Children’s Hospital refuses to release tax records

ABC-7’s quest to get to the truth about the financial health of El Paso Children’s Hospital hasn’t been easy.

The station cares about unraveling the mystery because taxpayers are on the hook to pay off $120 million in bonds for the hospital.

There’s a human side too.

A Children’s Hospital employee wrote to say, “Recently, 7 positions were cut to make up for lost revenue. It’s tough seeing morale really low at work because so many people poured their tears and sweat into getting this place open.”
The hospital confirmed those terminations, and an additional consolidation of two positions into one.

Children’s Hospital has been open more than two years now. When the ABC-7 newsroom started hearing rumors of financial instability, ABC-7 Managing Editor Eric Huseby searched for the hospital’s IRS form 990 returns, which should be publicly available, but instead found none had been submitted since the hospital’s Fiscal Year 2010, well before it opened its doors.

The hospital confirmed that was the case, then sent us a lengthy email which mentioned many successful ventures at the hospital but didn’t answer the question of why it was more than a year late filing its IRS return, other than a brief mention that it was new and didn’t have historical information. No detail was provided to ABC-7 about how the hospital’s lack of historical data impacted its ability to file its tax return.

The 2011 return covers a fiscal year that ran from Oct. 1, 2011 through Sept. 30, 2012. It was due to be filed by February 15, 2013. The IRS makes it relatively easy to receive up to two 90-day extensions. Hospital CEO Larry Duncan told ABC-7 the hospital has received two extensions, and that its form 990 is now due April 16, 2014. His explanation didn’t address how the hospital received an additional eight months to complete its filing, beyond the six months that are part of a normal extension filing.

ABC-7 then requested copies of any form 8868 the hospital has filed. Form 8868 is a request for a 90 day extension in filing form 990. Line 7 on an 8868 requires the filer to list a specific reason for the request. ABC-7 management believes the answers on line 7 may contain information important to the taxpayers of El Paso County, who are already paying debt service on the bonds that built the hospital, and may yet be asked to provide financial resources to ensure the hospital’s viability.

The hospital told ABC-7, “The IRS does not require a non-profit organization to publicly disclose form 8868.”

ABC-7 management believes Texas public information law does require disclosure.
Marketing manager Georgina Panahi told us “El Paso Children’s Hospital is not a public entity,” which would require disclosure of public documents. She said the hospital is, “A separately licensed, non-taxing, independent, 501(c) (3) not-for-profit children’s hospital.”

ABC-7 managing editor Eric Huseby wrote her back, urging the hospital to consider providing the IRS extension requests as a show of good faith to the taxpayers of El Paso County.”

He received no response to that point.

Huseby also cited section 552.003(1)(A)(xii), of the Texas Government Code, which says “An entity that is supported in whole or in part by public funds or that spends public funds is a government body.”

The hospital was created with the sale of $120 million dollars in bonds.

Children’s Hospital insists it can withhold those records from the taxpayers who voted to authorize the sale of those bonds, and continue paying debt service on them.

ABC-7 has filed a formal Freedom of Information Act request for the documents.

If the hospital continues to withhold them, ABC-7 will seek the assistance of Texas Attorney General Greg Abbott in making them public.