Internal Revenue Bulletin 2012-32 (PDF rendition): IRS Notices

Preserve advance releases and the authoritative Internal Revenue Bulletin rendition; directory timestamps are file-publication metadata, not legal effective dates. HTML bulletins begin June 2003; earlier available issues require full PDF parsing. Whole bulletin rendition: numbered items are identified below; other legal material and publisher context remain included. This is not a new standalone advance release.

Bulletin No. 201
2-32
August 6, 2012
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
INCOME TAX
Rev. Rul. 2012–21, page 123.
Federal rates; adjusted federal rates; adjusted federal
long-term rate and the long-term exempt rate.For pur-
poses of sections 382, 642, 1274, 1288, and other sections
of the Code, tables set forth the rates for August 2012.
EXEMPT ORGANIZATIONS
REG–130266–11, page 126.
Proposed regulations under section 501 of the Code, required
the Patient Protection and Affordable Care Act of 2010, pro-
vide guidance to charitable hospital organizations regarding the
requirements to establish a written financial assistance policy
and a written policy relating to emergency medical care; limit
charges for emergency or other medically necessary care pro-
vided to an individual eligible for financial assistance; and make
reasonable efforts to determine whether an individual is eligible
for financial assistance before engaging in extraordinary collec-
tion actions.
Finding Lists begin on page ii.

The IRS Mission
Provide Americ
a’s taxpayers top-quality service by helping
them understa
nd and meet their tax responsibilities and en-
force the law wi
th integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument of
the Commissioner of Internal Revenue for announcing official
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, legislation, court decisions, and other items of general
interest. It is published weekly and may be obtained from the
Superintendent of Documents on a subscription basis. Bulletin
contents are compiled semiannually into Cumulative Bulletins,
which are sold on a single-copy basis.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application of
the tax laws, including all rulings that supersede, revoke, mod-
ify, or amend any of those previously published in the Bulletin.
All published rulings apply retroactively unless otherwise indi-
cated. Procedures relating solely to matters of internal man-
agement are not published; however, statements of internal
practices and procedures that affect the rights and duties of
taxpayers are published.
Revenue rulings represent the conclusions of the Service on the
application of the law to the pivotal facts stated in the revenue
ruling. In those based on positions taken in rulings to taxpayers
or technical advice to Service field offices, identifying details
and information of a confidential nature are deleted to prevent
unwarranted invasions of privacy and to comply with statutory
requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—19
86 Code.
This part i
ncludes rulings and decisions based on provisions of
the Intern
al Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B, Leg-
islation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury’s Office of the Assistant Secre-
tary (Enforcement).
Part IV
.—Items of General Interest.
This par
t includes notices of proposed rulemakings, disbar-
ment an
d suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The c
ontents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S.Government Printing Office, Washington, DC 20402.
August 6, 20122012–32 I.R.B.

Part I. Rulings
and Decisions Under the Internal Revenue Code
of 1986
Section 42.—L
ow-Income
Housing Credi
t
The adjusted a
pplicable federal short-term, mid-
term, and long
-term rates are set forth for the month
of August 2012
. See Rev. Rul. 2012-21, page 123.
Section 280G.—Golden
Parachute Payments
Federal short-term, mid-term, and long-term rates
are set forth for the month of August 2012. See Rev.
Rul. 2012-21, page 123.
Section 382.—Limitation
on Net Operating Loss
Carryforwa
rds and Certain
Built-In Losses Following
Ownership Change
The adjusted applicable federal long-term rate is
set forth for the month of August 2012. See Rev. Rul.
2012-21, page 123.
Section 412.—Minimum
Funding Standards
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of August 2012. See Rev. Rul. 2012-21, page 123.
Section 467.—Certain
Payments for the Use of
Property or Services
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of August 2012. See Rev. Rul. 2012-21, page 123.
Section 468.—Special
Rules for Mining and Solid
Waste
Reclamation and
Closi
ng Costs
The ad
justed applicable federal short-term, mid-
term,
and long-term rates are set forth for the month
of Aug
ust 2012. See Rev. Rul. 2012-21, page 123.
Section 482.—
Allocation
of Income and D
eductions
Among Taxpaye
rs
Federal short
-term, mid-term, and long-term rates
are set forth f
or the month of August 2012. See Rev.
Rul. 2012-21
, page 123.
Section 483.—Interest on
Certain Deferred Payments
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of August 2012. See Rev. Rul. 2012-21, page 123.
Section 642.—Special
Rules for Credits and
Deductions
Federal short-term, mid-term, and long-term rates
are set forth for the month of August 2012. See Rev.
Rul. 2012-21, page 123.
Section 807.—Rules for
Certain Reserves
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of August 2012. See Rev. Rul. 2012-21, page 123.
Section 846.—Discounted
Unpaid Losses Defined
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of August 2012. See Rev. Rul. 2012-21, page 123.
Section 1274.—Determi-
nation of Issue Price in the
Case of Certain Debt Instru-
ments Issued for Property
(Also Sections 42, 280G, 382, 412, 467, 468, 482,
483, 642, 807, 846, 1288, 7520, 7872.)
Federal rates; adjusted federal rates;
adjusted federal long-term rate and the
long-term exempt rate.For purposes of
sections 382,
642, 1274, 1288, and other
sections of th
e Code, tables set forth the
rates for Augu
st 2012.
Rev. Rul. 2012
–21
This revenue
ruling provides various
prescribed r
ates for federal income tax
purposes for
August 2012 (the current
month). Tabl
e 1 contains the short-term,
mid-term, an
d long-term applicable fed-
eral rates (
AFR) for the current month
for purpose
s of section 1274(d) of the
Internal Re
venue Code. Table 2 contains
the short-t
erm, mid-term, and long-term
adjusted a
pplicable federal rates (ad-
justed AFR
) for the current month for
purposes o
f section 1288(b). Table 3 sets
forth the a
djusted federal long-term rate
and the lo
ng-term tax-exempt rate de-
scribed i
n section 382(f). Table 4 contains
the appro
priate percentages for deter-
mining th
e low-income housing credit
describe
d in section 42(b)(1) for build-
ings pla
ced in service during the current
month. H
owever, under section 42(b)(2),
the appl
icable percentage for non-feder-
ally sub
sidized new buildings placed in
service
after July 30, 2008, and before
Decemb
er 31, 2013, shall not be less than
9%. Fin
ally, Table 5 contains the federal
rate fo
r determining the present value of
an annu
ity, an interest for life or for a term
of year
s, or a remainder or a reversionary
inter
est for purposes of section 7520.
2012–32 I.R.B.123August 6, 2012

REV. RUL. 2012–21 TABLE 1
Applicable Federal Rates (AFR) for August 2012
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-term
AFR
.25%.25%.25%.25%
110% AFR.28%.28%.28%.28%
120% AFR.30%.30%.30%.30%
130% AFR.33%.33%.33%.33%
Mid-term
AFR.88%.88%.88%.88%
110% AFR.97%.97%.97%.97%
120% AFR1.06%1.06%1.06%1.06%
130% AFR1.14%1.14%1.14%1.14%
150% AFR
1.32%1.32%1.32%1.32%
175% AFR1.55%1.54%1.54%1.54%
Long-term
AFR2.23%2.22%2.21%2.21%
110% AFR
2.45%
2.44%2.43%2.43%
120% AFR2.68%2.66%
2.65%2.65%
130% AFR2.91%2.89%2.88%2.87%
REV. RUL. 2012–21 TABLE 2
Adjusted AFR for August 2012
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-term adjusted
AFR
.25%.25%.25%.25%
Mid-term adjusted AFR1.07%1.07%1.07%1.07%
Long-term adjusted
AFR
3.01%2.99%2.98%2.97%
REV. RUL. 2012–21 TABLE 3
Rates Under Section 382 for August 2012
Adjusted federal long-term rate for the current month3.01%
Long-term tax-exempt rate for ownership changes during the current month (the highest of the adjusted
federal long-term rates for the current month and the prior two months.)3.06%
REV. RUL. 2012–21 TABLE 4
Appropriate Percentages Under Section 42(b)(1) for August 2012
Note: Under Section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after
July 30, 2008, and before December 31, 2013, shall not be less than 9%.
Appropriate percentage for the 70% present value low-
income housing credit
7.36%
Appropriate percentage for the 30% present value low-income housing credit
3.15%
August 6, 20121242012–32 I.R.B.

REV. RUL. 2012–21 TABLE 5
Rate Under Section 7520 for August 2012
Applicable federal rate for determining the present value of an annuity, an interest for life or a term of years,
or a remainder or reversionary interest1.0%
Section 1288.—Treatment
of Original Issue Discount
on Tax-Exempt Obligations
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of August 2012. See Rev. Rul. 2012-21, page 123.
Section 7520.—Valuation
Tables
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of August 2012. See Rev. Rul. 2012-21, page 123.
Section 7872.—Treatment
of Loans With Below-Market
Interest Rates
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of August 2012. See Rev. Rul. 2012-21, page 123.
2012–32 I.R.B.125August 6, 2012

Part IV. Items o
fGeneralInterest
Notice of Prop
osed
Rulemaking
Additional Re
quirements for
Charitable Ho
spitals
REG–130266–
11
AGENCY: Inte
rnal Revenue Service
(IRS), Treas
ury.
ACTION: Noti
ce of proposed rulemaking.
SUMMARY: Thi
s document contains pro-
posed regula
tions that provide guidance
regarding th
e requirements for charitable
hospital or
ganizations relating to financial
assistance
and emergency medical care
policies, c
harges for certain care provided
to individu
als eligible for financial assis-
tance, and
billing and collections. The
regulatio
ns reflect changes to the law made
by the Pati
ent Protection and Affordable
Care Act of
2010. The regulations will
affect cha
ritable hospital organizations.
DATES: Com
ments and requests for
apublich
earing must be received by
Septembe
r 24, 2012.
ADDRESSE
S: Send submissions to:
CC:PA:LP
D:PR (REG–130266–11), room
5203, Int
ernal Revenue Service, PO Box
7604, Ben
Franklin Station, Washing-
ton, DC 2
0044. Submissions may be
hand-de
livered Monday through Friday
between
the hours of 8 a.m. and 4 p.m.
to CC:PA
:LPD:PR (REG–130266–11),
Courier
’s Desk, Internal Revenue Ser-
vice, 1
111 Constitution Avenue, NW,
Washin
gton, DC, or sent electroni-
cally v
ia the Federal eRulemaking Por-
tal ath
ttp://www.regulations.gov(IRS
REG–13
0266–11).
FOR FUR
THER INFORMATION
CONTA
CT: Concerning the proposed
regul
ations, Amber L. Mackenzie
or Pre
ston J. Quesenberry at (202)
622–6
070; concerning submissions of
comme
nts and requests for a public
heari
ng, Oluwafunmilayo Taylor at (202)
622–
7180 (not toll-free numbers).
SUPPLEMENTAR
Y INFORMATION:
Paperwork Redu
ction Act
The collection
of information con-
tained in this n
otice of proposed rule-
making has been
submitted to the Office
of Management
and Budget for review
and approval u
nder 1545–0047, in accor-
dance with the
Paperwork Reduction Act
of 1995 (44 U.S
.C. 3507(d)). Comments
on the collect
ion of information should
be sent to the
Office of Management
and Budget,A
ttn: Desk Officer for
the Departme
nt of the Treasury, Office
of Informati
on and Regulatory Affairs,
Washington
, DC 20503, with copies
to theInter
nal Revenue Service,
Attn: IRS Re
ports Clearance Officer,
SE:W:CAR:M
P:T:S:M, Washington, DC
20224. Com
ments on the collection
of informa
tion should be received
by August 2
7, 2012. Comments are
specifica
lly requested concerning:
Whether th
eproposedcollectionofin-
formation
is necessary for the proper per-
formance o
f the functions of the Internal
Revenue S
ervice, including whether the
informat
ion will have practical utility;
The accur
acy of the estimated burden
associat
ed with the proposed collection of
informat
ion;
How the qu
ality, utility, and clarity of
the infor
mation to be collected may be en-
hanced;
How the bu
rden of complying with the
proposed
collection of information may be
minimiz
ed, including through forms of in-
formati
on technology; and
Estimat
es of capital or start-up costs
and cost
s of operation, maintenance, and
purchas
e of services to provide informa-
tion.
The coll
ectionofinformationinthe
propose
d regulations is in §§ 1.501(r)–4
and 501(
r)–6(c). The collection of infor-
mation
flows from section 501(r)(4) of
the Int
ernal Revenue Code (Code), which
requir
es hospital organizations to estab-
lish a w
ritten financial assistance policy
and a wr
itten policy related to care for
emerg
ency medical conditions, and sec-
tion 5
01(r)(6), which requires a hospital
organ
ization to make reasonable efforts to
deter
mine whether an individual is eligible
for as
sistance under a financial assistance
policy before
engaging in extraordinary
collection ac
tions against that individual.
The expected r
ecordkeepers are hospi-
tal organizat
ions described in sections
501(c)(3) and
501(r)(2).
Estimated num
ber of recordkeepers:
3,377.
Estimated av
erage annual burden hours
per recordke
eper: 11.5 hours.
Estimated to
tal annual recordkeeping
burden: 38,8
36.
An agency may
not conduct or sponsor,
and a person i
s not required to respond to, a
collection o
f information unless it displays
a valid contr
ol number assigned by the Of-
fice of Mana
gement and Budget.
Books or reco
rds relating to a collection
of informat
ion must be retained as long
as their con
tents may become material in
the adminis
tration of any internal revenue
law. Genera
lly, tax returns and return in-
formation
are confidential, as required by
26 U.S.C. 6
103.
Backgroun
d
The Patien
t Protection and Affordable
Care Act, P
ublic Law 111–148 (124 Stat.
119 (2010)
)(theAffordableCareAct),
enacted se
ction 501(r) of the Code, which
adds requ
irements for hospital organiza-
tions tha
t are (or seek to be) recognized
as descri
bed in section 501(c)(3). Section
501(r)(1
) of the Code states that an organ-
ization d
escribed in section 501(r)(2) (a
hospita
l organization) will not be treated
as descr
ibed in section 501(c)(3) unless
the orga
nization meets the requirements
describ
ed in section 501(r)(3) through
501(r)(
6). The Affordable Care Act did
not oth
erwise affect the substantive stan-
dards f
or tax exemption that hospital
organi
zations are required to meet under
sectio
n 501(c)(3).
Sectio
n 501(r)(2)(A) defines a hospital
organi
zation as: (i) An organization that
operat
es a facility required by a state to
be lic
ensed, registered, or similarly rec-
ogniz
ed as a hospital; and (ii) any other
organ
ization that the Secretary determines
has th
e provision of hospital care as its
princ
ipal function or purpose constituting
the b
asis for its exemption under section
501(
c)(3).
Sect
ion 501(r)(2)(B)(i) requires a hos-
pita
l organization that operates more than
August 6, 20121262012–32 I.R.B.

one hospital facility to meet the require-
ments of section 501(r) separately with
respect to each hospital facility. Section
501(r)(2)(B)(ii) provides that a hospital
organization will not be treated as de-
scribed in section 501(c)(3) with respect to
any hospital facility for which the require-
ments of section 501(r) are not separately
met.
Community Health Needs Assessments
Section 501(r)(3) requires a hospital or-
ganization to conduct a community health
needs assessment (CHNA) at least once
every three years and adopt an implemen-
tation strategy to meet the community
health needs identified through the CHNA.
The CHNA must take into account input
from persons who represent the broad
interests of the community served by the
hospital facility, including those with spe-
cial knowledge of or expertise in public
health. In addition, the CHNA must be
made widely available to the public.
Financial Assistance Policy and
Emergency Medical Care Policy
Section 501(r)(4) requires a hospital or-
ganization to establish a written financial
assistance policy (FAP) and a written pol-
icy relating to emergency medical care.
The FAP must include: (1) Eligibil-
ity criteria for financial assistance, and
whether such assistance includes free or
discounted care; (2) the basis for calculat-
ing amounts charged to patients; (3) the
method for applying for financial assis-
tance; (4) in the case of an organization
that does not have a separate billing and
collections policy, the actions the hospi-
tal organization may take in the event of
nonpayment; and (5) measures to widely
publicize the FAP within the community
to be served by the hospital organization.
The emergency medical care policy
must require the hospital organization to
provide, without discrimination, care for
emergency medical conditions (within the
meaning of the Emergency Medical Treat-
ment and Labor Act (EMTALA), section
1867 of the Social Security Act (42 U.S.C.
1395dd)) to individuals regardless of their
eligibility under the organization’s FAP.
Limitation on Charges
Section 501(r)(5)(A) requires a hospital
organization to limit amounts charged for
emergency or other medically necessary
care provided to individuals eligible for
assistance under the organization’s FAP
(FAP-eligible individuals) to not more than
the amounts generally billed to individu-
als who have insurance covering such care
(AGB). Section 501(r)(5)(B) prohibits the
use of gross charges.
Billing and Collections
Section 501(r)(6) requires a hospital or-
ganization to make reasonable efforts to
determine whether an individual is FAP-
eligible before engaging in extraordinary
collection actions (ECAs) against the indi-
vidual.
Notice 2010–39
In June 2010, the Department of
Treasury (Treasury Department) and
the Internal Revenue Service (IRS) is-
sued Notice 2010–39, 2010–24 I.R.B.
756 (May 27, 2010)), which solicited
comments regarding the application of
the additional requirements imposed by
section 501(r). The Treasury Department
and the IRS received approximately 125
comments in response to Notice 2010–39.
The principal comments considered
in drafting these proposed regulations
are discussed in this preamble under
Explanation of Provisions.
Notice 2011–52
In July 2011, the Treasury Depart-
ment and the IRS issued Notice 2011–52,
2011–30 I.R.B. 60 (July 8, 2011)), which
addressed the CHNA requirements de-
scribed in section 501(r)(3). Notice
2011–52 described specific provisions
related to the CHNA requirements that
the Treasury Department and the IRS
anticipate will be included in regula-
tions to be proposed under section 501(r)
and solicited comments from the public.
The comment period for Notice 2011–52
closed on September 23, 2011. The Trea-
sury Department and the IRS received
more than 80 comments in response to
Notice 2011–52.
Hospital organizations may rely on the
guidance in Notice 2011–52 with respect
to any CHNA made widely available to the
public, and any implementation strategy
adopted, on or before the date that is six
months after the date further guidance re-
garding the CHNA requirements is issued.
Explanation of Provisions
These proposed regulations provide
guidance on the requirements described in
section 501(r)(4) through 501(r)(6) of the
Code. Sections 501(r)(4), 501(r)(5), and
501(r)(6) all relate to a hospital facility’s
FAP or to individuals who are, or may
be, FAP-eligible. The proposed regula-
tions under section 501(r)(4) describe the
information that a hospital facility must
include in its FAP and the methods a hos-
pital facility must use to widely publicize
its FAP. They also describe what a hospi-
tal facility must include in its emergency
medical care policy. The proposed reg-
ulations under section 501(r)(5) describe
how a hospital facility determines the
maximum amounts (that is, the amounts
generally billed to individuals who have
insurance coverage, or AGB) it can charge
FAP-eligible individuals for emergency
and other medically necessary care. In the
case of an individual who is FAP-eligible
but has not applied for financial assistance
at the time charges are made, the proposed
regulations provide that a hospital facility
will not fail to satisfy section 501(r)(5) if
it charges the individual more than AGB,
provided the hospital facility is comply-
ing with all the requirements regarding
notifying individuals about the FAP and
responding to applications submitted, in-
cluding correcting the amount charged and
seeking to reverse any ECA previously
initiated if an individual is later found to
be FAP-eligible.
The proposed regulations under section
501(r)(6) describe the actions that are con-
sidered “extraordinary collection actions”
and the “reasonable efforts” a hospital fa-
cility must make to determine FAP-eligi-
bilitybeforeengaginginsuchactions. In
general, to have made reasonable efforts
under the proposed regulations, a hospi-
tal facility must determine whether an indi-
vidual is FAP-eligible or provide required
notices during a notification period end-
ing 120 days after the date of the first
billing statement. Although a hospital fa-
cility may undertake extraordinary collec-
tion actions after this 120-day notification
2012–32 I.R.B.127August 6, 2012

period, a hospital facility that has not de-
termined whether an individual is FAP-el-
igible must still accept and process a FAP
application from the individual for an ad-
ditional 120 days. Accordingly, the to-
tal period during which a hospital facil-
ity must accept and process FAP applica-
tions is 240 days from the date of the first
billing statement. If a hospital facility re-
ceives a FAP application during the appli-
cation period, it must suspend any ECAs it
has started until it has processed the appli-
cation and, if it determines the individual
is FAP-eligible, must seek to reverse the
ECAsandpromptlyrefundanyoverpaid
amounts. While debts may be referred to
third parties to assist with collection ac-
tions at any time, including during the ini-
tial 120-day notification period, they may
not be sold to third parties during the noti-
fication period unless and until an eligibil-
ity determination has been made.
These proposed regulations also pro-
vide guidance on which entities must
meet the requirements described in section
501(r)(4) through 501(r)(6). In partic-
ular, the proposed regulations contain a
definitions section that defines “hospi-
tal organization,” “hospital facility,” and
other key terms used in the regulations.
In crafting proposed regulations to im-
plement these interrelated statutory pro-
visions, the Treasury Department and the
IRS sought to ensure that patients who may
require financial assistance — and the pa-
tient advocacy groups that assist them —
will have access to the information about
a hospital facility’s FAP that the patients
need in order to effectively seek financial
assistance under the FAP. The Treasury
Department and the IRS also sought to pre-
serve hospital facilities’ flexibility to de-
termine the best way to meet the particular
health needs of the specific communities
they serve. Neither the statute nor these
proposed regulations establish specific el-
igibility criteria that a FAP must contain.
Moreover, aside from prohibiting hospital
facilities from charging FAP-eligible indi-
viduals more than AGB, neither the statute
nor the proposed regulations dictate the
amounts or kinds of financial assistance
that a FAP must provide.
As discussed further in this Explanation
of Provisions, these proposed regulations
do not provide guidance on the CHNA re-
quirements described in section 501(r)(3)
or on the consequences described in sec-
tions 501(r)(1) and 501(r)(2)(B) for failing
to satisfy the section 501(r) requirements.
The Treasury Department and the IRS in-
tend to issue additional proposed regula-
tions addressing the CHNA requirements
and the consequences for failing to sat-
isfy the section 501(r) requirements and re-
sponding to the comments received in re-
sponse to Notice 2011–52.
1.Hospital Facilities and Organizations
a.Hospital Facilities
Because section 501(r)(2)(B) requires a
hospital organization to satisfy the require-
ments of section 501(r) separately with re-
spect to each hospital facility it operates,
a number of commenters requested a defi-
nition of “hospital facility.” In accordance
with section 501(r)(2)(A)(i), the proposed
regulations define a hospital facility as a
facility that is required by a state to be li-
censed, registered, or similarly recognized
as a hospital. Except as otherwise pro-
vided in future published guidance, a hos-
pital organization may treat multiple build-
ings operated under a single state license as
a single hospital facility. Future published
guidance also will address whether a hos-
pital organization’s operations in a single
building under more than one state license
are treated as one or multiple hospital fa-
cilities.
The proposed regulations refer to hos-
pital facilities taking certain actions. Such
references are intended to include in-
stances in which the hospital organization
operating the hospital facility takes action
through, or on behalf of, the hospital fa-
cility.
b.Hospital Organizations
In accordance with section
501(r)(2)(A)(i), the proposed regulations
provide that a hospital organization
includes any organization recognized (or
seeking to be recognized) as described
in section 501(c)(3) that operates one or
more hospital facilities.
Section 501(r)(2)(A)(ii) provides that
a hospital organization also includes any
other organization that the Secretary de-
termines has the provision of hospital
care as its principal function or purpose
constituting the basis for its exemption
under section 501(c)(3). These proposed
regulations do not include a determination
that any other categories of organizations
or facilities have the provision of hospital
care as their principal function or purpose,
but comments are requested regarding
whether additional organizations should
be included. Moreover, the Treasury De-
partment and the IRS intend that any future
regulations regarding any such categories
of organizations or facilities will apply
only prospectively, after an opportunity
for notice and comment. Prior to the ef-
fective date of any such future regulations,
only organizations operating a facility re-
quired by a state to be licensed, registered,
or similarly recognized as a hospital will
be considered “hospital organizations”
that must satisfy the requirements under
section 501(r).
c.Hospital Facilities Located Outside of
the United States
A number of commenters asked
whethersection501(r)willapplytoan
organization as a result of its operating
a hospital facility located outside of the
United States. The proposed regulations
provide that, for purposes of determining
whether a facility is required by a state
to be licensed, registered, or similarly
recognized as a hospital, the term “state”
includes only the 50 states and the District
of Columbia, and not any U.S. territory
or foreign country. As a result, a facility
located outside of the United States will
not be considered a hospital facility under
these proposed regulations. Thus, pend-
ing any future guidance regarding other
categories of hospital organizations or fa-
cilities, a hospital organization operating
a facility located outside of the United
States that is not required to be licensed by
any State will not be required to meet the
section 501(r) requirements with respect
to that facility and an organization will not
be considered a hospital organization as a
result of operating such a facility.
d.Operating Hospital Facilities Through
Partnerships or Disregarded Entities
Notice 2011–52 notes that the Treasury
Department and the IRS intend to include
within the definition of “hospital organi-
zation” any organization described in sec-
tion 501(c)(3) that operates a hospital fa-
cility through a disregarded entity, or a
joint venture, limited liability company, or
August 6, 20121282012–32 I.R.B.

other entity treated asa partnership for fed-
eral tax purposes. Notice 2011–52 also re-
quested comments regarding whether (or
under what circumstances) an organiza-
tion should not be considered to “operate”
a hospital facility for purposes of section
501(r) as a result of its owning a small in-
terest (other than a general partner or simi-
lar interest) in an entity treated as a partner-
ship for federal tax purposes that operates
the hospital facility.
The proposed regulations provide that
a hospital organization includes any or-
ganization that operates a hospital facility
through a disregarded entity. The Trea-
sury Department and the IRS are consid-
ering the comments received in response
to Notice 2011–52 regarding the operation
of hospital facilitiesthrough partnerships
and will address this issue in separate guid-
ance.
e.Government Hospital Organizations
A number of commenters requested that
the Treasury Department and the IRS pro-
vide an exception from the requirements
imposed by section 501(r) for certain gov-
ernment hospital organizations. For exam-
ple, some commenters suggested that the
requirements of section 501(r) should not
apply to a hospital organization that ex-
cludes its income from gross income un-
der section 115 but has nonetheless ap-
plied for and received recognition as an or-
ganization described in section 501(c)(3).
Other commenters suggested that the sec-
tion 501(r) requirements should not apply
to any hospital organization that is a gov-
ernmental unit or an affiliate of a govern-
mental unit as described in Rev. Proc.
95–48, 1995–2 C.B. 418 (relieving such
organizations from the annual filing re-
quirement under section 6033).
The statutory language of section 501(r)
applies to all hospital organizations that
are (or seek to be) recognized as described
in section 501(c)(3). Section 501(r) does
not explicitly address government hospi-
tal organizations, nor does it include a spe-
cific exception for government hospital or-
ganizations. Accordingly, as indicated in
Notice 2011–52, the Treasury Department
and the IRS intend to apply section 501(r)
to every hospital organization that has been
recognized (or seeks recognition) as an or-
ganization described in section 501(c)(3).
As a result, the proposed regulations do not
contain any exceptions or special rules for
government hospital organizations and are
intended to apply to any government hos-
pital organization recognized as described
in section 501(c)(3). However, in recogni-
tion of the unique position of government
hospitals, the Treasury Department and the
IRS request comments regarding alterna-
tive methods a government hospital may
use to satisfy the requirements of section
501(r)(4) through 501(r)(6).
2.Failures To Satisfy the Requirements of
Section 501(r)
Numerous commenters requested guid-
ance on the consequences of failing to
meet one or more of the requirements of
section 501(r). The Treasury Department
and the IRS are continuing to consider
comments regarding the consequences of
failing to meet the requirements of section
501(r) and will address this issue in sepa-
rate guidance.
3.Community Health Needs Assessments
As described in the Background sec-
tion of this preamble, the comment period
for Notice 2011–52, which solicited com-
ments on anticipated regulatory provisions
regarding the CHNA requirements, closed
on September 23, 2011. The Treasury
Department and the IRS are considering
the comments received in response to No-
tice 2011–52 and will address the CHNA
requirements in separate guidance. Ac-
cordingly, these proposed regulations do
not provide further guidance regarding the
CHNA requirements. Hospital organiza-
tions may continue to rely on the antic-
ipated regulatory provisions described in
Notice 2011–52 with respect to any CHNA
made widely available to the public, and
any implementation strategy adopted, un-
til six months after the date further guid-
ance regarding the CHNA requirements is
issued.
4.Financial Assistance Policies and
Emergency Medical Care Policies
In accordance with the statute, the pro-
posed regulations require hospital organi-
zations to establish written FAPs as well as
written emergency medical care policies.
a.Financial Assistance Policies
The proposed regulations provide that
a hospital organization meets the require-
ments of section 501(r)(4)(A) with respect
to a hospital facility it operates if the hospi-
tal organization establishes for that hospi-
tal facility a written FAP that applies to, at
a minimum, all emergency and other med-
ically necessary care provided by the hos-
pital facility.
In general, a hospital facility’s FAP
must include: (1) Eligibility criteria for fi-
nancial assistance, and whether such assis-
tance includes free or discounted care; (2)
the basis for calculating amounts charged
to patients; (3) the method for applying for
financial assistance; (4) in the case of an
organization that does not have a separate
billing and collections policy, the actions
the organization may take in the event of
nonpayment; and (5) measures to widely
publicize the FAP within the community
served by the hospital facility.
While the FAP itself must generally in-
clude each of these items of information
andmustbemadeavailableonaWebsite
and without charge upon request in pub-
lic locations in the hospital facility and by
mail, the proposed regulations otherwise
permit a hospital facility to widely publi-
cize its FAP using summaries that do not
contain all of the information in the FAP.
In addition, the Treasury Department and
the IRS recognize that certain details re-
lated to the FAP are likely to change reg-
ularly and that it may be inefficient in cer-
tain circumstances for a hospital facility to
have to update its FAP to reflect every such
change. As a result, the proposed regula-
tions give hospital facilities the option of
providing certain information separately
from the FAP, as long as the FAP explains
how members of the public can readily ob-
tain this information free of charge on a
Web site and in writing.
i. Eligibility Criteria and Basis for
Calculating Amounts Charged to Patients
A few commenters noted that section
501(r)(4) does not appear to mandate that
FAPs contain any particular eligibility cri-
teria and asked that hospital facilities be
given the flexibility to develop FAP eligi-
bility criteria that respond to local needs.
Other commenters asked the Treasury De-
partment and the IRS to require all FAPs
2012–32 I.R.B.129August 6, 2012

to include certain minimum eligibility cri-
teria.
Consistent with the statute, the pro-
posed regulations do not mandate any
particular eligibility criteria and require
only that a FAP specify the financial assis-
tance, including all discounts and free care,
available under the FAP and all of the spe-
cific eligibility criteria that an individual
must satisfy to receive each such discount,
free care, or other level of assistance. If
applicable, a FAP must also specify the
amounts, such as gross charges, to which
any discount percentages specified in the
FAP will be applied.
At least one commenter recommended
that hospital facilities be required to con-
sult with members of the community,
including representatives of vulnerable or
disadvantaged community members, as
they develop or revise their FAPs. Al-
though the proposed regulations do not
include such a requirement, the Treasury
Department and the IRS are considering
the potential link between the needs of
a hospital facility’s community, as deter-
mined through the hospital facility’s most
recent CHNA, and a hospital facility’s
FAP. Comments are requested on this is-
sue.
In addition,because section
501(r)(5)(A) requires a hospital facility to
limit amounts charged for emergency or
other medically necessary care provided
to FAP-eligible individuals to not more
than the amounts generally billed to
individuals who have insurance covering
such care (AGB), the proposed regulations
require the FAP to state that following
a determination of FAP-eligibility, an
individual will not be charged more than
AGB for emergency or other medically
necessary care.
The FAP must also state which of the
permitted methods (described in the sec-
tion of this preamble on Limitation on
Charges) the hospital facility uses to deter-
mine AGB. Finally, if applicable, the FAP
must either state the percentage(s) of gross
charges the hospital facility applies to
determine AGB (the AGB percentage(s))
and how these AGB percentage(s) were
calculated or explain how members of the
public may readily obtain this information
in writing and free of charge.
ii. Method for Applying for Financial
Assistance
Section 501(r)(4)(A)(iii) requires a hos-
pital facility’s FAP to include the method
for applying for financial assistance under
the FAP. Accordingly, the proposed regu-
lations require a hospital facility’s FAP to
describe how an individual may apply for
financial assistance under the FAP. In ad-
dition, either the hospital facility’s FAP or
FAP application form (including accompa-
nying instructions) must describe the infor-
mation or documentation the hospital fa-
cility may require an individual to submit
as part of his or her FAP application and
provide certain contact information that an
individual can use to obtain assistance with
the FAP application process. Financial as-
sistance may not be denied based on the
omission of information or documentation
if such information or documentation is
not specifically required by the FAP or
FAP application form.
iii. Actions That May Be Taken in the
Event of Nonpayment
Section 501(r)(4)(A)(iv) requires a hos-
pital facility that does not have a sepa-
rate billing and collections policy to de-
scribe in the FAP the actions the hospital
facility may take in the event of nonpay-
ment. The statute does not define what it
means for a hospital facility to have a sep-
arate billing and collections policy. The
Treasury Department and the IRS propose
to define the term “billing and collections
policy” as a separate written policy that de-
scribes the actions a hospital facility may
take in the event of nonpayment in a man-
ner that would be sufficient to satisfy sec-
tion 501(r)(4)(A)(iv) if the hospital facil-
ity had chosen to include the description in
its FAP. The Treasury Department and the
IRS also propose to define the term “ac-
tions a hospital organization may take in
the event of nonpayment” to include any
extraordinary collection actions described
in section 501(r)(6) that a hospital organi-
zation may take only after making reason-
able efforts to determine whether an indi-
vidual is FAP-eligible.
Accordingly, to implement the require-
ment under section 501(r)(4)(A)(iv), the
proposed regulations require either the
FAP, or a separate written billing and col-
lections policy, to describe the actions that
the hospital facility (or other authorized
party) may take related to obtaining pay-
ment of a bill for medical care provided
by the facility, including, but not limited
to, any extraordinary collection actions
described in section 501(r)(6). Either the
FAP or billing and collections policy must
also describe the process and time frames
the hospital facility (or other authorized
party) will use in taking these actions,
including any reasonable efforts to deter-
mine whether an individual is FAP-eligible
described in section 501(r)(6). In addition,
the FAP or billing and collections pol-
icy must describe the office, department,
committee, or other body with the final
authority or responsibility for determining
that the hospital facility has made rea-
sonable efforts to determine whether an
individual is FAP-eligible and may there-
fore engage in extraordinary collection
actions against the individual.
In the case of a hospital facility that ful-
fills these requirements in a separate writ-
ten billing and collections policy rather
than in the FAP, the proposed regulations
require the hospital facility’s FAP to state
that the actions the hospital facility may
take in the event of nonpayment are de-
scribed in a separate billing and collections
policy and explain how members of the
public may readily obtain a free copy of
this separate policy both on a Web site and
upon request.
iv. Widely Publicizing the FAP
In accordance with section
501(r)(4)(A)(v), the proposed regulations
require a FAP to include measures to
widely publicize the FAP. One commenter
asked that “widely publicize” be defined
by example but that it not be defined too
narrowly or prescriptively because hos-
pital facilities need flexibility to address
their particular circumstances. Other
commenters recommended requiring use
of one or a combination of the following
specific measures to widely publicize a
FAP:
•Posting information on the hospital fa-
cility’s Web site;
•Distributing information at the hospital
facility’s patient access points;
•Notifying patients upon admission;
•Distributing information with dis-
charge materials;
August 6, 20121302012–32 I.R.B.

•Posting information conspicuously in
public areas of the hospital facility (in-
cluding admissions areas, emergency
rooms, waiting rooms, billing offices,
outpatient reception areas, etc.);
•Including information with or on
billing statements;
•Mentioning the FAP when discussing
an individual’s bill over the telephone;
•Making the FAP available for pub-
lic inspection and/or copying without
charge at the hospital facility’s prin-
cipal, regional, and district offices
during regular business hours;
•Publicizing the FAP to physicians and
community health centers in the com-
munity;
•Including information regarding the
FAP in hospital newsletters or maga-
zines;
•Including information regarding the
FAP in appropriate reports filed with
state governments;
•Publicizing the FAP through local
news media; and/or
•Publicizing the FAP through social ser-
vice agencies.
In addition, several commenters asked
that hospital facilities be allowed to pub-
licize a summary of the FAP instead of
the FAP itself. According to these com-
menters, summaries of a FAP are often
more easily understood by members of the
public. Some commenters also asked that
such summaries of the FAP, or the FAP
itself, be translated into languages spo-
ken by a significant part of the community
served by the hospital facility.
The proposed regulations require a FAP
to include four types of measures that the
hospital facility will take to widely publi-
cize the FAP. Hospital facilities have the
option of summarizing these measures in
the FAP itself or explaining in the FAP how
members of the public may readily obtain
a free written summary of these measures.
First, the FAP must include measures
the hospital facility will take to make pa-
per copies of the FAP, the FAP application
form, and a plain language summary of
the FAP available upon request and with-
out charge, both for distribution in public
locations in the hospital facility and by
mail. Each of these documents must be
made available in English and in the pri-
mary language of any populations with
limited proficiency in English that consti-
tute more than 10 percent of the residents
of the community served by the hospital
facility. A similar 10 percent threshold
is used in certain state laws requiring no-
tification about financial assistance, as
well as certain federal regulations requir-
ing notices or summaries to be issued in
non-English languages. See, for example,
26 CFR 54.9815–2719T(e)(3); 29 CFR
2520.102–2(c)(2); 45 CFR 147.136(e)(3).
Second, the FAP must include measures
the hospital facility will take to inform and
notify visitors to the hospital facility about
the FAP through a conspicuous public dis-
play or other measure(s) reasonably calcu-
lated to attract the attention of visitors to
the hospital facility. Such measures could
include, for example, conspicuously post-
ing signs and displaying brochures that
provide basic information about the FAP
in public locations in the hospital facility.
Third, the FAP must include measures
the hospital facility will take to inform and
notify members of the community served
by the hospital facility about the FAP in
a manner reasonably calculated to reach
those members of the community who are
most likely to require financial assistance.
Such measures could include, for exam-
ple, the distribution of information sheets
summarizing the FAP to local public agen-
cies and nonprofit organizations that ad-
dress the health needs of the community’s
low-income populations.
For purposes of these proposed regula-
tions, “informing and notifying” hospital
visitors and community members about a
FAP does not require a hospital facility to
provide these individuals with the FAP or
all of the information in the FAP. Rather,
provision of a summary of the FAP or no-
tification of the FAP’s existence, combined
with instructions on how to obtain more in-
formation about the FAP, will suffice.
The proposed regulations also make
clear that whether a measure is reasonably
calculated to attract visitors’ attention or
reach members of the community likely to
require financial assistance will depend on
all of the facts and circumstances, includ-
ing the primary languages spoken by the
residents of the community served by the
hospital facility and other attributes of the
community and the hospital facility.
Finally, the FAP must include measures
the hospital facility will take to make the
FAP, FAP application form, and a plain
language summary of the FAP widely
available on the hospital facility or hos-
pital organization’s Web site or on a Web
site established and maintained by another
entity. The hospital facility must conspic-
uously post complete and current versions
of these documents, both in English and in
the primary language of any populations
with limited proficiency in English that
constitute more than 10 percent of the
residents of the community served by the
hospital facility.
In addition, any individual with access
to the Internet must be able to access,
download, view, and print a hard copy of
these documents, without requiring spe-
cial computer hardware or software (other
than software that is readily available to
members of the public without payment of
any fee) and without payment of a fee to
the hospital facility, hospital organization,
or other entity maintaining the Web site.
Finally, the hospital facility or hospital
organization must provide any individual
who asks how to access a copy of the FAP,
FAP application form, or plain language
summary of the FAP online with the direct
Web site address, or URL, where these
documents are posted.
b.Emergency Medical Care Policy
A number of commenters opined that
the requirement under section 501(r)(4)(B)
that a hospital facility establish an emer-
gency medical care policy is intended
to reflect existing federal law under the
Emergency Medical Treatment and Labor
Act (EMTALA) and is not intended to
create any new requirements other than
to set forth pre-existing obligations under
federal law in a written policy.
To satisfy the requirements of section
501(r)(4)(B), the proposed regulations
provide that a hospital facility must es-
tablish a written policy that requires the
hospital facility to provide, without dis-
crimination, care for emergency med-
ical conditions (within the meaning of
EMTALA) to individuals, regardless of
whether they are FAP-eligible. The pro-
posed regulations further provide that an
emergency medical care policy will gen-
erally satisfy this standard if it requires
the hospital facility to provide the care
for any emergency medical condition that
the hospital facility is required to provide
under Subchapter G of Chapter IV of Title
42 of the Code of Federal Regulations,
2012–32 I.R.B.131August 6, 2012

the subchapter regarding the Centers for
Medicare and Medicaid Services’ stan-
dards and certification and including the
regulations under EMTALA.
Any hospital policy or procedure
that discourages individuals from seek-
ing emergency medical care, such as
demanding that emergency department
patients pay before receiving treat-
ment or permitting debt collection ac-
tivities in the emergency department,
may jeopardize a hospital facility’s
compliance with EMTALA and with
the requirement under 501(r)(4)(B) to
establish a nondiscriminatory emergency
medical care policy. Accordingly, the
proposed regulations provide that unless
a hospital facility’s emergency medical
care policy prohibits debt collection
activities from occurring in the emergency
department or in other hospital venues
where such activities could interfere
with the treatment of emergency medical
conditions without discrimination, the
hospital facility’s policy will not meet the
requirements of section 501(r)(4)(B).
c.Establishing the FAP and Other
Policies
The proposed regulations provide that a
hospital organization will have established
a FAP, a separate billing and collections
policy, or an emergency medical care pol-
icy for a hospital facility only if an au-
thorized body of the hospital organization
has adopted the policy for the hospital fa-
cility and the hospital facility has imple-
mented the policy. For these purposes,
an authorized body of a hospital organi-
zation means: (1) Thehospital organiza-
tion’s governing body (that is, the board
of directors, board of trustees, or equiva-
lent controlling body); (2) a committee of
the governing body that is permitted under
state law to act on behalf of the governing
body; or (3) other parties authorized by the
governing body of the hospital organiza-
tion to act on its behalf (such as, for exam-
ple, one or more executives of the hospi-
tal facility), to the extent permitted under
state law. In the case of a hospital facility
(operated by a hospital organization) that
is recognized as an entity under state law
but is a disregarded entity for federal tax
purposes, an authorized body of the hospi-
tal organization may also include the gov-
erning body of that hospital facility or a
committee of, or other parties authorized
by, that governing body, as permitted un-
der state law.
A hospital facility has implemented a
policy if it has consistently carried out the
policy.
One commenter asked whether, for pur-
poses of complying with section 501(r)(4),
a policy established for a system of multi-
ple hospital facilities will qualify as a pol-
icy for each hospital facility in the sys-
tem. The proposed regulations provide
that, while a hospital organization operat-
ing multiple hospital facilities must sepa-
rately establish a FAP and emergency med-
ical care policy for each hospital facil-
ity it operates, such policies may contain
the same operative terms. The proposed
regulations do note, however, that differ-
ent AGB percentages and methods of de-
termining AGB and the unique attributes
of a hospital facility or the community it
serves could necessitate that hospital fa-
cilities include in their FAPs (or other-
wise make available) different information
about AGB or different measures to widely
publicize the FAP. For example, if a hospi-
tal organization operates two hospital fa-
cilities, only the first of which serves a
community that includes a population with
limited proficiency in English that consti-
tutes more than 10 percent of the commu-
nity’s residents, only the first hospital fa-
cility must include in its FAP (or otherwise
make available a summary of) measures
to widely publicize the FAP in a language
other than English.
5.Limitation on Charges
The proposed regulations provide that
a hospital organization meets the require-
ments of section 501(r)(5) with respect to
a hospital facility it operates if the hospi-
tal facility limits the amount charged for
any emergency or other medically neces-
sary care it provides to a FAP-eligible in-
dividual to not more than the amounts gen-
erally billed to individuals with insurance
covering that care (AGB). The proposed
regulations also require a hospital facility
to limit the amount charged for any med-
ical care it provides to a FAP-eligible in-
dividual to less than the gross charges for
that care.
a.Amounts Generally Billed
In discussing methods to determine
AGB, numerous commenters pointed to
the Joint Committee on Taxation’s (JCT)
statement in the Technical Explanation
of the Affordable Care Act that “[i]t is
intended that amounts billed to those who
qualify for financial assistance may be
based on either the best, or an average
of the three best, negotiated commercial
rates, or Medicare rates.” Staff of the
Joint Committee on Taxation, Technical
Explanation of the Revenue Provisions
of the “Reconciliation Act of 2010,” as
Amended, in Combination with the “Pa-
tient Protection and Affordable Care Act”
(March 21, 2010), at 82 (Technical Expla-
nation). A few commenters recommended
requiring hospital facilities to use Medi-
care rates in determining AGB, while
at least one commenter requested that
hospital facilities not be required to use
Medicare rates. Numerous commenters
asked that hospital facilities be permitted
to determine AGB by applying an average
percentage of gross charges that commer-
cial insurers and the patients they cover
are, together, expected to pay.
A number of commenters recom-
mended that AGB should be determined
at least annually, and a few commenters
asked that AGB be calculated based on
past claims paid by commercial insur-
ers, such as claims paid over the last six
months or over the prior year. In addition,
several commenters asked that hospital
facilities be permitted to make separate
AGB determinations for inpatient and out-
patient services.
The proposed regulations provide two
methods for hospital facilities to use to de-
termine AGB. The first method is a “look-
back” method based on actual past claims
paid to the hospital facility by either Medi-
care fee-for-service only or Medicare fee-
for-service together with all private health
insurers paying claims to the hospital facil-
ity (including, in each case, any associated
portions of these claims paid by Medicare
beneficiaries or insured individuals).
The Treasury Department and the IRS
believe that the three “best” commercial
rates may be difficult to determine because
different commercial insurers may negoti-
ate the lowest rates for different items and
services. Basing AGB on the claims paid
by all private health insurers and Medi-
August 6, 20121322012–32 I.R.B.

care avoids this difficulty by eliminating
the need to determine which private health
insurers have the lowest rates. Although
such an approach allows a hospital facility
to include the higher rates paid by health
insurers that are not the lowest (or three
lowest), it also requires the hospital facility
to include the rates paid by Medicare. In
addition, basing AGB on the claims paid
by all private health insurers and Medi-
care is arguably more consistent with the
statutory phrase “amounts generally billed
to individuals who have insurance” than
basing AGB only on claims paid by those
private health insurers with the lowest, or
three lowest, rates. However, the Trea-
sury Department and the IRS request com-
ments regarding whether hospital facilities
shouldalsohavetheoptionofbasingAGB
on claims paid by the private health insurer
with the lowest rate or by the three private
health insurers with the three lowest rates,
and how the lowest rate(s) should be de-
termined. The Treasury Department and
the IRS also request comments regarding
whether hospital facilities should have the
option of basing AGB on claims paid by
all private health insurers paying claims to
the hospital facility, without also including
claims paid by Medicare.
The second method for determining
AGB is “prospective,” in that it requires
the hospital facility to estimate the amount
it would be paid by Medicare and a Medi-
care beneficiary for the emergency or other
medically necessary care at issue if the
FAP-eligible individual were a Medicare
fee-for-service beneficiary. This prospec-
tive method is based only on Medicare
because the Treasury Department and the
IRS expect that such a method is only
administrable if based on a single in-
surer’s billing and coding processes. The
Treasury Department and the IRS request
comments regarding whether a hospital
facility should also have the option of
determining AGB prospectively by es-
timating the amount the facility would
charge the insured individual and the pri-
vate health insurer with the lowest rate (or
the insured individuals and three private
health insurers with the three lowest rates).
These two methods of determining
AGB are mutually exclusive, and a hos-
pital facility may use only one method
to determine AGB. After choosing a par-
ticular method, a hospital facility must
continue to use that method. The Treasury
Department and the IRS request comments
on whether a hospital facility should be
allowed to change its method of calcu-
lating AGB under certain circumstances
or following a certain period of time and,
if so, under what circumstances or how
frequently.
Several commenters asked whether
Medicare Advantage should be included
in the determination of AGB. The pro-
posed regulations clarify that for purposes
of determining AGB, amounts paid under
“Medicare” only include amounts paid
under “Medicare fee-for-service,” which
is defined as including only Medicare Part
A and Part B and excluding Medicare Ad-
vantage (or Medicare Part C). For purposes
of the proposed regulations, claims paid
under Medicare Advantage are treated as
claims paid by a private health insurer.
Finally, a number of commenters rec-
ommended that in states that require spe-
cific discounts or otherwise control the
amount that may be billed to patients with
financial need, those requirements should
establish AGB. Given the wide variation
among state laws and the advantage of
uniformity in applying the federal rules,
the Treasury Department and the IRS are
proposing to adopt a single federal regula-
tory definition of AGB.
i. Look-Back Method
Under the look-back method for de-
termining AGB, a hospital facility must
determine AGB for any emergency or
other medically necessary care provided to
a FAP-eligible individual by multiplying
the gross charges for that care by one or
more percentages of gross charges, called
AGB percentages. The hospital facility
must calculate its AGB percentage(s) no
less frequently than annually by divid-
ing the sum of certain claims paid to the
hospital facility by the sum of the associ-
ated gross charges for those claims. More
specifically, these AGB percentages must
be based on all claims that have been paid
in full to the hospital facility for emer-
gency and other medically necessary care
by either Medicare fee-for-service alone or
by Medicare fee-for-service and all private
health insurers together as the primary
payer(s) of these claims during a prior
12-month period. For these purposes, a
hospital facility may include in “all claims
that have been paid in full” both the por-
tions of the claims paid by Medicare or the
private insurer and the associated portions
of the claims paid by Medicare beneficia-
ries or insured individuals in the form of
co-insurance, copayments, or deductibles.
A hospital facility must begin applying its
AGB percentage(s) by the 45th day after
the end of the 12-month period the hos-
pital facility used in calculating the AGB
percentage(s).
The Treasury Department and the
IRS request comments regarding this
look-back method generally, and regarding
three aspects of this method in particular.
First, comments are requested regard-
ing whether a hospital facility using the
look-back method should have the option
to base its AGB percentage(s) on a rep-
resentative sample of claims (rather than
all claims) that have been paid in full over
a prior 12-month period. Specifically,
comments should address how a hospital
facility would ensure that such samples are
representative and reliable. Second, com-
ments are requested regarding whether a
hospital facility needs more than 45 days
between the end of the 12-month period
used in calculating the AGB percentage(s)
and the date it must begin applying the
AGB percentage(s). Third, comments are
requested regarding whether hospital fa-
cilities might significantly increase their
gross charges after calculating one or more
AGB percentages and whether such an in-
crease could mean that determining AGB
by multiplying current gross charges by an
AGB percentage will result in charges that
exceed the amounts that are in fact gener-
ally billed to those with insurance at the
time of the charges. If so, comments are
requested regarding whether safeguards
should be implemented to offset increases
in gross charges after the calculation of
the AGB percentage(s), including, for ex-
ample, requiring AGB to be determined
by applying an AGB percentage not to
current gross charges but rather to current
gross charges reduced by any percentage
increases in gross charges since the AGB
percentage was last calculated.
As previously noted, numerous com-
menters asked that hospital facilities be
permitted to determine AGB by applying
one average percentage of gross charges.
The proposed regulations provide that
a hospital facility using the look-back
method may calculate one average AGB
percentage for all emergency and other
2012–32 I.R.B.133August 6, 2012

medically necessary care provided by the
hospital facility. Alternatively, a hospital
facility may calculate multiple AGB per-
centages for separate categories of care
(such as inpatient and outpatient care or
care provided by different departments)
or for separate items or services, as long
as the hospital facility calculates AGB
percentages for all emergency and other
medically necessary care provided by the
hospital facility.
ii. Prospective Medicare Method
Under the prospective Medicare
method, a hospital facility may deter-
mine AGB for any emergency or other
medically necessary care that the hospital
facility provides to a FAP-eligible individ-
ual by using the same billing and coding
process the hospital facility would use if
the individual were a Medicare fee-for-ser-
vice beneficiary. The hospital facility may
then set AGB for that care at the amount
the hospital facility determines would be
the amount Medicare and the Medicare
beneficiary together would be expected to
pay for the care.
b.Gross Charges
Section 501(r)(5)(B) prohibits the use
of gross charges. The proposed regulations
define a gross charge (also known as the
“chargemaster rate”) as a hospital facility’s
full, established price for medical care that
the hospital facility consistently and uni-
formly charges all patients before applying
any contractual allowances, discounts, or
deductions.
A number of commenters recom-
mended that section 501(r)(5)(B)’s pro-
hibition on gross charges should apply
only to FAP-eligible individuals, noting
that such an interpretation is consistent
with the JCT’s statement in the Technical
Explanation that “[a] hospital facility may
not use gross charges * * * when billing
individuals who qualify for financial as-
sistance.” Technical Explanation, at 82.
The proposed regulations adopt this rec-
ommendation. The proposed regulations
also clarify that the prohibition on the use
of gross charges applies to any medical
care, not just emergency and medically
necessary care, provided to a FAP-eligible
individual.
Numerous commenters requested that
hospital facilities not be prohibited from
including the amount of gross charges
on a hospital bill as an explanatory item
or a starting point for itemizing certain
discounts. Commenters stated that this
practice is standard in the healthcare indus-
try and should not be affected by section
501(r)(5)(B). The proposed regulations
make clear that including the gross charges
on hospital bills as the starting point to
which various contractual allowances,
discounts, or deductions are applied is
permissible, as long as the gross charges
are not the actual amount a FAP-eligible
individual is expected to pay.
c.Safe Harbor for Certain Charges in
Excess of AGB
A number of commenters noted that if
an individual has yet to submit a FAP ap-
plication, a hospital facility will not know
at the time of initial and subsequent billing
whether the individual is FAP-eligible.
The proposed regulations provide that
whether an individual is FAP-eligible is
determined without regard to whether the
individual has applied for assistance under
a hospital facility’s FAP. However, the
proposed regulations also provide a safe
harbor under which a hospital facility will
not violate section 501(r)(5) if it charges
more than AGB for emergency or other
medically necessary care, or charges gross
charges for any medical care, to a FAP-el-
igible individual who has not submitted a
complete FAP application as of the time of
the charge, as long as the hospital facility
made and continues to make reasonable
efforts to determine whether the individ-
ual is FAP-eligible (within the meaning
of and during the periods required under
section 501(r)(6), including by correcting
the amount charged if the individual is
subsequently found to be FAP-eligible).
The Treasury Department and IRS request
comments regarding the proposed safe
harbor and whether the patient protections
provided in section 1.501(r)–6, including
the requirements that a hospital facility
refund amounts overcharged and seek to
reverse previously taken ECAs (except
sales of debts) once an individual has been
determined to be FAP-eligible, are suffi-
cient.
6.Billing and Collection
The proposed regulations provide that
a hospital organization meets the require-
ments of section 501(r)(6) with respect to
a hospital facility it operates if the hospital
facility does not engage in ECAs against
an individual before making reasonable ef-
forts to determine whether the individual is
FAP-eligible. For these purposes, a hospi-
tal facility will be considered to have en-
gaged in ECAs against an individual if the
hospital facility engages in ECAs against
any other individual who has accepted or
is required to accept responsibility for the
first individual’s hospital bills. In addi-
tion, a hospital facility will be considered
to have engaged in an ECA against an indi-
vidual if any purchaser of the individual’s
debt or any debt collection agency or other
party to which the hospital facility has re-
ferred the individual’s debt has engaged in
an ECA against the individual.
a.Extraordinary Collection Actions
In discussing the scope of the term “ex-
traordinary collection actions” (ECAs),
many commenters pointed to the JCT’s
statement in the Technical Explanation
that “extraordinary collections include
lawsuits, liens on residences, arrests, body
attachments, or other similar collection
processes.” Technical Explanation, at 82.
A number of these commenters argued
that ECAs should be limited to the exam-
ples listed in the Technical Explanation,
with the term “other similar collection
processes” being limited to actions that
must be initiated through a legal or judicial
process.
Other commenters recommended that
additional actions related to collections
should constitute ECAs or even be prohib-
ited altogether, including such actions as
deferring or denying care based on a pat-
tern of nonpayment, selling patient debts
to third parties, referring debts to debt
collection agencies, charging interest on
patient debts, and any other action beyond
sending a patient a bill. A number of com-
menters also recommended that reporting
to credit agencies should constitute ECAs
and pointed to the statement in the Tech-
nical Explanation that reasonable efforts
include certain actions before “report-
ing to credit rating agencies is initiated.”
Technical Explanation, at 82. In addition,
several commenters suggested that the ex-
press approval of a hospital organization’s
governing body should be required before
a hospital facility it operates is permitted
August 6, 20121342012–32 I.R.B.

to engage in such actions as wage garnish-
ment, freezing bank accounts, or placing
liens on patients’ homes or cars.
The proposed regulations state that
ECAs include any actions taken by a hos-
pital facility against an individual related
to obtaining payment of a bill for care cov-
ered under the hospital facility’s FAP that
require a legal or judicial process. ECAs
that require a legal or judicial process in-
clude, but are not limited to, actions to—
•Place a lien on an individual’s prop-
erty;
•Foreclose on an individual’s real prop-
erty;
•Attach or seize an individual’s bank
account or any other personal property;
•Commence a civil action against an in-
dividual;
•Cause an individual’s arrest;
•Cause an individual to be subject to a
writ of body attachment; and
•Garnish an individual’s wages.
In addition, the Treasury Department
and the IRS understand that the reporting
of adverse information about an individ-
ual to consumer credit reporting agencies
or credit bureaus is a part of the process
of obtaining payment of a hospital bill that
can cause significant financial harm to an
individual for many years. Reporting to
credit agencies is also an activity that is re-
stricted in some state laws governing debt
collection by hospitals. The proposed reg-
ulations provide that ECAs include report-
ingtocreditagencies.
The final action listed in the proposed
regulations as an ECA is the sale of an in-
dividual’s debt to another party. A num-
ber of commenters suggested that the pro-
posed regulations prohibit the sale of debt
altogether. Such a prohibition is contained
in at least one state law governing debt col-
lection by hospitals. The proposed reg-
ulations provide that the sale of debt is
an ECA because the Treasury Department
and the IRS understand that after a hos-
pital facility has sold a debt, it may have
a more limited ability to control the pur-
chaser’s actions to collect the debt. By
contrast, when a hospital facility refers an
individual’s debt to a debt collection agent
or other party without selling the debt (for
example, by entering into a contract under
which the other party conducts all of the
facility’s billing and collections activities
pursuant to the hospital facility’s billing
and collections policy), a hospital facil-
ity can presumably maintain greater con-
trol over its third party agent. As a re-
sult, the proposed regulations do not de-
fine ECAs to include referring an individ-
ual’s debt without selling it. The Treasury
Department and the IRS request comments
regarding whether a hospital facility can
maintain sufficient control over the collec-
tion actions of parties to which it refers or
sells debt and whether either referring debt
or selling debt (or both) should constitute
ECAs.
The proposed regulations do not de-
fine ECAs to include deferring or denying
care based on a pattern of nonpayment, re-
quiring deposits before providing care, or
charging interest, although policies allow-
ing certain of these actions may not satisfy
the emergency medical care policy provi-
sion noted in section 4.b of this preamble.
In addition, the Treasury Department and
the IRS understand that some state laws
restrict the degree to which hospitals can
engage in these activities and request ad-
ditional comments on whether such activ-
ities should constitute ECAs.
The proposed regulations also do not
require a hospital facility to obtain gov-
erning body approval before engaging in
ECAs. Comments are requested regarding
what additional procedural protections, if
any, may be appropriate as a part of the rea-
sonable efforts to determine FAP-eligibil-
ity that a hospital facility must make before
engaging in ECAs, discussed in the imme-
diately following section 6.b of this pream-
ble.
b.Reasonable Efforts
In discussing the scope of the term
“reasonable efforts,” many commenters
pointed to the JCT’s statement in the Tech-
nical Explanation that reasonable efforts
were intended to include “notification by
the hospital of its FAP upon admission and
in written and oral communications with
the patient regarding the patient’s bill,
including invoices and telephone calls.”
Technical Explanation, at 82. A few com-
menters recommended that providing one
written summary of a FAP in at least one
invoice mailed or otherwise provided to
an individual following the provision of
hospital services and prior to referring the
account to a collection agency should be
deemed to constitute “reasonable efforts”
to determine the individual’s FAP-eligi-
bility. Other commenters recommended
that a hospital facility be required to pro-
vide at least three notices about the FAP
(as well as contact information to request
additional information) and wait at least
120 days from the first notice or billing
statement before engaging in ECAs. One
commenter noted that hospitals have tra-
ditionally handled their receivables inter-
nally and then turned them over to col-
lections agencies after 120 days. Several
commenters suggested that individuals be
given more than 120 days, such as one
year, to apply for financial assistance.
The proposed regulations provide that,
with respect to any care provided by a hos-
pital facility to an individual, the hospi-
tal facility will have made reasonable ef-
forts to determine whether the individual
is FAP-eligible if the hospital facility: (1)
Notifies the individual about the FAP; (2)
in the case of an individual who submits
an incomplete FAP application, provides
the individual with information relevant to
completing the FAP application; and (3)
in the case of an individual who submits
a complete FAP application, makes and
documents a determination as to whether
the individual is FAP-eligible (and meets
certain other specified requirements de-
scribed later in this preamble).
For purposes of meeting these require-
ments, the proposed regulations describe
both a “notification period” and an “ap-
plication period.” The notification period
is the period during which the hospital fa-
cility must notify anindividual about the
FAP. Under the proposed regulations, this
period begins on the date care is provided
to the individual and ends on the 120th day
after the hospital facility provides the in-
dividual with the first billing statement for
the care. If a hospital facility has met all of
the notification requirements and the indi-
vidual has failed to submit a FAP applica-
tion by the end of the notification period,
the hospital facility may engage in ECAs
against the individual. However, a hospital
facility must accept and process FAP ap-
plications submitted by an individual dur-
ing a longer “application period” that ends
on the 240th day after the hospital facil-
ity provides the individual with the first
billing statement for the care. The Trea-
sury Department and the IRS have pro-
posed including both a shorter notification
2012–32 I.R.B.135August 6, 2012

period and a longer application period as a
way of balancing the individual’s need for
sufficient time to seek financial assistance
with the hospital facility’s interest in effi-
ciently carrying out its billing processes.
The Treasury Department and the IRS re-
quest comments regarding other possible
ways to achieve this balance.
The Treasury Department and the IRS
are proposing a notification period of 120
days from the first billing statement be-
cause a few commenters suggested that
hospital billing cycles are typically 45 days
and the Treasury Department and the IRS
intend that individuals will receive notice
about the FAP with at least three billing
statements and then have at least 30 days
after the third billing statement to apply
for financial assistance before ECAs are
initiated. In addition, a 120-day notifi-
cation period was selected because hos-
pitals are used to dealing with a 120-day
period in the context of deeming debts to
be bad debts under the Medicare program
and because such a period is consistent
with some state requirements or recom-
mendations to wait 120 days before tak-
ing such collection actions as commenc-
ing lawsuits, reporting to credit agencies,
orreferringtocollectionagencies. Simi-
larly, a 240-day period to apply for finan-
cial assistance is roughly in the middle of
the range of application periods required
under various state laws and recommended
by some commenters. The Treasury De-
partment and the IRS request comments
regarding the proposed lengths of the noti-
fication period and the application period
and/or whether it would be preferable to
have only one concurrent period.
Finally, the Treasury Department and
the IRS recognize that some inpatients
staying at a hospital facility for a pro-
longed period of time may start receiving
billing statements in the mail before be-
ing discharged. Comments are requested
regarding whether the notification and
application periods for such inpatients
should start on a date later than the date of
the first billing statement (such as the date
of discharge) and on the feasibility of this
and other approaches to addressing this
issue.
i. Notification About the FAP
To satisfy the notification component
of “reasonable efforts” with respect to any
care provided to an individual, the pro-
posed regulations require a hospital facil-
itytodistributeaplainlanguagesummary
of the FAP, and offer a FAP application
form, to the individual before discharge
from the hospital facility. A hospital facil-
ity must also include a plain language sum-
mary of the FAP with all (and at least three)
billing statements for the care and all other
written communications regarding the bill
provided to the individual during the no-
tification period. In addition, the hospital
facility must inform the individual about
the FAP in all oral communications regard-
ing the amount due for the care that occur
during the notification period. Finally, the
hospital facility must provide the individ-
ual with at least one written notice that in-
forms the individual about the ECAs the
hospital facility (or other authorized party)
may take if the individual does not submit
a FAP application or pay the amount due
by a date (specified in the notice) that is no
earlier than the last day of the notification
period. The hospital facility must provide
this written notice at least 30 days before
the deadline specified in the notice.
The proposed regulations define a
“plain language summary” of the FAP
as a written statement that notifies an in-
dividual that the hospital facility offers
financial assistance under a FAP and also
includes the following items of informa-
tion in language that is clear, concise, and
easy to understand:
•A brief description of the eligibility re-
quirements and assistance offered un-
der the FAP;
•The direct Web site address, or URL,
and physical location(s) where the in-
dividual can obtain copies of the FAP
and FAP application form;
•Instructions on how the individual can
obtainafreecopyoftheFAPandFAP
application form by mail;
•The contact information of hospital fa-
cility staff who can provide the individ-
ual with information about the FAP and
the FAP application process, as well as
of any nonprofit organizations or gov-
ernment agencies the hospital facility
has identified as capable and available
sources of assistance with FAP appli-
cations;
•A statement of the availability of trans-
lations of the FAP, FAP application
form, and plain language summary in
other languages, if applicable; and
•A statement that no FAP-eligible in-
dividual will be charged more for
emergency or other medically neces-
sary care than AGB.
The proposed regulations provide that
if an individual submits a complete or in-
complete FAP application to a hospital fa-
cility during the application period, the
hospital facility will be deemed to have
met the notification requirements with re-
spect to the individual as of the time the
FAP application is submitted. Thus, once
a hospital facility receives a FAP applica-
tion from an individual, the hospital fa-
cility no longer needs to continue notify-
ing that individual about the FAP. How-
ever, the submission of a FAP application
form during the application period triggers
other requirements that the hospital facil-
ity must satisfy to have made reasonable
efforts to determine whether the individual
is FAP-eligible, which are discussed in the
immediately following sections 6.b.ii and
6.b.iii of this preamble.
Many commenters noted that even
when a hospital facility makes reasonable
efforts to notify an individual about its
FAP and FAP application process, some
individuals will decline to apply for finan-
cial assistance under the FAP, leaving the
hospital facility without the information it
needs to determine FAP-eligibility. These
commenters asked that a hospital facility
not be foreclosed from initiating ECAs
when it makes reasonable efforts to notify
an individual about its FAP and the indi-
vidual does not respond.
The Treasury Department and the IRS
recognize that some FAP-eligible individ-
uals will not submit a FAP application,
notwithstanding a hospital facility’s efforts
to notify individuals about its FAP. As a re-
sult, the proposed regulations provide that,
with respect to any care provided to an in-
dividual, a hospital facility has made rea-
sonable efforts to determine whether the
individual is FAP-eligible if the hospital
facility meets, and documents that it met,
the notification component of reasonable
efforts and the individual does not submit
a FAP application by the end of the no-
tification period (or, if later, the deadline
specified by the hospital facility). Once
the hospital facility has made reasonable
efforts to determine whether an individ-
August 6, 20121362012–32 I.R.B.

ual is FAP-eligible as a result of notify-
ing the individual during the 120-day no-
tification period, it may engage in one or
more ECAs against the individual. How-
ever, even after a hospital facility is per-
mitted to engage in ECAs against an indi-
vidual, it must still process FAP applica-
tions submitted before the end of the appli-
cation period in order to have made reason-
able efforts to determine whether the indi-
vidual is FAP-eligible, as described in the
immediately following sections 6.b.ii and
6.b.iii of this preamble.
ii. Incomplete FAP Applications
The proposed regulations provide that if
an individual submits an incomplete FAP
application during theapplication period,
a hospital facility will have made reason-
able efforts to determine whether the indi-
vidual is FAP-eligibleonly if it takes three
steps. First, if applicable, the hospital fa-
cility must suspend any ECAs against the
individual (meaning it does not initiate any
new ECAs or take further action with re-
spect to previously-initiated ECAs). Sec-
ond, the hospital facility must provide the
individual with a written notice that de-
scribes the additional information and/or
documentation the individual must submit
to complete his or her FAP application
and include a plain language summary of
the FAP with the written notice. Third,
the hospital facility must provide the in-
dividual with at least one written notice
that informs the individual about the ECAs
that the hospital facility or other authorized
party may initiate or resume if the individ-
ual does not complete the application or
pay the amount due by a completion dead-
line (specified in the notice) that is no ear-
lier than the later of 30 days from the date
of the written notice or the last day of the
application period. The hospital facility
must provide this written notice regarding
ECAs at least 30 days before the comple-
tion deadline.
If a hospital facility provides this re-
quired information and suspends any
ECAs against the individual, and the
individual fails to complete the FAP ap-
plication by the completion deadline, the
hospital facility will have made reasonable
efforts to determine whether the individual
is FAP-eligible and thus may initiate or
resume ECAs against the individual.
If the individual completes the FAP ap-
plication by the completion deadline, the
proposed regulations provide that the indi-
vidual will be considered to have submit-
ted a complete FAP application during the
application period,and thus the require-
ments for complete FAP applications, dis-
cussed in the immediately following sec-
tion 6.b.iii of this preamble, apply.
The Treasury Department and IRS re-
quest comments on ways to encourage
timely completion of incomplete appli-
cations so that hospital facilities may
determine whether individuals are FAP-el-
igible while still providing individuals
with sufficient time to apply for financial
assistance.
iii. Complete FAP Applications
The proposed regulations provide that
if a hospital facility receives a complete
FAP application from an individual during
the application period, the hospital facility
will have made reasonable efforts to deter-
mine whether the individual is FAP-eligi-
ble only if it suspends any ECAs against
the individual, makes and documents an
eligibility determination in a timely man-
ner, and notifies the individual in writing
of the determination and the basis for the
determination. In addition, if the hospital
facility has determined that the individual
is FAP-eligible, the hospital facility must
take three additional steps in a timely man-
ner. First, it must provide the individual
with a billing statement that indicates the
amount the individual owes as a FAP-eligi-
ble individual. This billing statement must
also show—or describe how the individual
can get information regarding—the AGB
for the care provided and how the hospi-
tal facility determined the amount the in-
dividual owes as a FAP-eligible individ-
ual. Second, the hospital facility must re-
fund any excess payments made by the in-
dividual. Third, the hospital facility must
take all reasonably available measures to
reverse any ECA (with the exception of a
sale of debt) taken against the individual to
collect the debt at issue. Accordingly, the
hospital facility generally must take mea-
sures to vacate any judgment against the
individual, lift any liens or levies on the in-
dividual’s property, and remove from the
individual’s credit report any adverse in-
formation reported to a consumer report-
ing agency or credit bureau.
The Treasury Department and the IRS
request comments regarding the feasibility
of reversing various ECAs when the hospi-
tal facility determines that an individual is
FAP-eligible, including in circumstances
in which an individual’s debt has been re-
ferred or sold to another party.
As a general matter, once a hospital fa-
cility has taken all of the required steps af-
ter receiving a complete FAP application,
it has made reasonable efforts to determine
whether the individual is FAP-eligible and
thus may initiate or resume ECAs against
the individual. However, the proposed
regulations also containananti-abuserule
that provides that a hospital facility will
not have made reasonable efforts to deter-
mine whether an individual is FAP-eligi-
ble if the hospital facility bases a determi-
nation that the individual is not FAP-eligi-
ble on information the hospital facility has
reason to believe is unreliable or incorrect
or on information obtained from the indi-
vidual under duress or through the use of
coercive practices.
In addition, the proposed regulations
provide that a hospital facility has made
reasonable efforts to determine whether
an individual is FAP-eligible if it deter-
mines that the individual is eligible for the
most generous assistance available under
its FAP based on information other than
that provided by the individual as part of
a complete FAP application. For exam-
ple, a hospital facility could make reason-
able efforts by determining that an individ-
ual is eligible for the most generous assis-
tance offered under its FAP based on in-
formation establishing that the individual
is eligible for assistance under one or more
means-tested public programs.
The Treasury Department and the IRS
seek comments on how to provide addi-
tional flexibility under the regulations to
hospital facilitiesseeking to determine
whether an individual is FAP-eligible so
that the procedural protections provided
under section 501(r)(6) are respected
but do not unnecessarily interfere with
a hospital facility’s reasonable financial
management. Comments are requested
on how a hospital facility might reason-
ably determine whether an individual is
FAP-eligible in ways other than soliciting
and processing FAP applications.
Specifically, the Treasury Department
and the IRS understand that many indi-
viduals who are not FAP-eligible (for ex-
2012–32 I.R.B.137August 6, 2012

ample, because they are relatively affluent
and/or have adequate insurance coverage)
will never submit a complete FAP applica-
tion. A hospital facility may wish to make
a FAP-eligibility determination based on
reliable information early in the billing cy-
cle in order to avoid unwarranted inter-
ference with its routine billing practices
and to avoid the administrative burdens of
notifying these non-FAP-eligible individ-
uals about the FAP and tracking each in-
dividual’s notification and application pe-
riods. The Treasury Department and the
IRS request comments regarding whether,
and under what circumstances, a hospital
facility should be permitted to use reliable
information, other than that provided by
an individual with a complete FAP appli-
cation, to make a determination that the
individual is not FAP-eligible or is eli-
gible for assistance that is less than the
most generous assistance offered under the
FAP. Comments are also requested regard-
ing whether a hospital facility might be
able to rely on prior FAP-eligibility de-
terminations for a period of time to avoid
having to re-determine whether an indi-
vidual is FAP-eligible every time he or
she receives care. The Treasury Depart-
ment and the IRS request comments re-
garding what sources of information can
reliably and accurately be used to deter-
mine FAP-eligibility and whether hospital
facilities should therefore have the flexi-
bility to use such sources of information
rather than being limited to making deter-
minations based only on complete FAP ap-
plications.
iv. Agreements With Other Parties
The proposed regulations provide that if
a hospital facility refers or sells an individ-
ual’s debt to another party during the ap-
plication period, the hospital facility will
have made reasonable efforts to determine
whether the individual is FAP-eligible only
if it first obtains (and, to the extent appli-
cable, enforces) a legally binding written
agreement from the other party to abide
by certain requirements. First, a party
to which the individual’s debt is referred
during the notification period must agree
torefrainfromengaginginECAsagainst
the individual until the hospital facility
has made reasonable efforts to determine
whether the individual is FAP-eligible.
Second, if the individual submits a FAP
application during the application period,
the party must suspend any ECAs against
the individual untilthe hospital facility
has made reasonable efforts to determine
whether the individual is FAP-eligible.
Third, if the individual submits a FAP
application during theapplication period
and the hospital facility determines that
the individual is FAP-eligible, the party
must adhere to procedures specified in the
agreement that ensure that the FAP-eligi-
ble individual does not pay, and will have
no obligation to pay, the party and hospital
facility together more than he or she is re-
quired to pay as a FAP-eligible individual.
If the party, rather than the hospital facility,
has the authority to do so, the party must
also take all reasonably available measures
to reverse any ECA (with the exception of
a sale of debt) taken against the individual
to collect the debt at issue.
Fourth, if the party refers or sells the
debt to yet another party during the appli-
cation period, the party must obtain a writ-
ten agreement from theother party to abide
by the three previously-mentioned require-
ments.
The Treasury Department and the IRS
request comments regarding the feasibil-
ity of a hospital facility imposing these
requirements on the parties to which it
sells or refers debt by means of a written
agreement. In particular, comments are
requested regarding how the regulations
should balance the need to ensure that hos-
pital facilities satisfy the requirements of
section 501(r)(6) with the goal of avoiding
unnecessary disruptions and inefficiencies
in their billing processes.
v. Miscellaneous Issues
In order to ensure that individuals have
sufficient opportunity to consider whether
they might be eligible for assistance un-
der the hospital facility’s FAP, the pro-
posed regulations also provide that a hos-
pital facility will not have made reasonable
efforts to determine whether an individ-
ual is FAP-eligible simply because it ob-
tains a signed waiver from the individual.
Thus, a signed statement that the individ-
ual does not wish to apply for assistance
under the FAP or to receive certain notifi-
cations about the FAP will not constitute a
determination of FAP-eligibility or satisfy
the requirement to make reasonable efforts
to determine FAP-eligibility before engag-
ing in ECAs against the individual.
Finally, the proposed regulations pro-
vide that a hospital facility may print any
written notice or communication described
in this section 6 of the preamble, including
any plain language summary of the FAP,
on a billing statement or along with other
descriptive or explanatory matter, as long
as the required information is conspicu-
ously placed and of sufficient size to be
clearly readable.
Effective/Applicability Dates
Consistent with the statutory effective
date, the proposed regulations provide
that, except for the requirements of section
501(r)(3), section 501(r) applies to taxable
years beginning after March 23, 2010. The
requirements of section 501(r)(3) apply to
taxable years beginning after March 23,
2012.
The regulations under section 501(r)(4)
through 501(r)(6) are proposed to apply
for taxable years beginning on or after the
date these rules are published in theFed-
eral Registeras final or temporary regu-
lations. Taxpayers may rely on these pro-
posed regulations until final or temporary
regulations are issued. The Treasury De-
partment and the IRS invite comments on
whether, and what type of, transitional re-
lief may be necessary.
Availability of IRS Documents
IRS notices, revenue rulings, and rev-
enue procedures cited in this preamble are
made available by the Superintendent of
Documents, U.S. Government Printing Of-
fice, Washington, DC 20402.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a significant
regulatory action as defined in Executive
Order 12866, as supplemented by Execu-
tive Order 13563. Therefore, a regulatory
assessment is not required. It has also
been determined that section 553(b) of the
Administrative Procedure Act (5 U.S.C.
chapter 5) does not apply to this proposed
regulation. It is hereby certified that these
regulations will not have a significant
economic impact on a substantial number
of small entities. This certification is
based on the fact that the regulations
August 6, 20121382012–32 I.R.B.

are consistent with the requirements
imposed by statute and that the collection
of information in the regulation that is
subject to the Regulatory Flexibility Act
will impose a minimal burden upon the
affected organizations. Consistent with
the statute, the regulations require hospital
facilities to establish two written policies
— a financial assistance policy (FAP)
and an emergency medical care policy
— but much of the work involved in
putting such policies into writing need
only be performed once. Moreover, while
hospital facilities may need to periodically
modify these policies to reflect changed
circumstances, the proposed regulations
attempt to minimize that ongoing burden
by giving hospital facilities the option of
providing certain information separately
from the policy, as long as the policy
explains how members of the public
can readily obtain this information free
of charge. In addition, as a general
matter, the regulations describing how a
hospital facility makesreasonable efforts
to determine eligibility for assistance
under its FAP and widely publicizes its
FAP are designed to ensure that a hospital
facility can meet these requirements by
providing basic information about its
FAP using pre-existing processes (such
as the issuance of billing statements)
and resources (such as its Web site and
physician networks) in providing this
information. Thus, the collection of
information in this regulation that is
subject to the Regulatory Flexibility Act
will not impose a significant economic
burden upon the affected organizations.
Accordingly, a Regulatory Flexibility
Analysis under the Regulatory Flexibility
Act (5 U.S.C. chapter 6) is not required.
Pursuant to section 7805(f) of the Code,
this regulation has been submitted to the
Chief Counsel for Advocacy of the Small
Business Administration for comment on
its impact on small entities.
Comments and Requests for Public
Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any comments that are sub-
mitted timely to the IRS as prescribed in
this preamble under the “Addresses” head-
ing. The Treasury Department and the IRS
request comments on all aspects of the pro-
posed rules. All comments will be avail-
able atwww.regulations.govor upon re-
quest.
A public hearing will be scheduled if
requested in writing by any person that
timely submits written comments. If a
public hearing is scheduled, notice of the
date, time, and place for the public hearing
will be published in theFederal Register.
Drafting Information
The principal authors of these proposed
regulations are Preston J. Quesenberry and
Amber L. Mackenzie, Office of the Chief
Counsel (Tax-Exempt and Government
Entities). However, other personnel from
the Treasury Department and the IRS
participated in their development.
*****
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 1 is proposed
to be amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.501(r)–0 is added to
read as follows:
§ 1.501(r)–0. Outline of regulations.
This section lists the table of contents
for §§ 1.501(r)–1 through 1.501(r)–7.
§ 1.501(r)–1. Definitions.
(a) Application.
(b) Definitions.
(1) Amounts generally billed (AGB).
(2) AGB percentage.
(3) Application period.
(4) Billing and collections policy.
(5) Completion deadline.
(6) Disregarded entity.
(7) Emergency medical care.
(8) Emergency medical conditions.
(9) Extraordinary collection action
(ECA).
(10) Financial assistance policy (FAP).
(11) FAP application.
(12) FAP application form.
(13) FAP-eligible individual.
(14) Gross charges.
(15) Hospital facility.
(16) Hospital organization.
(17) Medicare fee-for-service.
(18) Notification period.
(19) Plain language summary.
(20) Primary payer.
(21) Private health insurer.
(22) Referring.
§ 1.501(r)–2. Failures to satisfy section
501(r) requirements.[Reserved]
§ 1.501(r)–3. Community health needs
assessments.[Reserved]
§ 1.501(r)–4. Financial assistance policy
and emergency medical care policy.
(a) In general.
(b) Financial assistance policy.
(1) In general.
(2) Eligibility criteria and basis for cal-
culating amounts charged to patients.
(3) Method for applying for financial
assistance.
(4) Actions that may be taken in the
event of nonpayment.
(5) Widely publicizing the FAP.
(6) Readily obtainable information.
(c) Emergency medical care policy.
(1) In general.
(2) Interference with provision of emer-
gency medical care.
(3) Relation to federal law governing
emergency care.
(4) Examples.
(d) Establishing the FAP and other poli-
cies.
(1) In general.
(2) Authorized body.
(3) Implementing a policy.
(4) Establishing a policy for more than
one hospital facility.
§ 1.501(r)–5. Limitation on charges.
(a) In general.
(b) Amounts generally billed.
(1) Look-back method.
(2) Prospective Medicare method.
(3) Examples.
(c) Gross charges.
(d) Safe harbor for certain charges in
excess of AGB.
§ 1.501(r)–6. Billing and collection.
(a) In general.
(b) Extraordinary collection actions.
(c) Reasonable efforts.
(1) In general.
2012–32 I.R.B.139August 6, 2012

(2) Notification.
(3) Incomplete FAP applications.
(4) Complete FAP applications.
(5) Suspending ECAs while a FAP ap-
plication is pending.
(6) Waiver does not constitute reason-
able efforts.
(7) Agreements with other parties.
(8) Clear and conspicuous placement.
§ 1.501(r)–7. Effective/applicability
dates.
(a) Statutory effective/applicability
date.
(1) In general.
(2) Community health needs assess-
ment.
(b) Effective/applicability date of regu-
lations.
Par. 3. Section 1.501(r)–1 is added to
read as follows:
§ 1.501(r)–1. Definitions.
(a)Application. The definitions set
forth in this section apply to §§ 1.501(r)–2
through 1.501(r)–7.
(b)Definitions—(1)Amounts generally
billed(AGB) means the amounts generally
billed for emergency or other medically
necessary care to individuals who have in-
surance covering such care, determined in
accordance with § 1.501(r)–5(b).
(2)AGB percentagemeans a percent-
age of gross charges that a hospital facil-
ity uses under § 1.501(r)–5(b)(1) to deter-
mine the AGB for any emergency or other
medically necessary care it provides to a
FAP-eligible individual.
(3)Application periodmeans the period
during which a hospital facility must ac-
cept and process an application for assis-
tance under its financial assistance policy
(FAP) submitted by an individual in order
to have made reasonable efforts to deter-
mine whether the individual is FAP-eligi-
ble. With respect to any care provided by a
hospital facility to an individual, the appli-
cation period begins on the date the care
is provided to the individual and ends on
the 240th day after the hospital facility pro-
vides the individual with the first billing
statement for the care.
(4)Billing and collections policymeans
a written policy that includes all of the el-
ements described in § 1.501(r)–4(b)(4).
(5)Completion deadlinemeans the date
after which a hospital facility may initiate
or resume extraordinary collection actions
against an individual who has submitted an
incomplete FAP application if that individ-
ual has not provided the hospital facility
with the missing information and/or docu-
mentation necessary to complete the appli-
cation. The completion deadline must be
specified in a written notice (as described
in § 1.501(r)–6(c)(3)(i)(C)) and must be no
earlier than the later of—
(i) 30 days after the hospital facility pro-
vides the individual with this written no-
tice; or
(ii) The last day of the application pe-
riod described in paragraph (b)(3) of this
section.
(6)Disregarded entitymeans an entity
that is generally disregarded as separate
from its owner for federal tax purposes un-
der § 301.7701–3 of this chapter. One ex-
ample of a disregarded entity is a domestic
single member limited liability company
that does not elect to be classified as an as-
sociation taxable as a corporation for fed-
eral tax purposes.
(7)Emergency medical caremeans care
provided by a hospital facility for emer-
gency medical conditions.
(8)Emergency medical conditions
means emergency medical conditions as
definedinsection1867oftheSocialSe-
curity Act (42 U.S.C. 1395dd).
(9)Extraordinary collection action
(ECA) means an action described in
§ 1.501(r)–6(b).
(10)Financial assistance policy(FAP)
means a written policy that meets the re-
quirements described in § 1.501(r)–4(b).
(11)FAP applicationmeans the infor-
mation and accompanying documentation
that a hospital facility requires an individ-
ual to submit to apply for financial assis-
tance under the facility’s FAP. A FAP ap-
plication is considered complete if it con-
tains information and documentation suffi-
cient for the hospital facility to determine
whether the applicant is FAP-eligible and
incomplete if it does not contain such in-
formation and documentation.
(12)FAP application formmeans the
application form (and any accompanying
instructions) that a hospital facility re-
quires an individual to submit as part of
his or her FAP application.
(13)FAP-eligible individualmeans an
individual eligible for financial assistance
under a hospital facility’s FAP, without re-
gard to whether the individual has applied
for assistance under the FAP.
(14)Gross charges,orthechargemas-
ter rate, means a hospital facility’s full,
established price for medical care that
the hospital facility consistently and uni-
formly charges all patients before applying
any contractual allowances, discounts, or
deductions.
(15)
Hospital facilitymeans a facility
that is required by a state to be licensed,
registered, or similarly recognized as a
hospital. Except as otherwise provided in
published guidance, a hospital organiza-
tion may treat multiple buildings operated
under a single state license as a single
hospital facility. For purposes of this
paragraph (b)(15), the term “state” in-
cludes only the 50 states and the District
of Columbia and not any U.S. territory or
foreign country. References to a hospital
facility taking actions include instances in
which the hospital organization operating
the hospital facility takes action through
or on behalf of the hospital facility.
(16)Hospital organizationmeans an
organization recognized (or seeking to
be recognized) as described in section
501(c)(3) that operates one or more hospi-
tal facilities, including a hospital facility
operated through a disregarded entity.
(17)Medicare fee-for-servicemeans
health insurance available under Medicare
Part A and Part B of Title XVIII of the
Social Security Act.
(18)Notification periodmeans the pe-
riod during which a hospital facility must
notify an individual about its FAP in ac-
cordance with § 1.501(r)–6(c)(2) in order
to have made reasonable efforts to deter-
mine whether the individual is FAP-eligi-
ble. With respect to any care provided by a
hospital facility to an individual, the noti-
fication period begins on the first date care
is provided to the individual and ends on
the 120th day after the hospital facility pro-
vides the individual with the first billing
statement for the care.
(19)Plain language summarymeans a
written statement that notifies an individ-
ual that the hospital facility offers financial
assistance under a FAP and provides the
following additional information in lan-
guage that is clear, concise, and easy to un-
derstand—
(i) A brief description of the eligibility
requirements and assistance offered under
the FAP;
August 6, 20121402012–32 I.R.B.

(ii) The direct Web site address (or
URL) and physical location(s) (including
a room number, if applicable) where the
individual can obtain copies of the FAP
and FAP application form;
(iii) Instructions on how the individual
can obtain a free copy of the FAP and FAP
application form by mail;
(iv) The contact information, including
the telephone number(s) and physical loca-
tion (including a room number, if applica-
ble), of hospital facility staff who can pro-
vide an individual with information about
the FAP and the FAP application process,
as well as of the nonprofit organizations
or government agencies, if any, that the
hospital facility has identified as available
sources of assistance with FAP applica-
tions;
(v) A statement of the availability of
translations of the FAP, FAP application
form, and plain language summary in other
languages, if applicable; and
(vi) A statement that no FAP-eligible
individual will be charged more for emer-
gency or other medically necessary care
than AGB.
(20)Primary payermeans a health in-
surer (whether a private health insurer or a
public payer such as Medicare) that pays
first on a claim for medical care (usually
after a deductible has been paid by the in-
sured) up to the limits of the policy or pro-
gram, regardless of other insurance cover-
age the insured may have. Primary pay-
ers are distinguished from secondary pay-
ers that pay second on a claim for medi-
cal care to the extent payment has not been
made by the primary payer.
(21)Private health insurermeans any
organization that offers insurance for med-
ical care that is not a governmental unit
describedinsection170(c)(1). Forpur-
poses of §1.501(r)–5(b), claims paid under
Medicare Advantage (Part C of Title XVIII
of the Social Security Act) are treated as
claims paid by a private health insurer.
(22)Referringan individual’s debt to a
debt collection agency or other party in-
cludes contracting with, delegating, or oth-
erwise using the debt collection agency or
other party to collect amounts owed by the
individual to the hospital facility while still
maintaining ownership of the debt.
Par. 4. Sections 1.501(r)–2 and
1.501(r)–3 are added and reserved to read
as follows:
§ 1.501(r)–2. Failures to satisfy section
501(r) requirements.[Reserved].
§ 1.501(r)–3. Community health needs
assessments.[Reserved].
Par. 5. Sections 1.501(r)–4, 1.501(r)–5,
1.501(r)–6, and 1.501(r)–7 are added to
read as follows:
§ 1.501(r)–4. Financial assistance policy
and emergency medical care policy.
(a)In general. A hospital organiza-
tion meets the requirements of section
501(r)(4) with respect to a hospital facil-
ity it operates if the hospital organization
establishes for that hospital facility—
(1) A written financial assistance pol-
icy (FAP) that meets the requirements de-
scribed in paragraph (b) of this section; and
(2) A written emergency medical care
policy that meets the requirements de-
scribed in paragraph (c) of this section.
(b)Financial assistance policy—(1)In
general. To satisfy paragraph (a)(1) of this
section, a hospital facility’s FAP must ap-
ply to all emergency and other medically
necessary care provided by the hospital fa-
cility and include—
(i) Eligibility criteria for financial assis-
tance and whether such assistance includes
free or discounted care;
(ii) The basis for calculating amounts
charged to patients;
(iii) The method for applying for finan-
cial assistance;
(iv) In the case of a hospital facility
that does not have a separate billing and
collections policy, the actions that may be
taken in the event of nonpayment; and
(v) Measures to widely publicize the
FAP within the community served by the
hospital facility.
(2)Eligibility criteria and basis for cal-
culating amounts charged to patients—(i)
In general. To satisfy paragraphs (b)(1)(i)
and (b)(1)(ii) of this section, the FAP
must—
(A) Specify all financial assistance
available under the FAP, including all dis-
count(s) and free care and, if applicable,
the amount(s) (for example, gross charges)
to which any discount percentages will be
applied;
(B) Specify all of the eligibility criteria
that an individual must satisfy to receive
each such discount, free care, or other level
of assistance;
(C) State that following a determina-
tion of FAP-eligibility, a FAP-eligible indi-
vidual will not be charged more for emer-
gency or other medically necessary care
than the amounts generally billed to indi-
viduals who have insurance covering such
care (AGB);
(D) Describe which method under
§ 1.501(r)–5(b) the hospital facility uses
to determine AGB; and
(E) If the hospital facility uses
the look-back method described in
§ 1.501(r)–5(b)(1) to determine AGB,
either state the hospital facility’s AGB per-
centage(s) and describe how the hospital
facility calculated such percentage(s) or
explain how members of the public may
readilyobtainthisinformationinwriting
and free of charge.
(ii)Examples. The following examples
illustrate this paragraph (b)(2):
Example 1. Q is a hospital facility that estab-
lishes a FAP that provides assistance to all uninsured
and underinsured individuals whose family income is
less than or equal to x% of the Federal Poverty Level
(FPL), with the level of discount for which an indi-
vidual is eligible under Q’s FAP determined based
upon the individual’s family income as a percent-
age of FPL. Q’s FAP defines the meaning of “unin-
sured,” “underinsured,” “family income,” and “Fed-
eral Poverty Level” and specifies that all emergency
and other medically necessary care provided by Q
is covered under the FAP. Q’s FAP also states that
Q determines AGB by multiplying the gross charges
for any emergency or other medically necessary care
it provides to a FAP-eligible individual by 50 per-
cent. The FAP states, further, that Q calculated the
AGB percentage of 50 percent based on all claims
paid in full to Q by Medicare and private health in-
surers and the individuals they insured over a speci-
fied 12-month period, divided by the associated gross
charges for those claims. Q’s FAP contains the fol-
lowing chart, specifying each discount available un-
der the FAP, the amounts (gross charges) to which
these discounts will be applied, and the specific el-
igibility criteria for each such discount:
2012–32 I.R.B.141August 6, 2012

Family income as % of FPLDiscount off of gross charges
>y% - x%
50%.
>z% - y%
75%.
≤z%
Free.
Q’s FAP also contains a statement that no FAP-
eligible in
dividual will be charged more for emer-
gency or other medically necessary care than AGB
because Q’s AGB percentage is 50 percent of gross
charges and
the most a FAP-eligible individual will
be charged is 50 percent of gross charges. Q’s FAP
satisfies t
he requirements of this paragraph (b)(2).
Example 2. R is a hospital facility that establishes
a FAP that provides assistance based on household
income. R’s
FAP defines the meaning of “household
income” and specifies that all emergency and other
medically necessary care provided by R is covered
under the FA
P. R’s FAP contains the following chart,
specifying the assistance available under the FAP and
the specific eligibility criteria for each level of assis-
tance offer
ed, which R updates occasionally to ac-
count for inflation:
Household incomeMaximum amount individual will be responsible for paying
>$b - $a
40% of gross charges, up to the lesser of AGB or x% of annual household income.
>$c - $b
20% of gross charges, up to the lesser of AGB or y% of annual household income.
≤$c$0 (free).
R’s F
AP contains a statement that no FAP-eligi-
ble individual will be charged more for emergency or
other medically necessary care than AGB. R’s FAP
also
states that R determines AGB by multiplying
the gross charges for any emergency or other medi-
cally necessary care it provides by AGB percentages,
whi
ch are based on claims paid under Medicare. In
addition, the FAP provides a web address individu-
als can visit, and a telephone number they can call,
if t
heywouldliketoobtainaninformationsheetstat-
ing R’s AGB percentages and explaining how these
AGB percentages were calculated. This information
sh
eet, which R makes available on its Web site and
provides to any individual who requests it, states that
R’s AGB percentages are 35 percent of gross charges
fo
r inpatient care and 60 percent of gross charges for
outpatient care. It also states that these percentages
were based on all claims paid to R for emergency
o
r other medically necessary inpatient and outpatient
care by Medicare and Medicare beneficiaries over a
specified 12-month period, divided by the associated
g
ross charges for those claims. R’s FAP satisfies the
requirements of this paragraph (b)(2).
(3)Method for applying for financial
assistance—(i)In general.Tosatisfy
paragraph (b)(1)(iii) of this section, a hos-
pital facility’s FAP must describe how an
individual applies for financial assistance
under the FAP. In addition, either the hos-
pital facility’s FAP or FAP application
form (including accompanying instruc-
tions) must describe the information and
documentation the hospital facility may
require an individual to submit as part
of his or her FAP application and pro-
vide the contact information described
in § 1.501(r)–1(b)(19)(iv). The hospital
facility may not deny financial assistance
under the FAP based on an applicant’s
failure to provide information or docu-
mentation that the hospital facility’s FAP
or FAP application form does not require
an in
dividual to submit as part of a FAP
appl
ication.
(ii)
Example. The following example
illu
stratesthisparagraph(b)(3):
Example. S is a hospital facility with a FAP that
bases eligibility solely on an individual’s household
inco
me. S’s FAP provides that an individual may ap-
ply for financial assistance by completing and sub-
mitting S’s FAP application form. S’s FAP also de-
scr
ibes how individuals can obtain copies of the FAP
application form. S’s FAP application form contains
lines on which the applicant lists all items of house-
hol
d income received by the applicant’s household
over the last three months and the names of the ap-
plicant’s household members. The instructions to S’s
FA
P application form tell applicants where to sub-
mit the application and provide that an applicant must
attach to his or her FAP application form proof of
ho
usehold income in the form of the applicant’s most
recent federal tax return, payroll check stubs from the
last three months, documentation of the applicant’s
q
ualification for certain specified state means-tested
programs, or other reliable evidence of the applicant’s
earned and unearned household income. S does not
r
equire FAP applicants to submit any information or
documentation not mentioned in the FAP application
form instructions. S’s FAP application form instruc-
tions also provide the contact information of hospital
facility staff who can provide an applicant with infor-
mation about the FAP and FAP application process.
S’s FAP satisfies the requirements of this paragraph
(b)(3).
(4)Actions that may be taken in the
event of nonpayment—(i)In general.To
satisfy paragraph (b)(1)(iv) of this section,
either a hospital facility’s FAP or a separate
written billing and collections policy es-
tablished by the hospital facility must de-
scribe—
(A) Any actions that the hospital facility
(or other authorized party) may take relat-
ing to obtaining payment of a bill for med-
ical care, including, but not limited to, any
extr
aordinary collection actions described
in§1
.501(r)–6(b);
(B) T
he process and time frames the
hosp
ital facility (or other authorized party)
uses
in taking the actions described in
par
agraph (b)(4)(i)(A) of this section, in-
clu
ding, but not limited to, the reasonable
eff
orts it will make to determine whether
an i
ndividual is FAP-eligible before en-
gag
ing in any extraordinary collection
ac
tions, as described in § 1.501(r)–6(c);
an
d
(C
) The office, department, committee,
or
other body with the final authority or re-
sp
onsibility for determining that the hospi-
ta
l facility has made reasonable efforts to
de
termine whether an individual is FAP-el-
ig
ible and may therefore engage in extra-
o
rdinary collection actions against the in-
d
ividual.
(
ii)Separate billing and collections
p
olicy. In the case of a hospital facility
t
hat satisfies paragraph (b)(1)(iv) of this
s
ection by establishing a separate written
b
illing and collections policy, the hospital
facility’s FAP must state that the actions
the hospital facility may take in the event
of nonpayment are described in a separate
billing and collections policy and explain
how members of the public may readily
obtain a free copy of this separate policy.
(5)Widely publicizing the FAP—(i)In
general. To satisfy paragraph (b)(1)(v) of
this section, a FAP must include, or explain
how members of the public may readily
obtain a free written description of, mea-
sures taken by the hospital facility to—
August 6, 20121422012–32 I.R.B.

(A) Make the FAP, FAP application
form, and a plain language summary of the
FAP (as defined in § 1.501(r)–1(b)(19))
widely available on a Web site, as de-
scribed in paragraph (b)(5)(iv) of this
section;
(B) Make paper copies of the FAP, FAP
application form, and plain language sum-
mary of the FAP available upon request
and without charge, both in public loca-
tions in the hospital facility and by mail,
in English and in the primary language of
any populations with limited proficiency
in English that constitute more than 10
percent of the residents of the community
served by the hospital facility;
(C) Inform and notify visitors to the
hospital facility about the FAP through
conspicuous public displays or other mea-
sures reasonably calculated to attract visi-
tors’ attention; and
(D) Inform and notify residents of the
community served by the hospital facil-
ity about the FAP in a manner reasonably
calculated to reach those members of the
community who are most likely to require
financial assistance.
(ii)Meaning of inform and notify.For
purposes of paragraphs (b)(5)(i)(C) and
(b)(5)(i)(D) of this section, a measure will
inform and notify visitors to a hospital
facility or residents of a community about
the hospital facility’s FAP if the mea-
sure, at a minimum,notifies the reader
or listener that the hospital facility offers
financial assistance under a FAP and in-
forms him or her about how or where to
obtain more information about the FAP.
(iii)Meaning of reasonably calculated.
Whether one or more measures to widely
publicize a hospital facility’s FAP are rea-
sonably calculated to inform and notify
visitors to a hospital facility or residents of
a community about the hospital facility’s
FAP in the manner described in paragraphs
(b)(5)(i)(C) and (b)(5)(i)(D) of this section
will depend on all of the facts and circum-
stances, including the primary language(s)
spoken by the residents of the community
served by the hospital facility and other at-
tributes of the community and the hospital
facility.
(iv)Widely available on a Web site.For
purposes of paragraph (b)(5)(i)(A) of this
section, a hospital facility makes its FAP,
FAP application form, and plain language
summary of the FAP widely available on a
Web site only if—
(A) The hospital facility conspicuously
posts complete and current versions of
these documents in English and in the
primary language of any populations with
limited proficiency in English that consti-
tute more than 10 percent of the residents
of the community served by the hospital
facility on—
(1) The hospital facility’s Web site;
(2) If the hospital facility does not have
its own Web site separate from the hospital
organization that operates it, the hospital
organization’s Web site; or
(3) A Web site established and main-
tained by another entity, but only if the
Web site of the hospital facility or hospi-
tal organization (if the facility or organi-
zation has a Web site) provides a conspic-
uously-displayed link to the Web page on
which the document is posted, along with
clear instructions for accessing the docu-
ment on that Web site;
(B) Any individual with access to the
Internet can access, download, view, and
print a hard copy of these documents with-
out requiring special computer hardware
or software (other than software that is
readily available to members of the pub-
lic without payment of any fee) and with-
out payment of a fee to the hospital facility,
hospital organization, or other entity main-
taining the Web site; and
(C) The hospital facility provides any
individual who asks how to access a copy
of the FAP, FAP application form, or plain
language summary of the FAP online with
the direct Web site address, or URL, of the
web page on which these documents are
posted.
(v)Limited English proficient pop-
ulations. For purposes of paragraphs
(b)(5)(i)(B) and (b)(5)(iv)(A) of this sec-
tion, a hospital facility may determine
whether any language minority with lim-
ited proficiency in English constitutes
more than 10 percent of the residents of the
community served by the hospital facility
based on the latest data available from
the U.S. Census Bureau or other similarly
reliable data.
(vi)Examples. The following examples
illustrate this paragraph (b)(5):
Example 1. (i) Z is a hospital facility whose
FAP states that Z will make its FAP, FAP application
form, and a plain language summary of its FAP
widely available through its Web site. In accordance
with its FAP, the home page and main billing page
of Z’s Web site conspicuously display the follow-
ing message: “Need help paying your bill? You
may be eligible for financial assistance. Click h
ere
for more information.” When readers click on the
link, they are taken to a web page that explains the
various discounts available under Z’s FAP and the
specific eligibility criteria for each such discount.
This web page also provides a telephone number
and room number of Z that individuals can call or
visit for more information about the FAP, as well as
the name and contact information of a few nonprofit
organizations and government agencies that Z has
identified as capable and available sources of assis-
tance with FAP applications. In addition, the web
page contains prominently-displayed links that allow
readers to download PDF files of the FAP and the
FAP application form, free of charge. Z provides
any individual who asks how to access a copy of
the FAP, FAP application form, or plain language
summary of the FAP online with the URL of this web
page. Z’s FAP includes measures to make the FAP
widely available on a Web site within the meaning of
paragraph (b)(5)(i)(A) of this section.
(ii) Z’s FAP also states that Z will make paper
copies of the FAP, FAP application form, and plain
language summary of the FAP available upon re-
quest and without charge, both by mail and in its
billing office, admissions and registrations areas, and
emergency room, and will inform and notify visitors
to the hospital facility about the FAP in these same
locations using signs and brochures. In accordance
with its FAP, Z conspicuously displays a sign in
large font regarding the FAP in its billing office,
admissions and registrations areas, and emergency
room. The sign says: “Uninsured? Having trouble
paying your hospital bill? You may be eligible for
financial assistance.” The sign also provides the URL
of the Web page where Z’s FAP and FAP application
form can be accessed. In addition, the sign provides
a telephone number and room number of Z that
individuals can call or visit with questions about the
FAP or the FAP application process. Underneath
each sign, Z conspicuously displays copies of a
brochure that contains all of the information required
to be included in a plain language summary of the
FAP (as defined in § 1.501(r)–1(b)(19)). Z makes
these brochures available in quantities sufficient to
meet visitor demand. Z also makes paper copies of
its FAP and FAP application form available upon
request and without charge in these same locations
and by mail. Z’s FAP includes measures to widely
publicize the FAP within the meaning of paragraphs
(b)(5)(i)(B) and (b)(5)(i)(C) of this section.
(iii) In addition, Z’s FAP states that Z will in-
form and notify members of the community served
by the hospital facility about the FAP through its quar-
terly newsletter and by distributing copies of its FAP
brochures to physicians and local nonprofit organi-
zations and public agencies that address the health
needs of low-income people. In accordance with its
FAP, Z distributes copies of the brochure and its FAP
application form to all of its referring staff physicians
and to the community health centers serving its com-
munity. Z also distributes copies of these documents
to the local health department and to numerous pub-
lic agencies and nonprofit organizations in its com-
munity that address the health issues and other needs
of low-income populations, in quantities sufficient to
meet demand. In addition, every issue of the quar-
terly newsletter that Z mails to the individuals in its
customer database contains a prominently-displayed
2012–32 I.R.B.143August 6, 2012

advertisement informing readers that Z offers finan-
cial assistance and that people having trouble paying
their hospital bills may be eligible for financial assis-
tance. The advertisement also provides readers with
the URL of the Web page where Z’s FAP and FAP ap-
plication form can be accessed and a telephone num-
ber and room number of Z that individuals can call or
visit with questions about the FAP or the FAP appli-
cation process. Z’s FAP includes measures to widely
publicize its FAP within the meaning of paragraph
(b)(5)(i)(D) of this section.
(iv) Because Z’s FAP includes measures to
widely publicize the FAP described in para-
graphs (b)(5)(i)(A), (b)(5)(i)(B), (b)(5)(i)(C), and
(b)(5)(i)(D)ofthissection,Z’sFAPmeetsthere-
quirements of this paragraph (b)(5).
Example 2. Assume the same facts asExample
1, except that Z serves a community in which 11
percent of the residents speak Spanish and have
limited proficiency in English. Z’s FAP states that
Z will provide all of the information described in
Example 1,includingtheFAPitself,inbothSpanish
and English. In accordance with its FAP, Z translates
its FAP, FAP application form, and FAP brochure
(which constitutes a plain language summary of
the FAP) into Spanish, and displays and distributes
Spanish versions of these documents in its hospi-
tal facility and in the Spanish-speaking portions of
the community it serves, using all of the measures
described inExample 1. Moreover, the home page
and main billing page of Z’s Web site conspicuously
display an “¿Habla Español?” link that takes readers
to a web page that summarizes the FAP in Spanish
and contains links that allow readers to download
PDF files of the Spanish versions of the FAP and FAP
application form, free of charge. Z’s FAP meets the
requirements of this paragraph (b)(5) by including
measures to widely publicize the FAP within the
community served by Z.
Example 3. Assume the same facts asExample
1, except that instead of including generalized sum-
maries of the measures Z will take to widely publicize
its FAP in the FAP itself, Z’s FAP states that a task
force established by Z with control over a set bud-
get will meet at least annually to develop and adopt
a plan to widely publicize Z’s FAP. The FAP further
states that the task force will summarize this plan in
a one-page information sheet that will be made avail-
able upon request in Z’s billing office and posted on
the Web page through which Z makes its FAP and
FAP application form widely available. In year 1, the
task force considers the needs of Z’s patients and the
surrounding community and adopts and implements
a plan to take all of the measures described inExam-
ple 1. The task force prepares a one-page information
sheet summarizing this plan that is made available as
described in the FAP. Z’s FAP meets the requirements
of this paragraph (b)(5) in year 1 by including mea-
sures to widely publicize the FAP within the commu-
nity served by Z.
(6)Readily obtainable information.For
purposes of this paragraph (b), members
of the public may readily obtain informa-
tion if a hospital facility makes the infor-
mation available free of charge both on a
Web site and in writing upon request in a
manner similar to that described in para-
graphs (b)(5)(i)(A) and (b)(5)(i)(B) of this
section.
(c)Emergency medical care pol-
icy—(1)In general. To satisfy paragraph
(a)(2) of this section, a hospital facility
must establish a written policy that re-
quires the hospital facility to provide,
without discrimination, care for emer-
gency medical conditions to individuals
regardless of whether they are FAP-eligi-
ble.
(2)Interference with provision of emer-
gency medical care. A hospital facility’s
emergency medical care policy will not be
described in paragraph (c)(1) of this sec-
tion unless it prohibits the hospital facil-
ity from engaging in actions that discour-
age individuals from seeking emergency
medical care, such as by demanding that
emergency department patients pay before
receiving treatment for emergency medi-
cal conditions or by permitting debt col-
lection activities in the emergency depart-
ment or in other areas of the hospital fa-
cility where such activities could interfere
with the provision, without discrimination,
of emergency medical care.
(3)Relation to federal law governing
emergency medical care. Subject to para-
graph (c)(2) of this section, a hospital fa-
cility’s emergency medical care policy will
be described in paragraph (c)(1) of this
section if it requires the hospital facility
to provide the care for emergency medi-
cal conditions that the hospital facility is
required to provide under Subchapter G of
Chapter IV of Title 42 of the Code of Fed-
eral Regulations (or any successor regula-
tions).
(4)Examples. The following examples
illustrate this paragraph (c):
Example 1. F is a hospital facility with a ded-
icated emergency department that is subject to
the Emergency Medical Treatment and Labor Act
(EMTALA) and is not a critical access hospital.
F establishes a written emergency medical care
policy requiring F to comply with EMTALA by
providing medical screening examinations and
stabilizing treatment and referring or transferring
an individual to another facility, when appropriate,
and to provide emergency services in accordance
with 42 CFR 482.55 (or any successor regulation).
F’s emergency medical care policy also states
that F prohibits any actions that would discourage
individuals from seeking emergency medical
care, such as by demanding that emergency
department patients pay before receiving treatment
for emergency medical conditions or permitting debt
collection activities in the emergency department
or in other areas of the hospital facility where
such activities could interfere with the provision,
without discrimination, of emergency medical care.
F’s emergency medical care policy is described in
paragraph (c)(1) of this section.
Example 2. G is a rehabilitation hospital facility.
G does not have a dedicated emergency depart-
ment, nor does it have specialized capabilities that
would make it appropriate to accept transfers of
individuals who need stabilizing treatment for an
emergency medical condition. G establishes a writ-
ten emergency medical care policy that addresses
how it appraises emergencies, provides initial treat-
ment, and refers or transfers an individual to another
facility, when appropriate, in a manner that com-
plies with 42 CFR 482.12(f)(2) (or any successor
regulation). G’s emergency medical care policy
also states that G prohibits any actions that would
discourage individuals from seeking emergency
medical care, such as by permitting debt collection
activities in any areas of the hospital facility where
such activities could interfere with the provision,
without discrimination, of emergency medical care.
G’s emergency medical care policy is described in
paragraph (c)(1) of this section.
(d)Establishing the FAP and other poli-
cies—(1)In general. A hospital organi-
zation has established a FAP, a billing and
collections policy, or an emergency medi-
cal care policy for a hospital facility only if
an authorized body ofthe hospital organi-
zation has adopted the policy for the hospi-
tal facility and the hospital facility has im-
plemented the policy.
(2)Authorized body. For purposes of
this paragraph (d), an authorized body of a
hospital organization means—
(i) The governing body (that is, the
board of directors, board of trustees, or
equivalent controlling body) of the hospi-
tal organization;
(ii) A committee of the governing body,
which may be composed of any individu-
als permitted under state law to serve on
such a committee, to the extent that the
committee is permitted by state law to act
on behalf of the governing body;
(iii) To the extent permitted under state
law, other parties authorized by the gov-
erning body of the hospital organization to
act on its behalf; or
(iv) In the case of a hospital facility
(operated by the hospital organization)
that has its own governing body and is
recognized as an entity under state law
but is a disregarded entity for federal tax
purposes, the governing body of that dis-
regarded entity (or a committee of or other
parties authorized by that governing body
as described in paragraphs (d)(2)(ii) or
(d)(2)(iii) of this section).
(3)Implementing a policy. For pur-
poses of this paragraph (d), a hospital facil-
August 6, 20121442012–32 I.R.B.

ity has implemented a policy if the hospi-
tal facility has consistently carried out the
policy.
(4)Establishing a policy for more than
one hospital facility. Although a hospi-
tal organization operating more than one
hospital facility must separately establish
a FAP and emergency medical care policy
for each hospital facility it operates, such
policies may contain the same operative
terms. However, different AGB percent-
ages and methods of determining AGB and
the unique attributes of the communities
that different hospital facilities serve may
require the hospital facilities to include in
their FAPs (or otherwise make available)
different information regarding AGB and
different measures to widely publicize the
FAP in order to meet the requirements of
paragraphs (b)(2) and/or (b)(5) of this sec-
tion.
§ 1.501(r)–5. Limitation on charges.
(a)In general. A hospital organiza-
tion meets the requirements of section
501(r)(5) with respect to a hospital facility
it operates if the hospital facility limits the
amount charged for care it provides to any
individual who is eligible for assistance
under its financial assistance policy (FAP)
to—
(1) In the case of emergency or other
medically necessary care, not more than
the amounts generally billed to individu-
als who have insurance covering such care
(AGB), as determined under paragraph (b)
of this section; and
(2) In the case of all other medical care,
less than the gross charges for such care, as
described in paragraph (c) of this section.
(b)Amounts generally billed.Inorder
to meet the requirements of paragraph
(b)(1) of this section, a hospital facil-
ity must determine AGB for emergency
or other medically necessary care using
a method described in either paragraph
(b)(1) or (b)(2) of this section. A hospital
facility may use only one of these meth-
ods to determine AGB. After choosing a
particular method, a hospital facility must
continue to use that method.
(1)Look-back method—(i)In general.
A hospital facility may determine AGB
for any emergency or other medically nec-
essary care it provides to a FAP-eligible
individual by multiplying the hospital fa-
cility’s gross charges for the care provided
to the individual by one or more percent-
ages of gross charges (AGB percentages).
The hospital facility must calculate its
AGB percentage(s) at least annually by
dividing the sum of all claims for emer-
gency and other medically necessary care
described in either paragraph (b)(1)(i)(A)
or (b)(1)(i)(B) of this section that have
been paid in full to the hospital facility
during a prior 12-month period by the sum
of the associated gross charges for those
claims:
(A) Claims paid by Medicare fee-for-
service as the primary payer, including
any associated portions of the claims paid
by Medicare beneficiaries in the form of
co-insurance or deductibles; or
(B) Claims paid by both Medicare fee-
for-service and all private health insurers
as primary payers, together with any as-
sociated portions of these claims paid by
Medicare beneficiaries or insured individ-
uals in the form of co-payments, co-insur-
ance, or deductibles.
(ii)One or multiple AGB percentages.
A hospital facility’s AGB percentage that
is calculated using the method described
in this paragraph (b)(1) may be one av-
erage percentage of gross charges for all
emergency and other medically necessary
care provided by the hospital facility. Al-
ternatively, a hospital facility may calcu-
late multiple AGB percentages for sepa-
rate categories of care (such as inpatient
and outpatient care or care provided by dif-
ferent departments) or for separate items
or services, as long as the hospital facility
calculates AGB percentages for all emer-
gency and other medically necessary care
provided by the hospital facility.
(iii)Start date for applying AGB per-
centages. For purposes of determining
AGB under this paragraph (b)(1), with re-
spect to any AGB percentage that a hospi-
tal facility has calculated, the hospital fa-
cility must begin applying the AGB per-
centage by the 45th day after the end of the
12-month period the hospital facility used
in calculating the AGB percentage.
(2)Prospective Medicare method.As
an alternative to the method described in
paragraph (b)(1) of this section, a hospital
facility may determine AGB for any emer-
gency or other medically necessary care
provided to a FAP-eligible individual by
using the billing and coding process the
hospital facility would use if the FAP-eli-
gible individual were a Medicare fee-for-
service beneficiaryand setting AGB for
the care at the amount the hospital facil-
ity determines would be the amount Medi-
care and the Medicare beneficiary together
would be expected to pay for the care.
(3)Examples. The following examples
illustrate this paragraph (b):
Example 1. On January 15 of year 1, Y, a hospital
facility, generates data on all claims paid to it in full
for emergency or other medically necessary care by
all private health insurersand Medicare fee-for-ser-
vice as primary payers over the immediately preced-
ing calendar year. Y determines that it received a to-
tal of $360 million on these claims from the private
health insurers and Medicare and another $40 mil-
lion from their insured patients and Medicare bene-
ficiaries in the form of deductibles, co-insurance, and
co-payments. Y’s gross charges for these claims to-
taled $800 million. Y calculates that its AGB percent-
age is 50 percent of gross charges ($400 million/$800
million x 100). Y determines AGB for any emer-
gency or other medically necessary care it provides
to a FAP-eligible individual between February 1 of
year 1 (less than 45 days after the end of the 12-month
claim period) and January 31 of year 2 by multiplying
the gross charges for the care provided to the individ-
ual by 50%. Y has determined AGB in accordance
with this paragraph (b).
Example 2. On September 20 of year 1, X, a hos-
pital facility, generates data on all claims paid to it in
full for emergency or other medically necessary care
by Medicare fee-for-serviceas the primary payer over
the12monthsendingonAugust31ofyear1.Xde-
termines that, of these claims for inpatient services,
it received a total of $80 million from Medicare and
another $20 million from Medicare beneficiaries in
the form of co-insurance or deductibles. X’s gross
charges for these inpatient claims totaled $250 mil-
lion. Of the claims for outpatient services, X received
a total of $100 million from Medicare and another
$25 million from Medicare beneficiaries. X’s gross
charges for these outpatient claims totaled $200 mil-
lion. X calculates that its AGB percentage for inpa-
tient services is 40 percent of gross charges ($100 mil-
lion/$250 million x 100) and its AGB percentage for
outpatient services is 62.5percent of gross charges
($125 million/$200 million x 100). Between October
15 of year 1 (45 days after the end of the 12-month
claim period) and October 14 of year 2, X determines
AGB for any emergency or other medically necessary
inpatient care it provides to a FAP-eligible individ-
ual by multiplying the gross charges for the inpatient
care it provides to the individual by 40% and AGB
for any emergency or other medically necessary out-
patient care it provides to a FAP-eligible individual by
multiplying the gross charges for the outpatient care
it provides to the individual by 62.5%. X has deter-
mined AGB in accordance with this paragraph (b).
Example 3. Z is a hospital facility. Whenever
Z provides emergency or other medically necessary
care to a FAP-eligible individual, Z determines the
AGB for the care by using the billing and coding
process it would use if the individual were a Medi-
care fee-for-service beneficiary and setting AGB for
the care at the amount it determines Medicare and the
Medicare beneficiary together would be expected to
pay for the care. Z determines AGB in accordance
with this paragraph (b).
2012–32 I.R.B.145August 6, 2012

(c)Gross charges. A hospital facil-
ity must charge a FAP-eligible individual
less than the gross charges for any medi-
cal care provided to that individual. How-
ever, a billing statement issued to a FAP-el-
igible individual for medical care provided
by a hospital facility may state the gross
charges for such care as the starting point
to which various contractual allowances,
discounts, or deductions are applied, as
long as the actual amount the individual
is expected to pay is less than the gross
charges for such care.
(d)Safe harbor for certain charges in
excess of AGB. A hospital facility will be
deemed to meet the requirements of para-
graph (a) of this section, even if it charges
more than AGB for emergency or other
medically necessary care (or gross charges
for any medical care) provided to a FAP-el-
igible individual if—
(1) The FAP-eligible individual has not
submitted a complete FAP application to
the hospital facility as of the time of the
charge; and
(2) The hospital facility has made and
continues to make reasonable efforts to de-
termine whether the individual is FAP-eli-
gible, as described in § 1.501(r)–6(c), dur-
ing the applicable time periods described
in that section (including by correcting the
amount charged if the individual is subse-
quently found to be FAP-eligible).
§ 1.501(r)–6. Billing and collection.
(a)In general. A hospital organiza-
tion meets the requirements of section
501(r)(6) with respect to a hospital facility
it operates if the hospital facility does not
engage in extraordinary collection actions
(ECAs), as defined in paragraph (b) of this
section, against an individual before the
hospital facility has, consistent with para-
graph (c) of this section, made reasonable
efforts to determine whether the individual
is eligible for assistance under its financial
assistance policy (FAP). For purposes of
this section, with respect to any debt owed
by an individual for care provided by a
hospital facility—
(1) ECAs against the individual include
ECAs against any other individual who has
accepted or is required to accept responsi-
bility for the individual’s hospital bills; and
(2) The hospital facility will be deemed
to have engaged in an ECA against the in-
dividual if any purchaser of the individ-
ual’s debt or any debt collection agency or
other party to which the hospital facility
has referred the individual’s debt has en-
gaged in an ECA against the individual.
(b)Extraordinary collection actions.
ECAs are actions taken by a hospital
facility against an individual related to ob-
taining payment of a bill for care covered
under the hospital facility’s FAP that re-
quire a legal or judicial process or involve
selling an individuals’ debt to another
party or reporting adverse information
about the individual to consumer credit
reporting agencies orcredit bureaus. For
purposes of this paragraph (b), actions that
require a legal or judicial process include,
but are not limited to, actions to—
(1)Placealienonanindividual’sprop-
erty;
(2) Foreclose on an individual’s real
property;
(3) Attach or seize an individual’s bank
account or any other personal property;
(4) Commence a civil action against an
individual;
(5) Cause an individual’s arrest;
(6) Cause an individual to be subject to
a writ of body attachment; and
(7) Garnish an individual’s wages.
(c)Reasonable efforts—(1)In general.
With respect to any care provided by a hos-
pital facility to an individual, the hospi-
tal facility will have made reasonable ef-
forts to determine whether the individual is
FAP-eligible only if the hospital facility—
(i) Notifies the individual about its FAP
during the notification period (as defined
in § 1.501(r)–1(b)(18)), as described in
paragraph (c)(2) of this section;
(ii) In the case of an individual who
submits an incomplete FAP application
during the application period (as defined
in § 1.501(r)–1(b)(3)), meets the require-
ments described in paragraph (c)(3) of this
section; and
(iii) In the case of an individual who
submits a complete FAP application during
the application period, meets the require-
ments described in paragraph (c)(4) of this
section.
(2)Notification—(i)In general. Except
as provided in paragraph (c)(2)(ii) of this
section, with respect to any care provided
by a hospital facility to an individual, a
hospital facility will have notified the indi-
vidual about its FAP for purposes of para-
graph (c)(1)(i) of this section only if the
hospital facility—
(A) Distributes a plain language
summary of the FAP (as defined in
§ 1.501(r)–1(b)(19)) and offers a FAP
application form to the individual before
discharge from the hospital facility;
(B) Includes a plain language summary
of the FAP with all (and at least three)
billing statements for the care and all other
written communications regarding the bill
provided to the individual during the noti-
fication period;
(C) Informs the individual about the
FAP in all oral communications with the
individual regarding the amount due for
the care that occur during the notification
period; and
(D) Provides the individual with at least
one written notice that—
(1) Informs the individual about the
ECAs the hospital facility or other autho-
rized party may take if the individual does
not submit a FAP application or pay the
amount due by a deadline (specified in the
notice) that is no earlier than the last day
of the notification period; and
(2) Is provided to the individual at least
30 days before the deadline specified in the
written notice.
(ii)Notification when FAP application
is submitted. If an individual submits a
complete or incomplete FAP application
to a hospital facility during the application
period, the hospital facility will be deemed
to have notified the individual about its
FAP for purposes of paragraph (c)(1)(i) of
this section as of the day the application is
submitted. However, to have made reason-
able efforts to determine whether such an
individual is FAP-eligible, the hospital fa-
cility must meet the requirements of para-
graphs (c)(3) and (c)(4) of this section, as
applicable.
(iii)When no FAP application is sub-
mitted. If an individual fails to submit
a FAP application during the notification
period (or, if later, by the deadline speci-
fied in the written notice described in para-
graph (c)(2)(i)(D) of this section) and the
hospital facility has notified (and docu-
mented that it has notified) the individual
as described in paragraph (c)(2)(i) of this
section, the hospital facility will have satis-
fied paragraph (c)(1)(i) of this section. Un-
til and unless the individual subsequently
submits a FAP application during the re-
mainder of the application period, para-
graphs (c)(1)(ii) and (c)(1)(iii) do not ap-
ply. As a result, the hospital facility will
August 6, 20121462012–32 I.R.B.

have made reasonable efforts to determine
whether the individual is FAP-eligible and
may engage in one or more ECAs against
the individual.
(iv)Example. The following example
illustratesthisparagraph(c)(2):
Example. Individual A receives care from hospi-
tal facility T on February 1 and February 2. When
A is discharged from T on February 2, T gives A
its FAP application form and a plain language sum-
maryofitsFAP.OnMarch1,April15,andMay30,
T sends A billing statements that include a one-page
insert that provides a plain language summary of the
FAP. With the May 30 billing statement, T also in-
cludes a letter that informs A that if she does not pay
the amount owed or submit a FAP application form
by June 29 (120 days after the first billing statement
was provided on March 1), T may report A’s delin-
quency to credit reporting agencies, seek to obtain a
judgment against A, and, if such a judgment is ob-
tained, seek to attach and seize A’s bank account or
other personal property, which are the only ECAs that
T (or any party to which T refers A’s debt) may take
in accordance with T’s billing and collections policy.
T does not have any other written or oral communi-
cations with A about her bill before June 29. T keeps
electronic records showing that it provided a plain
language summary and FAP application to A on dis-
charge and included the letter regarding ECAs and the
plain language summaries with the billing statements
sent to A. A does not submit a FAP application form
by June 29. T has made reasonable efforts to deter-
mine whether A is FAP-eligible, and thus may engage
in ECAs against A, as of June 30.
(3)Incomplete FAP applications—(i)
In general. With respect to any care pro-
vided by a hospital facility to an individual,
if the individual submits an incomplete
FAP application during the application pe-
riod, the hospital facility will have made
reasonable efforts to determine whether
the individual is FAP-eligible only if the
hospital facility—
(A) Suspends any ECAs against the in-
dividual as described in paragraph (c)(5) of
this section;
(B) Provides the individual with a writ-
ten notice that describes the additional in-
formation and/or documentation required
under the FAP or FAP application form
that the individual must submit to the hos-
pital facility to complete his or her FAP
application and includes a plain language
summary of the FAP with this notice; and
(C) Provides the individual with at least
one written notice that—
(1) Informs the individual about the
ECAs the hospital facility or other au-
thorized party may initiate or resume if
the individual does not complete the FAP
application or pay the amount due by a
completion deadline (specified in the no-
tice) that is no earlier than the later of the
last day of the application period or 30
days after the hospital facility provides the
individual with the written notice; and
(2) Is provided to the individual at least
30 days before the completion deadline.
(ii)FAP application completed by the
completion deadline. If an individual who
has submitted an incomplete FAP appli-
cation during the application period com-
pletes the FAP application by the comple-
tion deadline, the individual will be con-
sidered to have submitted a complete FAP
application during the application period,
and the hospital facility will therefore only
have made reasonable efforts to determine
whether the individual is FAP-eligible if it
meets the requirements for complete FAP
applications described in paragraph (c)(4)
of this section.
(iii)FAP application not completed
by the completion deadline. If an indi-
vidual who submits an incomplete FAP
application to a hospital facility during
the application period fails to complete
the FAP application by the completion
deadline and the hospital facility has met
the requirements described in paragraph
(c)(3)(i) of this section, the hospital fa-
cility will have made reasonable efforts
to determine whether the individual is
FAP-eligible and may initiate or resume
ECAs against the individual after the com-
pletion deadline.
(iv)Examples. The following examples
illustrate this paragraph (c)(3):
Example 1. (i) Assume the same facts as the ex-
ample in paragraph (c)(2)(iv) of this section and the
following additional facts: A submits an incomplete
FAP application to T on October 13, two weeks be-
fore the last day of the application period on Octo-
ber 27 (240 days after the first billing statement was
provided on March 1). Eligibility for assistance un-
der T’s FAP is based solely on an individual’s fam-
ily income and the instructions to T’s FAP applica-
tion form require applicants to attach certain docu-
mentation verifying family income to their applica-
tion forms. The FAP application form that A submits
to T on October 13 includes all of the required income
information, but A fails to attach the required docu-
mentation verifying her family income. After receiv-
ing A’s incomplete FAP application on October 13, T
does not initiate any new ECAs against A and does
not take any further action on the ECAs T previously
initiated against A. On October 15, a member of T’s
staff calls A to inform her that she failed to attach any
of the required documentation of her family income
and explain what kind of documentation A needs to
submit and how she can submit it. On October 16, T
sends a letter to A explaining the kind of documen-
tation of family income that A must provide to T to
complete her application and informing A about the
ECAs that T (or any other authorized party) may initi-
ate or resume against A if A does not submit the miss-
ing documentation or pay the amount due by Novem-
ber 15 (30 days after October 16). T includes a plain
language summary of the FAP with the letter. T has
met the requirements of this paragraph (c)(3).
(ii) On November 15, A provides T with the miss-
ing documentation. Because A provides the miss-
ing documentation by the completion deadline, she
has submitted a complete FAP application during the
application period. As a result, to have made rea-
sonable efforts to determine whether A is FAP-eli-
gible, T must assess the documentation to determine
whether A is FAP-eligible and otherwise meet the re-
quirements for complete FAP applications described
in paragraph (c)(4) of this section.
Example 2. Individual B receives care from hos-
pital facility U on January 10. U has established a
FAP that provides assistance to all individuals whose
household income is less than $y, and the instruc-
tions to U’s FAP application form specify the docu-
mentation that applicants must provide to verify their
household income. Upon discharge, U’s staff gives B
a plain language summary of the FAP and a copy of
its FAP application form. On January 20, B submits
a FAP application form to U indicating that he has
household income of less than $y. The FAP applica-
tion form includes all of the required income informa-
tion, but B fails to attach the required documentation
verifying household income. On February 1, U sends
B the first billing statement for the care and includes
with the statement another plain language summary
of the FAP. U also includes with the billing statement
a letter informing B that the income information he
provided on his FAP application form indicates that
he may be eligible to pay only x% of the amount
stated on the billing statement if he can provide docu-
mentation that verifies his household income. In ad-
dition, this letter describes the type of documentation
(also described in the instructions to U’s FAP appli-
cation form) that B needs to provide to complete his
FAP application. By August 30, B has not provided
the missing documentation. U sends B a written no-
tice on August 30 informing him about the ECAs U
(or any other authorized party) may initiate against
B if B does not submit the missing documentation or
pay the amount due by September 29 (240 days after
the first billing statement was provided on February 1
and the last day of the application period). B fails to
provide the missing documentation by September 29.
U has made reasonable efforts to determine whether B
is FAP-eligible, and thus may engage in ECAs against
B, as of September 30.
(4)Complete FAP applications—(i)In
general. With respect to any care provided
by a hospital facility to an individual, if
the individual submits a complete FAP ap-
plication during the application period, the
hospital facility will have made reasonable
efforts to determine whether the individual
is FAP-eligible only if the hospital facility
does the following in a timely manner—
(A) Suspends any ECAs against the in-
dividual as described in paragraph (c)(5) of
this section;
2012–32 I.R.B.147August 6, 2012

(B) Makes and documents a determina-
tion as to whether the individual is FAP-el-
igible;
(C) Notifies the individual in writing
of the eligibility determination (including,
if applicable, the assistance for which the
individual is eligible) and the basis for this
determination;
(D) If the hospital facility determines
the individual is FAP-eligible, does the fol-
lowing—
(1) Provides the individual with a
billing statement that indicates the amount
the individual owes as a FAP-eligible in-
dividual and shows, or describes how the
individual can get information regarding,
the AGB for the care and how the hospital
facility determined the amount the indi-
vidual owes as a FAP-eligible individual;
(2) If the individual has made payments
to the hospital facility (or any other party)
for the care in excess of the amount he or
she is determined to owe as a FAP-eligible
individual, refunds those excess payments;
and
(3) Takes all reasonably available mea-
sures to reverse any ECA (with the ex-
ception of a sale of debt) taken against
the individual to collect the debt at issue;
such reasonably available measures gener-
ally include, but are not limited to, mea-
sures to vacate any judgment against the
individual, lift any lien or levy on the in-
dividual’s property, and remove from the
individual’s credit report any adverse in-
formation that was reported to a consumer
reporting agency or credit bureau.
(ii)Determination based on complete
FAP applications. If a hospital facility
has met the requirements described in
paragraph (c)(4)(i) of this section and not
violated the anti-abuse rule described in
paragraph (c)(4)(iii) of this section, the
hospital facility has made reasonable ef-
forts to determine whether the individual
is FAP-eligible and may initiate or resume
ECAs against the individual. To have
made reasonable efforts to determine the
FAP-eligibility of an individual who has
submitted a complete FAP application
during the application period, the hospital
facility must meet the requirements de-
scribed in this paragraph (c)(4) regardless
of whether the hospital facility has previ-
ously made such reasonable efforts under
paragraphs (c)(2)(iii) or (c)(3)(iii) of this
section.
(iii)Anti-abuse rule for complete FAP
applications. A hospital facility will not
have made reasonable efforts to determine
whether an individual is FAP-eligible if
the hospital facility bases its determination
that the individual is not FAP-eligible on
information that the hospital facility has
reason to believe is unreliable or incorrect
or on information obtained from the indi-
vidual under duress or through the use of
coercive practices. For purposes of this
paragraph (c)(4)(iii), a coercive practice
includes delaying or denying emergency
medical care to an individual until the in-
dividual has provided the requested infor-
mation.
(iv)Presumptive eligibility permitted.
A hospital facility will have made reason-
able efforts to determine whether an indi-
vidual is FAP-eligible if the hospital facil-
ity determines that the individual is eligi-
bleforthemostgenerous assistance (in-
cluding free care) available under the FAP
based on information other than that pro-
vided by the individual as part of a com-
plete FAP application and the hospital fa-
cility meets the requirements described in
paragraph (c)(4)(i) of this section.
(v)Examples. The following examples
illustrate this paragraph (c)(4):
Example 1. V is a hospital facility with a FAP
under which the specific assistance for which an in-
dividual is eligible depends exclusively upon that in-
dividual’s household income. The most generous as-
sistance offered for care under V’s FAP is 90 percent
off of gross charges up to a maximum amount due of
$1,000. On March 3, D, an individual, receives care
from V, the gross charges for which are $500. Al-
though D does not submit a FAP application to V, V
learns that D is eligible for certain benefits under a
state program that bases eligibility on household in-
come. Based on this knowledge, V determines that
D is eligible under V’s FAP to receive the most gen-
erous assistance under the FAP, resulting in D owing
$50 (90 percent off of the $500 in gross charges) for
the March 3 care. V documents this determination,
and, on March 21, sends D a billing statement that in-
forms him that V determined he was eligible for the
90% discount based on his eligibility for the benefits
under the state program and the fact that his bill, after
the discount, was not more than $1,000. This billing
statement indicates an amount owed of $50, shows
that V arrived at $50 by applying a 90 percent dis-
count to the gross charges for the care, and provides
a telephone number D can call to obtain the AGB for
the care he received. V has made reasonable efforts
to determine whether D is FAP-eligible as of March
21.
Example 2. Individual C receives care from hos-
pital facility W on September 1. W has established
a FAP that provides assistance only to individuals
whose family income is less than or equal to x% of
the Federal Poverty Level (FPL), which, in the case of
C’sfamilysize,is$y.Upondischarge,W’sstaffgives
C a plain language summary of the FAP and a FAP
application form and informs C that if she needs as-
sistance in filling out the form, W has a social worker
on staff who can assist her. C expresses interest in
getting assistance with a FAP application while she
is still on site and is directed to K, one of W’s so-
cial workers. K explains the eligibility criteria in W’s
FAP to C, and C realizes that to determine her family
income as a percentage of FPL she needs to look at
her prior year’s tax returns. On September 20, after
returning home and obtaining the necessary informa-
tion, C submits a FAP application to W that contains
all of the information and documentation required
in the FAP application form instructions. W’s staff
promptly examines C’s FAP application and, based
on the information and documentation therein, deter-
mines that C’s family income is well in excess of $y.
On October 1, W sends C her first billing statement
for the care she received on September 1. With the
billing statement, W includes a letter informing C that
she is not eligible for financial assistance because her
FAP application indicates that she has family income
in excess of x% of FPL ($y for a family the size of
C’s family) and W only provides financial assistance
to individuals with family income that is less than x%
of FPL. W has made reasonable efforts to determine
whether C is FAP-eligible as of October 1.
Example 3. E, an individual, receives care from
P, a hospital facility, in February. P provides E with
the first billing statement for the care on March 1. P
notifies E about its FAP as described in paragraph
(c)(2)(i) of this section, but E fails to submit a FAP
application by P’s specified deadline of June 30 (120
days after the initial March 1 billing statement and the
last day of the notification period). In September, P
seeks and obtains a judgment against E, in which the
court determines that E owes P $1,200 for the care
P provided and states that E has 30 days to pay this
amount. E does not pay any of the $1,200 in 30 days.
By October 20, P has seized E’s bank account and
obtained a total of $450 in funds from the account.
E submits a complete FAP application to P on Oc-
tober 20, before the last day of the application pe-
riod on October 27 (240 days after the initial March 1
billing statement). Upon receiving this application, P
does not seize any additional funds from E’s bank ac-
count and also does not initiate any additional ECAs
against E. P promptly examines the application and
determines that E is eligible under P’s FAP to receive
a discount that results in E only owing $150 for the
care she received. P also determines that the AGB
for the care is $500. P documents this determination,
seeks to vacate the judgment against E, lifts the levy
on E’s bank account, and sends E a letter that informs
her about the FAP discount for which she is eligible
and explains the basis for this eligibility determina-
tion. P includes with this letter a check for $300 (the
$450 that P seized from E’s bank account minus the
$150 that E owes as a FAP-eligible individual) and a
billing statement that indicates a $300 refund, shows
how P applied the FAP discount for which E is eli-
gible to arrive at an amount owed of $150, and states
that the AGB for the care is $500. P has made reason-
able efforts to determine whether E is FAP-eligible.
Example 4. R, a hospital facility, has established
a FAP that provides financial assistance only to indi-
viduals whose family income is less than or equal to
x% of the Federal Poverty Level (FPL), as based on
August 6, 20121482012–32 I.R.B.

their prior year’s federal tax return. Individual L re-
ceives care from R. While L is being discharged from
R, she is approached by M, an employee of a debt col-
lection company that has a contract with R to handle
all of R’s patient billing. M asks L for her family in-
come information, telling L that this information is
needed to determine whether L is eligible for finan-
cial assistance. L tells M that she does not know what
her family income is and would need to consult her
tax returns to determine it. M tells L that she can just
provide a “rough estimate” of her family income. L
states that her family income may be around $y, an
amount slightly above the amount that would allow
her to qualify for financial assistance. M enters $y on
the income line of a FAP application form with L’s
name on it and marks L as not FAP-eligible. Based
on M’s information collection, R determines that L
is not FAP-eligible and notifies L of this determina-
tion with her first billing statement. Because M had
reason to believe that the income estimate provided
by L was unreliable, R has violated the anti-abuse
rule described in paragraph (c)(4)(iii) of this section.
Thus, R has not made reasonable efforts to determine
whether L is FAP-eligible.
(5)Suspending ECAs while a FAP ap-
plication is pending. If an individual sub-
mits a complete or incomplete FAP appli-
cation during the application period, the
hospital facility will have made reasonable
efforts to determine whether the individ-
ual is FAP-eligible only if the hospital fa-
cility does not initiate any ECAs, or take
further action on any previously-initiated
ECAs, against the individual after receiv-
ing the application and until either—
(i) The hospital facility has met the re-
quirements described in paragraph (c)(4)
of this section; or
(ii) In the case of an incomplete FAP
application, the completion deadline has
passed without the individual having com-
pleted the FAP application.
(6)Waiver does not constitute reason-
able efforts. For purposes of this paragraph
(c), obtaining a signed waiver from an indi-
vidual, such as a signed statement that the
individual does not wish to apply for as-
sistance under the FAP or receive the in-
formation described in paragraphs (c)(2)
or (c)(3) of this section, will not constitute
a determination of FAP-eligibility and will
not satisfy the requirement to make reason-
able efforts to determine whether the indi-
vidual is FAP-eligible before engaging in
ECAs against the individual.
(7)Agreements with other parties.Ifa
hospital facility refers or sells an individ-
ual’s debt to another party during the ap-
plication period, the hospital facility will
have made reasonable efforts to determine
whether the individual is FAP-eligible only
if it first obtains (and, to the extent appli-
cable, enforces) a legally binding written
agreement from the party that—
(i) In the case of any debt referred to
the party during the notification period, the
partywillrefrainfromengaginginECAs
against the individual until the hospital fa-
cility has met (and documented that it has
met) the requirements necessary to have
made reasonable efforts under paragraph
(c)(2)(iii), (c)(3)(iii), or (c)(4)(ii) of this
section;
(ii) If the individual submits a FAP ap-
plication during the application period, the
party will suspend any ECAs against the
individual as described in paragraph (c)(5)
of this section;
(iii) If the individual submits a FAP ap-
plication during the application period and
the hospital facility determines the individ-
ual to be FAP-eligible, the party will do the
following in a timely manner—
(A) Adhere to procedures specified in
the agreement that ensure that the individ-
ual does not pay, and has no obligation to
pay, the party and the hospital facility to-
gether more than he or she is required to
pay as a FAP-eligible individual; and
(B) If applicable and if the party (rather
than the hospital facility) has the author-
ity to do so, takes all reasonably avail-
able measures to reverse any ECA (other
than the sale of a debt) taken against
the individual as described in paragraph
(c)(4)(i)(D)(3) of this section; and
(iv) If the party refers or sells the debt to
yet another party during the application pe-
riod, the party will obtain a written agree-
ment from that other party including all of
the elements described in this paragraph
(c)(7).
(8)Clear and conspicuous placement.
A hospital facility may print any written
notice or communication described in this
paragraph (c), including any plain lan-
guage summary of the FAP, on a billing
statement or along with other descrip-
tive or explanatory matter, as long as the
required information is conspicuously
placed and of sufficient size to be clearly
readable.
§ 1.501(r)–7. Effective/applicability
dates.
(a)Statutory effective/applicability
date—(1)In general. Except as provided
in paragraph (a)(2) of this section, section
501(r) applies to taxable years beginning
after March 23, 2010.
(2)Community health needs assess-
ment. The requirements of section
501(r)(3) apply to taxable years beginning
after March 23, 2012.
(b)Effective/applicability date of reg-
ulations. The rules of § 1.501(r)–1 and
§§ 1.501(r)–4 through 1.501(r)–6 apply to
taxable years beginning on or after the
date these regulations are published as fi-
nal regulations in theFederal Register.
Sarah Hall Ingram,
Acting Deputy Commissioner
for Services and Enforcement.
(Filed by the Office of the Federal Register on June 22, 2012,
11:15 a.m., and published in the issue of the Federal Register
for June 26, 2012, 77 F.R. 38148)
2012–32 I.R.B.149August 6, 2012

Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the ef-
fect:
Amplifieddescribes a situation where
no change is being made in a prior pub-
lished position, but the prior position is be-
ingextendedtoapplytoavariationofthe
fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that the
same principle also applies to B, the earlier
ruling is amplified. (Compare withmodi-
fied,below).
Clarifiedis used in those instances
where the language in a prior ruling is be-
ing made clear because the language has
caused, or may cause, some confusion.
It is not used where a position in a prior
ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modifiedis used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
withamplifiedandclarified, above).
Obsoleteddescribes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used in
a ruling that lists previously published rul-
ings that are obsoleted because of changes
in laws or regulations. A ruling may also
be obsoleted because the substance has
been included in regulations subsequently
adopted.
Revokeddescribes situations where the
position in the previously published ruling
is not correct and the correct position is
beingstatedinanewruling.
Supersededdescribes a situation where
the new ruling does nothing more than re-
state the substance and situation of a previ-
ously published ruling (or rulings). Thus,
the term is used to republish under the
1986 Code and regulations the same po-
sition published under the 1939 Code and
regulations. The term is also used when
it is desired to republish in a single rul-
ing a series of situations, names, etc., that
were previously published over a period of
time in separate rulings. If the new rul-
ing does more than restate the substance
of a prior ruling, a combination of terms
is used. For example,modifiedandsu-
persededdescribes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is self
contained. In this case, the previously pub-
lished ruling is first modified and then, as
modified, is superseded.
Supplementedis used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names in
subsequent rulings. After the original rul-
ing has been supplemented several times, a
new ruling may be published that includes
the list in the original ruling and the ad-
ditions, and supersedes all prior rulings in
the series.
Suspendedis used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of cases
in litigation, or the outcome of a Service
study.
Abbreviations
The fol
lowing abbreviations in current use
and for
merly used will appear in material
publis
hedintheBulletin.
A—Individual.
Acq.—A
cquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank
.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cu
mulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Coo
perative.
Ct.D.—Court Decision.
CY—County.
D—Decede
nt.
DC—Dummy Corporation.
DE—Donee.
Del. Order
—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Emp
loyer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduc
iary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Fo
reign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Fed
eral Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grante
e.
GP—General Partner.
GR—Grantor.
IC—Insura
nce Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited
Partner.
LR—Lessor.
M—Minor.
Nonacq.—No
nacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Persona
l Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Pa
rtnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Re
al Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsi
diary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target
Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Trans
feree.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpay
er.
TR—Trust.
TT—Trustee.
U.S.C.—Uni
ted States Code.
X—Corporation.
Y—Corporation.
Z—Corporat
ion.
August 6, 2012i2012–32 I.R.B.

Numerical Finding List
1
Bulletins 2012–27 through 2012–32
Announcements:
2012-26, 2012-27 I.R.B.8
2012-27, 2012-27 I.R.B.10
2012-28, 2012-27 I.R.B.10
Notices:
2012-39, 2012-31 I.R.B.95
2012-44, 2012-28 I.R.B.45
2012-45, 2012-29 I.R.B.59
2012-46, 2012-30 I.R.B.86
2012-47, 2012-31 I.R.B.98
2012-48, 2012-31 I.R.B.102
2012-49, 2012-31 I.R.B.119
2012-50, 2012-31 I.R.B.121
Proposed Regulations:
REG-134042-07, 2012-27 I.R.B.5
REG-153627-08, 2012-29 I.R.B.60
REG-125570-11, 2012-30 I.R.B.93
REG-130266-11, 2012-32 I.R.B.126
REG-134935-11, 2012-29 I.R.B.64
REG-141832-11, 2012-28 I.R.B.54
REG-107889-12, 2012-28 I.R.B.53
REG-113738-12, 2012-29 I.R.B.66
Revenue Procedures:
2012-28, 2012-27 I.R.B.4
2012-29, 2012-28 I.R.B.49
Revenue Rulings:
2012-19, 2012-28 I.R.B.16
2012-20, 2012-27 I.R.B.1
2012-21, 2012-32 I.R.B.123
Treasury Decisions:
9591, 2012-28 I.R.B.32
9592, 2012-28 I.R.B.41
9593, 2012-28 I.R.B.17
9594, 2012-29 I.R.B.57
9595, 2012-30 I.R.B.71
9596, 2012-30 I.R.B.84
1
A cumulative list of all revenue rulings, revenueprocedures, Treasury decisions, etc., publishedin Internal Revenue Bulletins 2012–1 through 2012–26 is in Internal Revenue Bulletin
2012–26, dated June 25, 2012.
2012–32 I.R.B.iiAugust 6, 2012

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2012–27 through 2012–32
Proposed Regulations:
REG-100276-97
Withdrawn by
Ann. 2012-27, 2012-27 I.R.B.10
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2012–1 through 2012–26 is in Internal Revenue Bulletin 2012–26, dated June 25, 2012.
August 6, 2012iii2012–32 I.R.B.

2012–32 I.R.B.August 6, 2012

August 6, 20122012–32 I.R.B.

Internal Revenue Service
W
ashington,DC20224
Official Business
Penalty for Private Use, $300
INTERNAL REVENUE BULLETIN
The Introduction at the beginning of this issue describes the purpose and content of this publication. The weekly Internal Revenue
Bulletin is sold on a yearly subscription basis by the Superintendent of Documents. Current subscribers are notified by the Superin-
tendent of Documents when their subscriptions must be renewed.
CUMULATIVE BULLETINS
The contents of this weekly Bulletin are consolidated semiannually into a permanent, indexed, Cumulative Bulletin. These are sold
on a single copy basis andare notincluded as part of the subscription to the Internal Revenue Bulletin. For the foreseeable future,
the IRS will not create Cumulative Bulletins after the 2008–2 edition. Subscribers to the weekly Bulletin are notified when copies of
the Cumulative Bulletin are available. Certain issues of Cumulative Bulletins are out of print and are not available. Persons desiring
available Cumulative Bulletins, which are listed on the reverse, may purchase them from the Superintendent of Documents.
ACCESS THE INTERNAL REVENUE BULLETIN ON THE INTERNET
You may view the Internal Revenue Bulletin on the Internet at www.irs.gov. Select Businesses. Under Businesses Topics, select
More Topics. Then select Internal Revenue Bulletins.
INTERNAL REVENUE BULLETINS ON CD-ROM
Internal Revenue Bulletins are available annually as part ofPublication 1796 (Tax Products CD-ROM). The CD-ROM can be
purchased from National Technical Information Service (NTIS) on the Internet at www.irs.gov/cdorders (discount for online orders)
or by calling 1-877-233-6767. The first release is available in mid-December and the final release is available in late January.
HOW TO ORDER
Check the publications and/or subscription(s) desired on the reverse, complete the order blank, enclose the proper remittance,
detach entire page, and mail to the Superintendent of Documents, P.O. Box 979050, St. Louis, MO 63197–9000. Please allow two to
six weeks, plus mailing time, for delivery.
WE WELCOME COMMENTS ABOUT THE INTERNAL
REVENUE BU
LLETIN
If you have
comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it, we
would be p
leased to hear from you. You can email us your suggestions or comments through the IRS Internet Home Page (www.irs.gov)
or write t
o the IRS Bulletin Unit, SE:W:CAR:MP:T:M:S, Washington, DC 20224.