A Dozen NJ Municipalities File “A Flurry” of Tax Appeals on Nonprofit Hospitals

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February 24, 2016; Star-Ledger (Newark, NJ)

NPQ has been following the discussion in New Jersey about property tax exemptions for nonprofit hospitals. As readers may remember, a judge ruled that the Morristown Medical Center was largely not exempt from property taxes because it housed many activities that were profit-making and paid top executives too well. He termed the modern nonprofit hospital a “legal fiction” and wrote that “the hospital in Morristown created ‘labyrinthine corporate structures, intertwined with both non-profit and for-profit subsidiaries and unaffiliated corporate entities.’” A subsequent settlement between the town and the hospital totaled $15.5 million.

With that, the hospital association gathered its supporters and tried to get a bill passed quickly that would inure them from such suits in return for a more contained payment program, but municipalities were not in favor. That bill got a pocket veto from Governor Chris Christie. Another attempt to rush a bill through apparently went nowhere.

Now, a dozen New Jersey municipalities have filed actions against the nonprofit hospitals in their localities. Martin Allen, who represented Morristown in its suit, says that he has filed tax appeals for Belleville, Freehold, Long Branch, New Brunswick, Rahway, Raritan Township, and Summit. Reportedly there are five more suits, though they are not named in this report.

“We know of 12 hospitals that received notice that the municipality planned to pursue ‘omitted assessments’ from prior years,” said hospital association spokeswoman Kerry McKean Kelly. “But we’re in a period from now through April 1st where municipalities can file tax appeals. We don’t have a count on those because it’s so fluid. It seems like every day we’re hearing of a new one.”

The disputes recently filed include: New Brunswick challenging Robert Wood Johnson University Hospital; Freehold challenging Centrastate Medical Center; Summit challenging Overlook; Belleville challenging Clara Maass Medical Center; Raritan Township challenging Hunterdon Medical Center; Long Branch challenging Monmouth Medical Center; and Rahway challenging Robert Wood Johnson University Hospital.—Ruth McCambridge