Many New Jersey non-profit hospitals challenged on taxes

On the heels of a court loss and legal settlement last year, many non-profit hospitals in New Jersey are facing a challenge from local municipalities regarding their tax exemptions, has reported

The aggressive actions being taken in New Jersey are the result of Morristown Medical Center, which lost its tax exemption status last June when it was thrown out by a state tax court judge. In that decision, the judge said excessive compensation paid to the hospital's chief executive officer--some $12 million in three years--belied its mission as a not-for-profit, community oriented institution, as well as through a set of labyrinth corporate structures Morristown's management had created.

Atlantic Health, Morristown's corporate parent, settled the dispute with the municipality for $25 million, including $10 million upfront, an action many experts say would open the floodgates for more cases.

"We know of 12 hospitals that received notice that the municipality planned to pursue 'omitted assessments' from prior seems like every day we're hearing of a new one," New Jersey Hospital spokesperson Kerry McKean Kelly told

Martin Allen, the attorney who represented Morristown in the successful legal battle, told he has filed tax appeals for the municipalities of Belleville, Freehold, Long Branch, New Brunswick, Rahway, Raritan Township and Summit.

Similar struggles are now occurring in Illinois, where a judge threw out the state's 2012 law that exempts not-for-profit hospitals from paying taxes, concluding that it is unconstitutional. As a result, at least two hospitals in Urbana have been ordered to pay taxes to their local municipalities.

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