Dimmit Regional Hospital

“Reconciliation of revenue per audited financial statements with return: bad debt expense $(6,035,068) interest expense (57,050) ------------ total $(6,092,118)”

“Reconciliation of expenses per audited financial statements with return: bad debt expense $6,035,068 interest expense 57,050 ----------- total $6,092,118”

“Liability for Uncertain Tax Positions: As an essential government function, the District is exempt from federal and state income taxes under Section 115 of the Internal Revenue Code and a similar provision of state law. The Hospital has been recognized as exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code and a similar provision of state law. However, the Hospital is subject to federal income tax on any unrelated business taxable income. The Hospital files tax returns in the U.S. federal jurisdiction. In 2012, the Hospital received notice from the IRS that its tax-exempt status had been automatically revoked, effective February 15, 2011. The Hospital believes the revocation to be an error and filed an application for retroactive reinstatement of its tax-exempt status with reasonable cause. The Hospital received a determination of exempt status effective November 5, 2012, the date of filing of the new application. The Hospital may be assessed penalties, interest and tax for the time period between February 15, 2011 and November 4, 2012, if the request for retroactive reinstatement with reasonable cause is not approved. However, the Hospital believes it is probable that the penalties, interest and tax will be abated with the retroactive reinstatement, which is currently under review by the Internal Revenue Service. Management currently estimates the amount of tax owed for the time period between February 15, 2011 and November 4, 2012, to be $95,000 to $237,000, however, the Hospital believes it is more-likely-than-not that its tax-exempt status will be retroactively reinstated and no provision is made in these financial statements. The Affordable Care Act requires hospitals to conduct Community Health Needs Assessments (CHNAs) every three years. The due date of initial CHNA under Affordable Care Act was September 30, 2013. The Hospitals CHNA was not completed and adopted by the board of directors until April 2014. Due to the untimely adoption of the Hospitals CHNA, the Hospital paid an excise tax penalty of $50,000 in 2015 that was applied to the 2013 tax filing. The Hospitals tax filing for the year ended September 30, 2014 was under audit as of September 30, 2017, but concluded subsequent to year with no fines due.”