Tuesday, August 27, 2013
For at least three decades, one of the central theoretical and practical debates about tax-exemption has revolved around nonprofit hospitals - in particular, whether they are "charities" that deserve exemption, either under federal law, or under state property tax exemption provisions. I make no secret about where I fall on that debate: my view is that many (maybe most, but not all) private nonprofit hospitals are simply big businesses selling health care services for a fee. They have about as much in common with traditional notions of charity as Apple Computer or Ford Motor Corporation, and deserve exemption as much as those companies.
Now it appears that the focus may be shifting to universities. We have blogged in the past about the lawsuit against Princeton, essentially claiming that at least certain buildings should not be exempt from property taxes because of their commercial uses. Then a few days ago, James Piereson and Naomi Schaefer Riley penned an opinion piece in the Wall Street Journal (may be paywall protected) about Princeton and other universities' commercialization and how it might affect exemption. Another such piece appeared yesterday in The Norman Transcript by independent columnist Taylor Armerding.
Armerding's article is notable mostly for its histrionics, but it is interesting that the piece pushes the same buttons that have been pushed in the hospital industry for years: high salaries for executives (university presidents) and some faculty; ever-increasing costs for "customers" (students in this case, instead of patients). So far we haven't seen muckraking stories about universities using collection agencies and "body attachments" to collect on student loans, but one wonders whether that is not far off given the debt loads at today's most prestigious institutions (and even some less-prestigious ones). Add this to the almost-weekly calls for college athletic program reforms, and you have something of at least a small storm on the "charitable-ness" of universities.
I don't (yet) have the same view of universities as I have of hospitals. Yes, universities "sell" education and big-time athletic programs are nothing more than minor leagues for the NBA and NFL, where money rules the roost. But they also are engaged in important public research (though the "public-ness" of research may be under attack as universities enter into sweetheart deals with private corporations to fund research projects and "research parks" such as the one I drive by on my way home from the University of Illinois every day) and other "knowledge-enhancing" work (presentation of artistic performances, for example) that I think is still deserving of exemption. Nonprofit hospitals largely don't do any such "public-regarding" activities (teaching hospitals excepted, but they would qualify for exemption as educational institutions anyway).
But I've got some advice for university presidents: take a look at the history of nonprofit hospitals and learn a lesson about how commercialization and lack of attention to one's public persona changes perceptions. I doubt that Princeton is going to lose it's tax exempt status in my lifetime, but assuming exemption is forever, like a diamond, might not be the best PR move. Adminsitrators at Provena-Covenant hospital in Urbana, IL, probably never thought they would lose exemption, either, and the resulting inattention to anything resembling a charitable mission is a large part of the reason that they did.