Tax-Exempt Hospitals Might Face Additional Reporting Requirements

Legislation pending in the U.S. House of Representatives, if enacted, would require 501(c)(3) hospitals to significantly expand the information disclosed in their Form 990 regarding charity care, community benefit activities, hospital operations, service-line profitability, and participation in the federal 340B drug discount program. H.R. 9504, the Tax-Exempt Hospital Transparency Act, was introduced June 29, 2026, and passed by the House Ways & Means Committee by a 25-15 vote on July 1.

While the proposal wouldn’t change the substantive exemption standards under IRC Section 501(c)(3) or Section 501(r), it would increase the level of operational and financial transparency required of charitable hospitals. If enacted, the bill could require hospitals — particularly larger systems and high-revenue facilities — to enhance data collection, cost allocation, internal reporting, and facility-level disclosure processes well before the first affected Form 990 filing.

Legislation highlights

• Each 501(c)(3) hospital would be required to annually disclose:
  • Its CMS certification number
  • The number of financial assistance applications received, approved, and denied
• Large hospitals (have more than 100 staffed inpatient beds and are neither a critical access hospital nor a rural emergency hospital) would also be required to annually disclose:
  • The top three community health needs from its most recent CHNA Report
    • The amount spent to address those needs
    • Steps taken to address those needs and the impact of such actions on community health
  • The amount spent on quality improvement
  • The amount spent on nonclinical programs
• High-revenue hospitals (have more than $100 million in net patient revenue and are neither a critical access hospital nor a rural emergency hospital) would also be required to annually disclose:
  • Allowable and unallowable advertising costs from CMS cost reports
  • A description of each health service line
  • The gross receipts and costs of each health service line
  • If participating in the 340B program:
    • The number of patients receiving 340B drugs, by insurance type
    • The aggregate net 340B payment amount for such drugs
    • The aggregate cost incurred to administer and comply with the program

The bill would direct the Government Accountability Office to study the estimated federal income tax liability of the 25 largest tax-exempt hospitals if they were taxable entities.

Effective compliance deadlines

For large and/or high-revenue 501(c)(3) hospitals, H.R. 9504 generally would become effective one year after enactment, with certain reporting requirements dependent on future implementation provisions. For all other 501(c)(3) hospitals, certain requirements generally would become effective three years after enactment.

Potential impact on tax-exempt hospitals

For 501(c)(3) hospitals, the most significant impacts would likely be operational. The proposal doesn’t appear to impose new exemption requirements, but it would increase transparency related to hospital financial performance, community benefit spending, charity care practices, and 340B program economics.

Although the bill is still proposed legislation, hospitals may want to begin preparing now. Recommended near-term steps include:

• Assessing current Form 990 Schedule H reporting processes
• Identifying data gaps
• Reviewing service-line accounting capabilities
• Documenting cost allocation methods
• Determining whether 340B and financial assistance data can be reported consistently across facilities

How CLA can help tax-exempt hospitals

CLA advisors are here to help tax-exempt hospitals monitor H.R. 9504 and evaluate how the proposed changes may affect Form 990 reporting, Schedule H disclosures, community benefit documentation, and internal financial reporting systems.

Our team can assist with readiness assessments, data gap analysis, cost allocation considerations, and planning for potential facility-level reporting requirements. If your organization would like to discuss the bill or its potential reporting implications, contact your CLA advisor.