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Key Medicare Reimbursement Drivers for Hospitals

Significant changes in the Inflation Reduction Act of 2022 (“IRA”) allow not-for-profit hospitals to receive an IRS refund or monetize accelerated deductions with engineers and architects for certain clean energy improvements, even if no tax liability is due. While in previous taxable years, not-for-profits were limited to capturing these cash benefits only if they had unrelated business income tax (“UBIT”), under the IRA, all not-for-profits are incentivized to invest in clean energy infrastructure through the direct payment program regardless of tax liability.  

The newly created direct payment option under Internal Revenue Code §6417 generally allows tax-exempt entities to receive a cash tax refund for applicable credits, including credits related to the purchase of qualified commercial vehicles, installation of charging stations, and energy projects (i.e. solar projects, co-gen facilities, etc). In addition, the IRA allows tax-exempt entities the opportunity to provide an immediate deduction related to energy-efficient commercial buildings to the person primarily responsible for designing the building improvements, thereby assisting in price negotiation.

Join Lynn Mucenski-Keck, Withum’s National Lead on Federal Tax Policy as she goes through the various ways your hospital can claim and benefit from these credits.