Monday, October 18, 2010

Another Property Tax Fight with a Hospital

The New Jersey Star-Ledger reports on another fight between a local community and a nonprofit hospital over property taxes.  Morristown is seeking $1 million in back taxes from Morristown Memorial Hospital relating to property that the hospital leases to doctors for their offices.  The hospital, which has already lost in state court, plans to appeal, but the city apparently isn't done, yet, either: the story quotes the mayor saying, "There is a lot more of the hospital that we believe that could be taxed."

While I'm not an expert on New Jersey property tax law, in most jurisdictions property is exempt from tax only if the property is both owned AND USED for charitable purposes, and many states tax property owned by charities that is leased to for-profit businesses or otherwise used for for-profit purposes.  This appears to be the grounds on which the trial court held against the hospital.

More importantly, the court refused to dismiss issues raised by Morristown regarding the overall exemption of the hospital.  The judge cited various disclosures on the hospital's form 990, particularly the levels of executive compensation and charity care, that according to the judge raised material issues regarding whether the hospital as a whole was operated for profit.

This is a case that may bear watching in the future.

JDC

http://lawprofessors.typepad.com/nonprofit/2010/10/another-property-tax-fight-with-a-hospital.html

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