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Posted on: September 21, 2020

Hospital Property Tax Bill Advances

Yesterday, the Assembly Appropriations Committee advanced with committee amendments A-1135, a bill which the League opposes. A-1135 seeks to address the ongoing issue of property tax exemptions for nonprofit hospitals with on-site for-profit medical providers. The issue stems from a tax court decision which brought to light how the business model for modern hospitals does not comport with the original public policy reasons for exempting non-profit hospitals from property taxes.

While the League is supportive of a legislative solution to this issue and continues to work with the sponsors on a solution, A-1135 is not a proper solution. As a threshold matter, the bill sets up an unconstitutional tax exemption. Notwithstanding the constitutional issues, A-1135 poses other concerns as it attempts to create a Community Service Contribution (CSC) fee which would be paid by hospitals organized as non-profits in lieu of any property tax. The CSC fee is calculated based on the amount of licensed acute-care beds in a hospital which, based on industry trends, would mean the fee would be reduced each year as hospitals move away from these types of beds.

The contemplated CSC fee would be far smaller than any property tax bill to which these hospitals would otherwise be subject, and would effectively serve as a subsidy to an otherwise profitable industry paid for by all other property taxpayers of host communities.

We do welcome some of the committee amendments made to A-1135, including the removal of provisions of the bill that would have voided the settlements and agreements some host municipalities have already made with hospitals in their communities. The amendments also remove a section of the bill as introduced that would have required payments already made under negotiated agreements to municipalities to be reimbursed to hospitals. However, even with these changes, the League remains opposed to A-1135.

We anticipate the bill will be brought to the full Assembly for a vote. We urge our members, especially those hosting non-profit hospitals, to review A-1135 and to reach out to your legislators expressing how this legislation would impact your community and your taxpayers.

Contact: Frank Marshall, Esq., Associate General Counsel, fmarshall@njlm.org, 609-695-3481 x137.

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