Tax Exempt Hospital Transparency Act
- Sponsor
- Rep. Murphy, Gregory F. [R-NC-3]
- Committees
- Ways and Means Committee (primary)
- Last action
- Jul 1, 2026
Bottom line
The bill significantly expands transparency requirements for tax-exempt hospitals, aiming to increase accountability for their community benefit obligations and financial operations.
What it actually does
This bill amends the Internal Revenue Code of 1986 to impose new, tiered reporting requirements on tax-exempt hospital organizations. It mandates disclosures on community health needs, financial assistance, quality improvement, nonclinical spending, advertising costs, health service line revenues and costs, and participation in the 340B drug discount program, with more detailed reporting for larger and higher-revenue hospitals.
Proponents argue
Proponents argue that this bill will enhance transparency and accountability for tax-exempt hospitals, ensuring they are truly meeting their community benefit obligations in exchange for their tax-exempt status. They contend that increased data on spending, financial assistance, and service line profitability will allow policymakers and the public to better assess how hospitals are using their resources and whether they are adequately serving their communities, particularly vulnerable populations.
Opponents contend
Opponents might argue that the bill imposes excessive administrative burdens and compliance costs on hospitals, potentially diverting resources from patient care and community programs. They may also raise concerns about the disclosure of proprietary financial information, particularly regarding health service lines, which could put hospitals at a competitive disadvantage or lead to misinterpretation of complex financial data. Furthermore, some may argue that existing reporting requirements are sufficient.
The bill is relatively short, but its technical nature and reliance on definitions from the Internal Revenue Code and Social Security Act require careful reading to grasp its full implications.
Section 2(a), new IRC Section 6033A(a)
General Reporting Requirements for All Tax-Exempt Hospital Organizations
This provision requires all tax-exempt hospital organizations to include on their annual IRS return a description of how they are addressing community health needs, their audited financial statements, their CMS certification number, the value of financial assistance provided, and the numbers of financial assistance applications received, granted, and denied. For larger hospitals, this information must be reported separately for each facility.
Supporters argue
Supporters argue this basic level of transparency is essential for all tax-exempt hospitals to demonstrate their commitment to community health and justify their tax-exempt status. It provides a baseline understanding of their financial assistance policies and community engagement.
Critics contend
Critics may contend that even these general requirements add to the administrative burden, particularly for smaller hospitals, without necessarily providing actionable insights that aren't already available through other means.
Tradeoffs
Balances the public's right to information about tax-exempt entities against the administrative costs imposed on hospitals.
Section 2(a), new IRC Section 6033A(b)
Additional Reporting for Large Tax Exempt Hospital Organizations
This section mandates that 'large' tax-exempt hospitals (those with over 100 staffed inpatient beds, excluding critical access and rural emergency hospitals) report on their top three community health needs, the spending allocated to address each, and the impact of those actions. They must also report spending on quality improvement and nonclinical programming, with definitions provided for these terms. This information must also be separately stated for each hospital facility.
Section 2(a), new IRC Section 6033A(c)
Additional Reporting for High Revenue Tax Exempt Hospital Organizations
This provision applies to 'high revenue' tax-exempt hospitals (those with over $100 million in net patient revenue, excluding critical access and rural emergency hospitals, with an inflation adjustment). These hospitals must report specified advertising costs, detailed health service line information (description, gross receipts, costs, and cost allocation methods), and specific data related to their participation in the Federal 340B drug discount program. This information must also be separately stated for each hospital facility.
Section 2(a), new IRC Section 6033A(c)(3)(B)(ii)
Standardized Health Service Line Taxonomy Development
This provision mandates that the Secretary of Health and Human Services (HHS), in consultation with the Secretary of the Treasury, publish and maintain a standardized health service line taxonomy within two years of the bill's enactment. High revenue tax-exempt hospitals will be required to map their internally defined health service lines to this taxonomy for reporting purposes. The taxonomy must be updated at least every five years.
Section 3
GAO Report on Costs and Tax Implications
This section directs the Comptroller General of the United States (GAO) to conduct a study and report to Congress within a specific timeframe (beginning 3 years after enactment, for a 1-year period). The report must estimate the additional labor and resource costs for the Department of the Treasury to administer the new reporting requirements, as well as the compliance costs for tax-exempt hospital organizations. It also requires an estimate of the tax liability for the 25 highest-grossing tax-exempt hospitals if they were not tax-exempt.
The general effective date for the new reporting requirements is tied to the publication of the standardized health service line taxonomy by HHS, which must occur within two years of enactment. This means most of the significant new reporting will not begin until at least three years after the bill becomes law.
Section 2(c)(1)
Why it matters:This is standard legislative practice for complex regulatory frameworks, allowing time for agencies to develop necessary guidance and for regulated entities to prepare. It is not necessarily evasive.
Case for: Supporters argue that delaying the effective date until the taxonomy is published is practical and necessary, providing hospitals and agencies sufficient time to implement complex new systems and processes, ensuring a smoother transition and more accurate reporting.
Case against: Critics might argue that this delay postpones the benefits of increased transparency, allowing hospitals to continue operating under less stringent reporting for an extended period. They might suggest that some reporting could begin sooner.
Estimated impact: Delays the full implementation of the most detailed reporting requirements for at least three years post-enactment.
An exception to the general effective date allows for earlier implementation of basic financial assistance reporting (value and application numbers) for smaller tax-exempt hospitals (those not classified as 'large' or 'high revenue'). For these hospitals, this specific reporting applies to taxable years beginning 3 years after the date of enactment, rather than waiting for the taxonomy publication.
Section 2(c)(2)
Why it matters:This is a carve-out to accelerate transparency on less complex data for smaller entities, while still acknowledging the need for more time for larger, more complex reporting. It's a pragmatic legislative detail.
Case for: Proponents argue that this allows for earlier transparency on fundamental financial assistance metrics from a broader range of hospitals, as this data is less complex to collect and does not depend on the new taxonomy.
Case against: Opponents might argue that even this earlier implementation for smaller hospitals still adds an administrative burden, and that a single, consistent effective date for all provisions would be simpler.
Estimated impact: Accelerates the reporting of financial assistance data for smaller tax-exempt hospitals by potentially several years compared to the general effective date.
This section explicitly states that nothing in the Act or its amendments should be construed to create any inference regarding the proper application of existing laws, including Section 340B of the Public Health Service Act, or Sections 501(c)(3) or 501(r) of the Internal Revenue Code, or any operational test or the private benefit doctrine.
Section 2(d)
Why it matters:This is a standard legislative drafting technique to prevent unintended legal interpretations or challenges to existing law based on the passage of new legislation. It aims to clarify that the new reporting requirements do not alter the underlying legal framework for tax-exempt status or the 340B program.
Case for: Proponents argue this clause is essential to prevent misinterpretations and ensure that the new reporting requirements are understood as purely additive transparency measures, not as a redefinition or reinterpretation of existing legal standards for tax-exempt status or the 340B program.
Case against: Critics might argue that while intended to be neutral, the very act of requiring new data, particularly on 340B, inherently raises questions about existing compliance and could implicitly signal areas of concern, regardless of the 'no inference' clause.
Estimated impact: Clarifies the legal scope of the bill, potentially preventing litigation or challenges based on implied changes to existing statutes.