Children's Hospitals Today - Winter 2018 - 14

FEATURE / OPERATIONS

Tax-exempt organizations, especially hospitals and
health systems, face a new reality now that the tax
reform bill has been signed into law.
By Ralph E. DeJong; Robert C. Louthian III; Erika Mayshar;
Michael W. Peregrine; and Mary K. Samsa

T

he tax reform bill (the Act) makes
sweeping changes to the tax rules
that affect exempt organizations
like children's hospitals on a daily basis. It
also reflects a troubling reality: complex,
diversified tax-exempt organizations will
face more pressure to defend their charitable status. This theme has emerged
over the last few months from legislative
discussions leading up to the Act, as well
as increased Internal Revenue Service
activity in the tax-exempt sector. This
includes the revocation of the tax-exempt
status of two Section 501(c)(3) hospitals
in recent months. Exempt organizations
that only focus on the specifics of the new
tax law will be missing the big picture.
Here are five takeaways for tax-exempt

14

CHILDREN'S HOSPITAL S TODAY Winter 2018

organizations about the most significant
rewrite of the tax code in 30 years.

A tax on talent
The country's largest tax-exempt organizations will now find it more costly to recruit
and retain top talent. Tax-exempt organizations are now required to pay an annual
excise tax on compensation exceeding $1
million paid to any of its "covered employees." This tax is 21 percent of the amount
exceeding $1 million (21 percent is the
corporate tax rate under the new law). For
example, to provide $2 million of reasonable compensation to a covered employee
in 2018, an exempt organization will owe
$210,000 in tax. There are several nuances
within this new rule:



Table of Contents for the Digital Edition of Children's Hospitals Today - Winter 2018

Contents
Children's Hospitals Today - Winter 2018 - Intro
Children's Hospitals Today - Winter 2018 - Cover1
Children's Hospitals Today - Winter 2018 - Cover2
Children's Hospitals Today - Winter 2018 - Contents
Children's Hospitals Today - Winter 2018 - 2
Children's Hospitals Today - Winter 2018 - 3
Children's Hospitals Today - Winter 2018 - 4
Children's Hospitals Today - Winter 2018 - 5
Children's Hospitals Today - Winter 2018 - 6
Children's Hospitals Today - Winter 2018 - 7
Children's Hospitals Today - Winter 2018 - 8
Children's Hospitals Today - Winter 2018 - 9
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Children's Hospitals Today - Winter 2018 - 11
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Children's Hospitals Today - Winter 2018 - 13
Children's Hospitals Today - Winter 2018 - 14
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Children's Hospitals Today - Winter 2018 - 20
Children's Hospitals Today - Winter 2018 - 21
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Children's Hospitals Today - Winter 2018 - 32
Children's Hospitals Today - Winter 2018 - Cover3
Children's Hospitals Today - Winter 2018 - Cover4
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