development.

Yes

This activity serves as a community-based clinical service targeting a vulnerable population.

Supporting a farmer’s market at a housing development in a low food access setting.

Yes

This program would improve the health of persons in the community by targeting an environmental health determinant.

Donating funds for a playground to an affordable housing provider to encourage physical activity based on a need for more opportunities for physical activity among their youth.

Yes

This donation would improve the health of children in the community by targeting an environmental health determinant.

Creating a residential lead abatement program targeting families with small children.

Yes

This program would improve the health of persons in the community by addressing an environmental health determinant.

Offering home environmental assessments to patients who present to the ER with asthma.

Yes

This assessment extends beyond typical patient care to screen for the upstream causes of health complications.

Developing a housing program for individuals who are unstably housed and present to the ER often.

Yes

This program targets the health needs of a particularly vulnerable population and prevents the use of unnecessary hospital care.

Providing short-term rental assistance to low-income patients or community members experiencing financial difficulties as a result of their medical condition.

Yes

This contribution would encourage health through addressing a social and environmental health determinant.

Creating a medical respite program for the purposes of reducing hospital costs or avoiding readmission penalties.

No

This program is designed with the intent of benefiting the hospital and should not be counted as a community benefit activity.

Creation of a housing and services program targeting formerly incarcerated individuals to keep them housed.

Yes

Programs such as these improve health and lower emergency room use and other societal costs.

Low-interest loans or investments to promote affordable housing.

No

Investments with an anticipated return do not count as community benefit; however, they can be described in Section VI for promoting health in the community.

Designing a community investment program to target financial resources and products to improve health in underserved communities based on community need.

Yes and No

Although the actual loans and investments (that are expected to receive returns) cannot be counted as community benefit, the staff time and resources spent in administering the program can be counted.

Development of affordable housing for hospital employees.

No

This investment is a benefit to a hospital’s employees and not to the community at large, it does not count as community benefit.

The recommendations in this paper were developed by Enterprise and the Catholic Health Association and they do not represent tax or legal advice. Health care organizations should consult the most recent guidance from their state and the IRS regarding required reporting of community benefit information.