New N.J. law gives unfair tax break to non-profit hospitals making millions, lawsuit says - NJ.com
Gov. Phil Murphy signed a law earlier this year that was supposed to resolve a years-old clash between nonprofit hospitals worth billions of dollars and the communities in which they are located that get little or no property tax dollars from them.
But instead of ending the fight, the law itself has become the target of a lawsuit.
Local officials, backed by consumer advocacy groups, argue the law should be struck down because it gives lucrative nonprofit hospitals an unconstitutional tax break at the expense of everyone else taxes.
A hearing in state Superior Court in Mercer County is scheduled for Nov. 19, according to court records.
The controversy stems from a landmark tax court ruling in 2015 that found Morristown Medical Center operated largely as a for-profit hospital and therefore should pay taxes. The two sides settled on an agreement that will require the hospital pay the town $15.5 million over the next 10 years.
The ruling triggered dozens of other lawsuits by communities frustrated that most of New Jersey’s 71 hospitals are tax-exempt, nonprofit companies, but belong to sprawling, multi-billion-dollar health care systems that operate for-profit ventures.
In a state with notoriously high property taxes, elected officials want to see these hospitals share in the cost of providing police, fire and other local services. New Jerseyans pay the highest property taxes in the nation, at an average of $9,112 a year.
After years of failed attempts, state legislators in December voted on a compromise piece of legislation that required nonprofit hospitals to make “community service” payments to the host municipality every year and preserve hospitals’ tax-exempt status.
The hospitals would pay $3 per day for each hospital bed and $300 per day for each satellite emergency care facility, based on the prior year’s tally of beds and facilities, according to the law. Fees would rise 2 percent annually to cover inflationary costs. The municipality would be required to share 5% of the payment with the county government.
Lawmakers who sponsored the legislation praised the compromise because it would require hospitals “to make meaningful contributions to their community support systems” and have “tax predictability” from year to year.
But the law failed to sway opponents. In April, Vineland, Livingston, Elizabeth, and Plainsboro filed suit against the law, saying the state must enforce tax laws uniformly, according to the state constitution.
“Every other taxpayer situated in a district with a hospital which qualifies for this special treatment under the bill will be required to make up the difference in the municipalities’ lost tax revenue, effectively subsidizing for-profit hospitals that are ‘nonprofit’ in name only,” according to the lawsuit.
Last week, New Jersey Citizen Action, a consumer activist group, the American Federation of Teachers and South Brunswick residents Mark and Katherine Smith filed a petition to join the lawsuit, but a judge declined the request, court records said.
Renée Steinhagen, executive director of the New Jersey Appleseed Public Interest Law Center, which is representing these plaintiffs, has filed an amicus, “friend of the court” brief in support of the original lawsuit.
A spokeswoman for the New Jersey Hospital Association declined to comment. A representative from the Attorney General’s Office, which will represent the state, also declined to discuss the case.
Citizen Action wants to be heard in this case because “health care has become a huge profit-making industry and they should pay taxes like every other profit-making industry in this country,” Associate Director Dena Mottola Jaborska said.
“It means taxes will increase for regular people to compensate,” she added. “Health care needs to be effective and compassionate and when health care is profit driven, it is neither.”
The New Jersey League of Municipalities, the chief lobbyist for the state’s 565 communities, does not plan to join the case against the state law but supports the challenge, Executive Director Michael Cerra said.
The league testified against the bill when it was before the Legislature, arguing that the fee should be based on square footage and other elements of tax assessment “science,” he said. Lawmakers, instead, listened to the hospitals, who fought to preserve their tax-exempt status, he said.
“I think the law has a large constitutional vulnerability, and I think there is a distinct chance the law will be struck down in part or entirely by the court,” Cerra said.
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source: https://www.nj.com/business/2021/10/new-nj-law-gives-unfair-tax-break-to-non-profit-hospitals-making-millions-lawsuit-says.html
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