Bill > S624

Introduced Session

This bill would restore the property tax exempt status of a nonprofit hospital with on-site for-profit medical providers as long as the hospital remains organized as a nonprofit institution under State law, and would require these nonprofit hospitals to pay an annual community service contribution to their host municipalities. The bill would clarify that modern, complex nonprofit hospitals that provide nonprofit and for-profit medical services remain entitled to a property tax exemption for the portions of hospital property used for the delivery of health care services of the hospital. The bill would also make these hospitals responsible for providing some financial support to their host communities to offset the costs of public safety services, such as police and fire safety services, which directly benefit these hospitals and their employees. This bill would establish a clear and predictable system in which nonprofit hospitals make a reasonable contribution to their host communities, while providing these hospitals a measure of tax relief to help them continue to fulfill their nonprofit mission. In a 2015 decision, the Tax Court held that a nonprofit hospital was not entitled to a property tax exemption because nonprofit and for-profit medical services were provided throughout the hospital in a commingled manner that did not allow taxing authorities to distinguish taxable for-profit uses of the hospital property from tax-exempt nonprofit uses of the property. Since for-profit medical services are commonly provided at nonprofit hospitals, municipalities began challenging the property tax exempt status held by other nonprofit hospitals, creating uncertainty and questions of fairness over the tax obligations of these non-profit hospitals. This bill would eliminate any uncertainty over the property tax status of nonprofit hospitals that use for-profit medical providers to help deliver their services, but still qualify as nonprofit institutions, while ensuring that a readily calculable fair share contribution is made to compensate host communities for the significant sums they expend providing essential services that benefit these hospitals. The bill requires municipalities to provide five percent of a nonprofit hospital community service contribution to the county in which the municipality is located to offset public safety services expenses borne by the county that benefit the hospital. The bill also permits a nonprofit hospital to apply to the New Jersey Health Care Facilities Financing Authority for an exemption from a community service contribution if the hospital or its satellite emergency care facility is in financial distress or at risk of being in financial distress. Notice of such an application is required to be provided to the municipality in which the hospital or satellite emergency care facility that is the subject of the application is located. Hospitals owned by the State or any political subdivision thereof are not subject to the community service contribution required by the bill. Portions of a nonprofit hospital that are leased to or used by a for-profit medical provider to deliver services independent of those provided by the hospital would be subject to property taxation in the same manner as for-profit gift and food shops. The bill also establishes a permanent commission, known as the Nonprofit Hospital Community Service Contribution Study Commission, to study and issue a report, every three years, on the community service contribution system created by the bill. The initial report is due within one year of the first organizational meeting of the commission. The report may include any recommendations on how to improve the administration, fairness, or any other aspect of this system, but must include an assessment of the adequacy of the amount of the community service contributions.

AI Summary

Committee Categories

Paul Sarlo (D)*,  Troy Singleton (D)*, 

Senate Budget and Appropriations Hearing (19:00 10/22/2020 Due to the public health emergency, the State House Annex remain) (on 10/22/2020)

Official Document