ABSTRACT

The Tax Cuts and Jobs TCJA of 2017 (TCJA) made sweeping changes to the US tax code for both for-profit and tax-exempt hospitals and health care systems. The effects of the TCJA will vary for different hospitals and health care systems. Financially strong for-profit systems will likely benefit from the repeal of the corporate alternative minimum tax and the lowering of the corporate tax rates while highly leveraged systems could suffer from the new limitations on the deductibility of interest. Tax-exempt institutions are anything but exempt from the TCJA. They bear the greater burden of the TCJA by having to deal with significant new taxes on unrelated business income and compensation arrangements, and modifications to certain employee benefit arrangements. Organizations that are proactive in analyzing these changes will find ways to benefit from the TCJA while others will have to face the consequences of their passive responses. Leaders of these systems will need to assess the efficiency of their organizations and evaluate whether tax exemption remains viable.