Donated Space

Question: Our hospital is leasing a floor on one of our wings to our system’s hospice program to start a "Hospice House" for patients who don't want to be at home during their final days. Our hospice program is part of our system's Senior and Community Service programs and their finances are controlled by Senior Services. They are separate from the hospital but yet we are all under the system's umbrella. We are leasing the space at a nominal fee since it is a service offered by our system and the fact that it meets a huge community need.

What can be reported as community benefit and how? The service is needed by the community and we will be collecting $390,000 less per year for the space than "market." Can we claim the $390,000 as community benefit?


From Keith Hearle of Verité Healthcare Consulting, LLC.

There are two options you might want to consider:

  • One, you can count the donated space as an "in-kind" donation. The CHA Guide and the IRS 990 Schedule H instructions speak to counting space provided to community organizations in this way, so treating this clinical space in a similar fashion is consistent with that guidance. For this option to be credible, you probably want to be sure that the nominal payment on the space in fact is nominal (i.e., $1 per year or even zero). But you’ll want a lease agreement in place to cover liability and other important matters.
  • Second, you can charge the hospice organization fair market value (FMV) for the space, but then make a community benefit cash contribution/grant to the organization that offsets the FMV amount. In other words, charge $390,000 and get paid for the space — but then separately give say $390,000 or $400,000 explicitly to help the hospice entity benefit the community. The two payments should not be exactly the same or discussed as a quid pro quo.  These are two separate transactions — FMV payment for the lease, and community benefit grant. To report cash contributions like this as community benefit there are rules that must be honored (you must restrict the use of the funds to a community benefit purpose — such as charity care to be provided by the Hospice, or Medicaid services).

Also, it's important to assure that a prudent layperson would agree that supporting the hospice, in a general sense, truly is a community benefit (meets the definition of a subsidized health service, provides services to low-income people, etc.). That's important under both scenarios.

(April 2015)

Question: We allow many outside groups to come in and use our facility for meeting space. Some of these groups, such as the Parkinson's support group, are directly related to improving health of seniors in the community. However, we do have a few groups that meet here (such as Girl Scout troops) for free but they do not relate directly to health care in the community. How do we count this? Under which category do we place these items? Can we count these costs as community benefit?

Recommendation: Donating space to health care related not-for-profit community groups can be counted as community benefit. Hosting non-health care related community groups, while not directly tied to improving health, supports the community building role of your organization and therefore should be reported as community-building.

We recommend estimating the overhead expense, staff time to set up and breakdown room, and cost of refreshments provided for the meetings. For the Parkinson's support group, the costs should be reported under Category E3. In-Kind Donation, or in the case of community building related groups, in F. Community Building. When estimating the true cost of the space, make sure to use cost (which can be derived from your organization's cost report) rather than using market rate values. For example, do not count what a local hotel might charge for a conference room, but develop an estimate of your costs.

Please Take Note: The information provided does not constitute legal or tax advice. The material is provided for informational/educational purposes only. Please consult with counsel regarding your organization's particular circumstances.