VI. Key Issues: Financing and Delivery >> C. Health Financing >> Private Health Revenues >> Health Philanthropy (last updated 2.13.16)
- Tax Exemption. Not-for-profit hospitals and many other charitable health care organizations receive federal tax exempt status under Internal Revenue Code Section 503(c)(3). This tax status confers great benefits to the qualifying entity not only through an exemption from federal income taxation, but also through favorable tax treatment with respect to receiving contributions and securing financing. Such tax incentives encourage the charitable purpose, i.e., the promotion of health, for which these hospitals and organizations were created.
Physicians and Other Health Professionals
- Tax Law. Physicians, however, receive no tax benefits for providing charity care. They cannot write off the cost of charity care from their personal or business taxes. The current tax code allows deductions for certain out-of pocket expenses in giving services to a qualified organization (e.g., travel expenses) but does not allow such deductions for the value of your time or for the services itself. See Publication 526 on Charitable Contributions. So, for example, a physician who volunteers at a not-for-profit hospital could get reimbursed for gas and parking related to her volunteer work, but not for her time off of work or for her help.
- Amount of Charity Care. There are conflicting reports on the amount of charity care given by physicians.
- Center for Studying Health System Change (August 2001). Issue Brief entitled “Physicians Pulling Back from Charity Care cites a four percent decline in physicians providing charity care between 1997-1999, which raises concerns about the growing problem of access for the poor and uninsured.
- AMA Center for Health Policy Research (April 2002). Physician Marketplace Report on “Physician Provision of Charity Care, 1988-1999” includes data to suggest that “physician commitment to charity care remains strong.”
- Health Philanthropy (Health Affairs topic page)