State and local governments scrambling to generate tax revenues have their eye on property, sales and other tax exemptions currently enjoyed by nonprofit groups, including not-for-profit hospitals. Minneapolis has already taken action, making charities pay streetlight fees like other businesses and residents.
Most of the tax proposals under consideration would broadly target all nonprofits, with the exception of churches. For example, Kansas might subject charities to sales and property taxes, and Hawaii might require charities to pay a 1 percent tax. In addition, the Honolulu City Council is considering raising property taxes for charities above the current annual cap of $100.
But while hospitals aren't being singled out, tapping into the wealth of prosperous not-for-profit hospitals is obviously an attractive proposition for cash-strapped governments. For example, if a proposal to cap property taxes for Indiana residents passes this November, local governments could institute user fees for police, fire and other services that would affect large nonprofits such as hospitals and universities.
In Pennsylvania, nonprofits, including the University of Pittsburgh Medical Center, have significant real estate investments, prompting calls for an "essential services" fee on charities based on property ownership. "In Pittsburgh and Allegheny County, we have a lot of nonprofits continually buying up real estate and expanding and getting bigger and bigger," says State Senator Wayne Fontana. "Each piece of property they buy becomes untaxable, which means everyone else has to pay more in property taxes just to maintain service levels."
- see this New York Times article