Not What the Doctors Ordered: Nonprofit Hospitals and the New Corporate Governance Requirements of the Form 990
Rummana Alam   |   2011 U. Ill. L. Rev. 229
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This Note analyzes whether there is a need for the Internal Revenue Service (IRS) to monitor corporate governance as it applies to nonprofit hospitals. There has been an increase in scandals involving nonprofit hospitals that are receiving tax-exemption, yet a decrease in charitable care in favor of higher pay for administrators. This led to a string of statutes focusing on corporate governance, as well as the IRS deciding to monitor corporate governance of nonprofit hospitals in its own way by requiring the Form 990. Although no evidence exists to show a link between good corporate governance and tax compliance, the IRS has continued to increase the filing burden on nonprofit hospitals.

The author argues that the Form 990, now required by the IRS, places an undue and unnecessary burden on nonprofit hospitals. The Form 990 is duplicative of other statutes focusing on corporate governance, and it also requires a much larger amount of time and resources than those predicted by the IRS, causing a strain on already limited nonprofit resources. The author suggests that monitoring corporate governance is both desirable and necessary but that the state and health care statutes already in place do a sufficient job of such monitoring. The author concludes that until the IRS has better data to support a connection between good governance and tax compliance, the Form 990 should be suspended, and the IRS should allow nonprofit hospitals to submit their annual compliance reports under other current reporting statutes in lieu of requiring the Form 990. Such an arrangement would save resources for both the IRS and nonprofit hospitals.