Tax-exempt hospitals are watching two federal proposals that, if enacted, could increase Form 990 reporting expectations and federal grant oversight. As of today, neither proposal is final, and both may change before taking effect, but the proposals are worth monitoring because they point toward more detailed federal reporting, more centralized award review, and closer scrutiny of community benefit and federal funding compliance.
The first proposal, the Tax Exempt Hospital Transparency Act (H.R. 9504), would significantly expand Form 990 reporting by incorporating additional community benefit and operational disclosures currently reported elsewhere or not reported at all.
The second proposal, an Office of Management and Budget (OMB) rule revising 2 CFR Part 200 for federal financial assistance, would implement new review requirements regarding discretionary awards. For hospitals, academic medical centers, research institutions, public-health organizations, and other recipients of federal financial assistance, the practical issue with this proposal is whether existing data, cost accounting, grant documentation, and governance processes are strong enough to support more detailed review.
Expanded Form 990 Reporting
The Tax Exempt Hospital Transparency Act advanced out of the House Ways and Means Committee but still remains at an early stage and would require passage by both chambers of Congress and Presidential approval before becoming law. If enacted, the bill would add new IRC §6033A reporting requirements for tax-exempt hospital organizations, significantly expanding the information reported with the annual Form 990 filing.
The bill would require additional disclosure by tax-exempt hospital organizations around community health needs assessment priorities. Hospitals would need to report how and why needs are identified and addressed. It would also require audited financial statements, CMS certification numbers or other identifying information required by Treasury, the value at cost of financial assistance provided under the hospital’s financial assistance policy, and the number of completed financial assistance applications received, granted, and denied.
Additional reporting would apply based on size and revenue. Hospitals with more than 100 staffed inpatient beds, other than critical access hospitals and rural emergency hospitals, would face enhanced reporting tied to the three highest-priority CHNA needs, spending to address each need, actions taken, community-health impact, quality-improvement spending, nonclinical programming, and other community benefits prescribed by Treasury. Hospitals with more than $100 million in annual net patient revenue, other than critical access hospitals and rural emergency hospitals, would face additional reporting on advertising costs, service-line descriptions, gross receipts, costs and allocation methods, and 340B utilization and financial information. Except as otherwise provided by Treasury, specified items would need to be reported both organization-wide and separately for each hospital facility.
Many of the new reporting requirements would not take effect immediately if enacted, including provisions tied to HHS publication of a standardized health service line taxonomy and delayed application dates for certain smaller organizations.
Proposed OMB Grant Oversight Changes
Separately, OMB has proposed changes to 2 CFR Part 200, the government-wide framework for federal financial assistance. The proposal was published May 29, 2026, the public comment period closed July 13, 2026, and OMB has proposed an October 1, 2026, effective date if a final rule is issued. If finalized, the changes could affect new awards and certain post-effective-date funding actions.
For hospitals and related organizations, several concepts deserve attention. The proposal would add a pre-issuance review process for discretionary awards, including review by a senior political appointee and consideration of whether awards advance presidential policy priorities. It also would expand agency authority to terminate awards, in whole or in part, when an award no longer effectuates program goals, agency priorities, or the national interest.
The proposal also would restrict use of federal award funds for DEI-related policies or activities as described in the proposed rule. In addition, hospitals may need to pay close attention to grant-cost documentation, including whether advertising or public relations costs, publication costs, conference costs, and related travel require prior approval or are otherwise authorized under the award. The proposal also would eliminate fixed-amount awards and fixed-amount subawards, moving more arrangements toward cost-reimbursement documentation.
Pass-through entities would have additional responsibilities, including expanded subaward reporting and subrecipient oversight obligations under the proposed rule. For health systems that sponsor research, operate grant-funded programs, or pass federal funding to affiliates or community partners, these changes could increase the importance of centralized grant oversight.
Why Hospitals Should Prepare Now for Proposed Federal Changes
These proposals have the potential to touch many of the systems and processes hospitals already rely on to track community benefit activities, administer financial assistance programs, manage federal grants, allocate costs, and oversee subrecipients. They also reinforce the importance of coordination among tax, finance, legal, compliance, grants management, community benefit, revenue cycle, and operational teams. Hospitals do not need to make major changes based on proposals that have not yet been finalized. However, now is a good time to assess whether existing systems and processes would support the additional reporting, documentation, and oversight these proposals could require. As part of that readiness review, hospitals should consider several key areas:
- Take stock of the data currently used for Form 990 and Schedule H reporting, including community health needs assessment activities, financial assistance program information, audited financial statement data, CMS certification numbers, and facility-level community benefit reporting.
- Evaluate whether existing cost accounting systems can produce the type of information that may be needed for service-line reporting, quality improvement initiatives, community benefit programs, administrative costs, advertising expenses, 340B activity, and grant-related expenditures.
- Review financial assistance application processes to ensure completed applications, approvals, denials, and related costs can be tracked accurately and consistently.
- Examine federal grant management practices, particularly around advertising and public relations costs, publications, conferences, travel, subawards, and other expenses that may require specific approval or authorization.
- Revisit subrecipient monitoring procedures to confirm that reporting, oversight, and documentation practices are well supported.
- Identify any gaps in reporting, documentation, or internal coordination that could create implementation challenges if either proposal moves forward.
Taking a measured approach now can help hospitals identify potential issues early, improve data quality, and avoid a last-minute scramble if new requirements are ultimately enacted or finalized.
A Practical Path Forward
The best response is measured preparation. Tax-exempt hospitals should monitor the legislative and regulatory process, avoid treating proposals as current law, and identify where existing reporting and documentation may fall short if the proposals move forward. Early readiness work can help hospitals respond efficiently if the rules are finalized, while preserving flexibility until the final requirements are clear.
If you have any questions or are interested in learning more, we are here to help. Please do not hesitate to reach out to discuss your specific situation.
This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.
