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IRS allows hospitals to claim credit for environmentally responsible activities

Catholic Health World, Volume 28, Number 10, June 1, 2012

IRS allows hospitals to claim credit for environmentally responsible activities

By KIM VAN OOSTEN

DENVER — Environmental sustainability and policy leaders from Catholic health care and other health care organizations meeting here at CleanMed 2012 had high praise for an IRS rule change that allows hospitals to report certain environmental investments and activities as community benefits on IRS Form 990, Schedule H.

"Over the last year, Health Care Without Harm and the Catholic Health Association worked with the IRS to support the expansion of community benefit reporting to include programs that improve community environmental health," said Gary Cohen. He is founder and president of Health Care Without Harm, which cosponsored the annual meeting along with Practice Greenhealth.

Health Care Without Harm and CHA advocated for the changes, presenting the IRS with articles and testimonials from leading public health organizations, scientists and clinicians documenting that environmental improvements made by hospitals and health providers directly impact the health of individuals.

It is important for hospitals to report community health improvements as community benefit because it signifies recognition that such activities represent benefit to the community. Previously, IRS officials voiced concern that hospital environmental improvements were either the cost of doing business or part of a public relations program and should not be reported as community benefit. While hospitals are not required to provide a specified amount of community benefit, they want to get full credit for all their community service.

The IRS implemented the rule change for the 2011 tax year. CHA and Health Care Without Harm codeveloped resources to help hospitals and health systems determine whether an environmental program or improvement project should be defined for IRS reporting purposes as a community benefit or a community-building expense on Schedule H forms.

Julie Trocchio, CHA's senior director of community benefit, and Paul Lipke, Health Care Without Harm's senior advisor, energy, green buildings and environmental health community benefits, described the rule and its implications for health care providers during a May 2 breakout session at CleanMed.

The new IRS policy clarifies that activities in the community-building category, including environmental improvements, may be reported as community benefit, provided they meet the criteria for community health improvement (see sidebar). The IRS instructions allow hospitals that reduce their own environmental hazards to count that activity as community benefit when the improvements are made for the primary purpose of improving community health, the changes address an environmental issue known to affect community health, and the solution or program costs the organization money it doesn't recoup.

Previously, if environmental improvements were listed on the IRS form, they could only be categorized as "community-building." Community building activities are reported separately from community benefit activities on IRS filings, said Trocchio. The new rules lift a prohibition against hospitals reporting as community benefit environmental improvements when those improvements are aimed at reducing the environmental hazards caused by, or the environmental impact of, the hospital's own activities.

Based on changes to the IRS rules, Cohen said that hospitals can now report initiatives such as running farmers' markets and doubling food stamp benefits for low-income residents to incentivize them to purchase healthy fruits and vegetables as a disease-prevention strategy. Hospitals also can now claim as community benefit the cost of conducting environmental audits in homes of asthma patients and any investments made in home improvements that remove or remediate asthma triggers in the home.

CHA's and Health Care Without Harm's guidance for following the new IRS reporting rules is posted at chausa.org/communitybenefit under the heading "What's New in Community Benefit."

To see all of CHA's environmental responsibility resources, go to chausa.org/environmental_responsibility. The site includes instructions for downloading a new book released for Earth Day 2012, Climate Change and Health: Is there a Role for the Health Care Sector? A print version is available free to CHA members, but shipping rates apply.


What counts and what doesn't with the IRS

A program or activity may be reported to the IRS as a community benefit provided it is:

  • Carried out or supported for the purpose of improving community health.
  • Subsidized by the organization.
  • Provided in response to a demonstrated community need.
  • Does not generate an inpatient or outpatient bill.
  • Seeks to achieve at least one community benefit objective, such as improving access to health services, enhancing public health or health literacy.
  • Not a marketing tool.
  • Not of greater benefit to the organization than to the community (for example, it is not designed primarily to increase referrals of insured patients with third party coverage).
  • Not required for licensure or accreditation.
  • Not restricted to individuals affiliated with the organization (employees and physicians).

Expenses and activities that should not be reported as either community benefit or community building include things such as:

  • Buying green cleaning products.
  • Complying with environmental regulations, such as medical radiological waste disposal.
  • Promotional products, or "green items" bearing the organization's name or logo.
  • Energy efficiency upgrades offset by future reductions in energy costs.

Copyright © 2012 by the Catholic Health Association of the United States
For reprint permission, contact Donna Troy or call (314) 253-3450.

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