New Jersey bill would have non-profit hospitals make payments in lieu of taxes

New Jersey lawmakers are currently mulling legislation that would require not-for-profit organizations--including hospitals--to make payments to cover the costs of municipal services, according to Bloomberg.

The bill, if signed into law, would require not-for-profit hospitals to make payments to municipalities if they own for-profit subsidiaries, such as medical groups. The payments would not be as high as a full tax levy, but would be enough to acknowledge that not-for-profits rarely do business than they did in decades past.

According to the bill as it is currently written, hospitals would pay a "community service contribution" that would be the equivalent of $2.50 per bed per day. That would represent $365,000 a year for a 400-bed hospital.

The bill was drafted in response to Morristown Medical Center losing litigation over its tax-exempt status earlier this year when it was revoked by a New Jersey court. The Morristown municipality had claimed that the various for-profit enterprises operated by the hospital had blurred the lines between being a not-for-profit and a for-profit business.

The revocation alternately created new fears that many more hospitals in the Garden State would lose their exemptions because of the way they do business, as well as the opening of a dialogue where the leaders of some of New Jersey's biggest hospital operators suggested they were open to paying some form of tax.

"It's not a stretch to say that every nonprofit that owns property should be looking at this," Linda Czipo, executive director of the Center for Non-Profits, told Bloomberg. "We're concerned about how the whole property-tax issue might play out for the broader nonprofit community."

The state's primary hospital lobby, the New Jersey Hospital Association, is in support of the bill. "The Morristown tax court decision has created a great deal of uncertainty, for hospitals and municipalities alike," association President Betsy Ryan told the publication. "Our goal was to support a statewide solution that would strike a fair balance."

To learn more:
- read the Bloomberg article