New Jersey’s nonprofit hospitals, which are traditionally exempt from paying taxes, would have to make payments to their host communities to cover the cost of municipal services under a new bill making its way through the state legislature, according to a report from BloombergBusiness.
Lawmakers are responding to a June court ruling that found that the 40-acre Morristown Medical Center owed local property taxes because of “blurred lines” between its nonprofit and for-profit businesses. The 687-bed hospital’s owner agreed to pay the town $15.5 million over the next decade.
The decision opened the door for other municipalities that host nonprofit businesses, including hospitals and universities, to challenge their tax-exempt status. Hospitals in Illinois, Pennsylvania, and Iowa also have come under scrutiny as towns struggle to balance budgets.
The judge who issued the Morristown ruling is also presiding over a lawsuit against Princeton University. Residents are challenging the university’s tax-exempt status because it collects drug-patent royalties that it shares with faculty.
Democratic New Jersey Senator Joseph Vitale is co-sponsoring a bill that would establish a payment formula for nonprofit hospitals that have for-profit businesses, such as doctor groups. The legislation would obligate the hospitals to make “community service contributions” of $2.50 per bed per day to host municipalities to defray costs such as police, fire, and ambulance crews. Many poor, inner-city hospitals or those deemed money-losing by the state would be exempt under the bill, which passed a Senate committee this month.
In New Jersey, property taxes make up almost all of the local revenue used to fund town, county, and school budgets. While hospitals can serve as a community’s economic anchor, the towns –– and their residents –– are footing the bill for the cost of services, such as police and fire.
Source: BloombergBusiness; December 28, 2015.