Nonprofit hospitals currently face an uphill battle filled with uncertainty and confusion regarding real property tax exemption. The issues facing nonprofit hospitals have been slowly brewing, evolving over decades throughout various states; however, the fight for the real property tax exemption has recently cast a bright spotlight on New Jersey. New Jersey came into national view when one of the state’s largest and nationally ranked hospitals lost its tax-exempt status in the 2015 New Jersey Tax Court decision, AHS Hospital Corporation v. Township of Morristown.
A municipality challenging the nonprofit hospital property tax exemption is nothing new: it has occurred since the 1950s. Current trends show that when municipalities run low on capital they challenge nonprofit hospitals’ real property tax exemption status in a “money grabbing” attempt to compensate for a lack in local tax revenues. In order to solve decades of uncertainty, states should enact a hospital contribution fee as New Jersey attempted in late 2015.