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IRS Section 501(r) Non-Profit Hospital Charity Care Mandate
⚖️ Governing Authority: 26 U.S.C. § 501(r)(4) & Treasury Reg. § 1.501(r)-4
Internal Revenue Code § 501(r) mandates that all non-profit tax-exempt hospitals establish, widely publicize, and honor a Financial Assistance Policy (FAP). Hospitals cannot initiate Extraordinary Collection Actions (ECAs) without making reasonable efforts to determine charity eligibility.
Key Statutory Rules & Protections
- Eligible patients cannot be charged more than the Amounts Generally Billed (AGB) to insured patients.
- Hospitals must provide a 240-day application period from the date of the first post-discharge billing statement.
- Prohibits credit bureau reporting, wage garnishment, or home liens prior to 120-day notification.
- Mandates retroactive refunds if charity care is approved after payments were made.
Step-by-Step Action Plan
- Calculate your household income relative to HHS Federal Poverty Guidelines.
- Download the hospital's plain language Financial Assistance Policy (FAP).
- Submit completed FAP application along with Form W-2 or prior-year Form 1040.
- Issue formal Cease & Desist to external collection agencies pending 501(r) determination.
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