New Jersey Hospitals Find Tax-Exempt Status Challenged

Morristown Memorial Hospital

As hospitals continue to evolve their business models in the face of rapid health-care industry change, some have faced questions about their traditional tax-exempt status. 

Last year, Morristown Medical Center in New Jersey agreed to pay $15.5 million in property tax after a judge ruled the hospital engages in some for-profit services. The hospital will now pay tax on a portion of its property used for profit-generating activities, such as retail. 

Some New Jersey legislators are drafting bills to standardize the process for determining nonprofit vs for-profit status, or to establish formulas for payment in lieu of taxes. This is opposed by municipalities looking to pursue revenue on a case-by-case basis. 

A bill last year would have imposed new fees on hospitals in lieu of tax payments. Governor Chris Christie declined to sign the bill into law.

A dozen New Jersey municipalities have appealed the nonprofit status of local hospitals since the Morristown decision, NJ.Com reports

The latest is North Bergen, which voted Feb. 24 to sue Palisades Medical Center over its tax status.

Read more about this issue in NJ Spotlight »

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