Tax-exempt classification of nonprofit hospitals has been increasingly subject to federal and state examination. Considering the benefits tax-exempt entities receive, it should not be surprising that these organizations face heavy regulatory scrutiny. The problem for tax-exempt hospitals is the lack of a clear and concise definition of charity care in order to maintain exempt status. State and local regulations aside, the IRS has not presented a consistent position regarding standards for nonprofit hospitals. This paper examines the evolution of hospital tax-exempt status and its relationship to charity care. Given the IRS's evolving and conflicting definitions of charity care, we can expect this issue to be debated for a long time to come.