A New Jersey judge has thrown out the property tax exemption for one of the state's not-for-profit hospitals. Morristown Medical Center lost its property tax exemption when Tax Court Judge Vito Bianco had ruled that the hospital had so intermingled its not-for-profit and for-profit business ventures until the two were unrecognizable, according to NJSpotlight.com.
Bianco had also dinged the hospital for excessive compensation, noting that its chief executive officer had been paid more than $12 million over a three-year period. Bianco ruled that the hospital's parking lot, fitness center and auditorium could retain their tax exemptions, primarily because they did not generate any revenues. The result: Morristown Medical Center could be on the hook for several million dollars a year in property taxes.
The ruling could wind up roiling the environment for tax-exempt hospitals through the United Sates, particularly as the Internal Revenue Service has taken a closer look at the issue over the years. Or it could prompt state legislatures to introduce bills favorable to the hospital sector.
That was the case in Illinois, which stripped Provena Health System of some of its property tax exemptions after regulators concluded it was not providing enough charity care. That led to hospital-lobbied revisions in the state's charity care regulations, which are now a nearly impenetrable thicket of language that likely guarantees no other facility will ever lose its tax exemption.
The lifting of Morristown Medical Center's exemption would likely undergo a lengthy appeals process, according to NJSpotlight.com. And lawmakers in the Garden State could draft legislation that would address the issue directly--something Judge Bianco suspected would occur.
"(If the) property-tax exemption for modern non-profit hospitals is to exist at all in New Jersey going forward, then it is a function of the Legislature and not the courts to promulgate what the terms and conditions will be," Bianco wrote in his decision. "Clearly, the operation and function of modern nonprofit hospitals do not meet the current criteria."