Cooperating for better care.

property-tax exemption

Tag Archives

N.J. case scares hospitals classified as nonprofit


Morristown Medical Center.Atlantic Health System, which owns Morristown Medical Center, in New Jersey, will pay $26 million to that town to end a dispute over the hospital’s property-tax exemption. The case has gotten wide attention because it raises the general issue of what really constitutes a nonprofit when the organizations involved may have big cash reserves and pay big executive compensation. Indeed there’s  been intensified scrutiny of “not-for-profit” hospitals  and insurers such as Blue Cross across America in the past several years.
Modern Healthcare reported that the settlement comes after “a New Jersey tax judge ruled in June that the hospital should not be exempt, concluding that if all hospitals operate the same way, ‘then for purposes of the property-tax exemption, modern nonprofit hospitals are essentially legal fictions.”’

The publication says that “Experts say the fight in New Jersey is likely to move now to the state’s Legislature, where hospitals are expected seek concrete criteria for determining tax exemptions so they don’t find themselves in the same situation as Morristown Medical Center. ”

“Morristown Medical Center will pay the town $15.5 million, including $5.5 million in penalties and interest over the next 10 years. Also, starting next year, the medical center will start paying about $1 million in annual taxes on 24% of its property, for the next 10 years.”

The judge in the case, Vito Bianco,  had noted  the hospital’s  relationships with for-profit subsidiaries and that it owns for-profit physician practices. He said he found it difficult to distinguish Atlantic Health System’s “not-for-profit” activities from  its for-profit ones. The judge also pointed out that the hospital has paid its executives huge  salaries, including $5 million to its CEO in 2005.

Contact Info

(617) 230-4965

Wellesley, Mass