Why are FQHC Look-alikes Required to Obtain 501(c)(3) Status?

501(c)(3) status

In order for a Community Health Center to become a FQHC Look-alike, the organization must first apply for and be designated  nonprofit  501(c)(3) status by the Internal Revenue Service (IRS). This is not a requirement of the Bureau of Primary Health Care; it is a Medicare requirement.  In order to complete an application for Medicare reimbursements, Medicare mandates all nonprofit organizations show proof of 501(c)(3) status.

The Bureau does require health centers to provide proof of being a non-profit, but an IRS designation is only one form of acceptable proof. For example, on a New Access Point grant, applicants may submit  documents showing non-profit incorporation with their state government which is usually a simple process. But since Look-alikes are required to meet all 19 Program Requirements, including the ability to bill Medicare, applicants must have their federal nonprofit tax status designation before applying to the Bureau for Look-alike designation.

Steps to earn 501(c)(3) status

Unfortunately health centers are not eligible for the EZ application because their budgets exceed the $250,000 threshold.

Step 1. Establish a nonprofit corporation

Establishing a nonprofit corporation is handled at the state level when the organization files Articles of Incorporation. Most nonprofits organize as corporations for a several reasons including liability protection for the directors. During this step the nonprofit health center typically obtains a federal tax ID number (FEIN) from the IRS and prepares its bylaws; the governance rules the board of directors musta follow.

Step 2. Obtain 501(c)(3) status

Step 2 is much more involved than step 1. The nonprofit corporation must apply to the IRS for recognition of tax exemption by filing IRS Form 1023. The form itself is up to 28 pages long but with the required attachments, schedules and other materials, applications may end up exceeding 50 pages.

Think of the 501(c)(3) application process as an audit of proposed and/or previous activity. You’ll want advice from your accountant and possibly an attorney. The IRS conducts a complete review of the organization’s governing structure, purpose and planned programs to make sure that the organization is formed for exclusively 501(c)(3) purposes and that its programs are designed to fulfill these stated purposes. The IRS is also looking for any possible conflicts-of-interest or the potential for the organization to benefit insiders, which would preclude the organization from 501(c)(3) status.

How to apply for FQHC Look-alike status

Obtaining 501(c)(3) status is only one of the many steps a health center needs to complete before gaining Look-alike status. For a complete list of requirements, applicants should review the Look-alike Initial Designation web page. It provides detailed application instructions and technical assistance resources. The process can take up to two years, but with expert assistance and an application that clearly demonstrates your compliance with health center program requirements, the time line can be significantly reduced.

How can a Health Center Solutions consultant help you become an FQHC Look-Alike?

At Health Center Solutions we are dedicated to helping community health centers. We can help your center get organized and apply for FQHC Look-alike status. Our process starts with an assessment of your organization’s readiness to apply and then offers a road map to success. Health Center Solutions has a 100 percent success rate in getting Look-alike status for our clients. Health Center Solutions’ dedicated professionals are focused on providing outcome-focused, customer-driven solutions. To schedule a meeting or to request more information about our solutions, please contact us today!

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