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Charitable Hospital Exemptions. William A. Rodda, CAE, RES Forsyth County Tax Assessor/Collector. G.S. 105-278.8 (Machinery Act).
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Charitable Hospital Exemptions William A. Rodda, CAE, RES Forsyth County Tax Assessor/Collector
G.S. 105-278.8 (Machinery Act) • Real & personal property held for or owned by a hospital organized and operated as a nonstock, nonprofit, charitable institution shall be exempted from taxation if actually and exclusively used for charitable hospital purposes.
G.S. 105-278.8 (Machinery Act) • If part of a property that otherwise meets the above requirements is used for a purpose that would require exemption if the entire property were so used, the valuation of the part so used shall be exempted from taxation.
G.S. 105-278.8 • A charitable hospital purpose is a hospital purpose that has humane and philanthropic objectives; it is a hospital activity that benefits humanity or a significant rather than limited segment of the community without expectation of pecuniary profit or reward.
G.S. 105-278.8 • The fact that a qualifying hospital charges patients who are able to pay for services rendered does not defeat the exemption.
Case Notes • An applicant will not be rejected simply because it charges patients who are able to pay for their services. (In re Foundation Health Systems, 1989).
Case Notes • What is a Hospital? “…an institution for the reception and care of sick, wounded, infirm, or aged persons…” (In re Foundation Health Systems, 1989).
Case Notes • Nonprofit outpatient surgical center with operating rooms designed to render hospital services was a “hospital” (In re Foundation Health Systems, 1989).
Case Notes • Hospital day care center which assists in the recruitment and retention of hospital employees is entitled to exemption (In re Moses Cone Memorial Hospital, 1995).
G.S. 131A-21 (Medical Commission) • If bonds or notes are issued by the Commission to provide or improve a health care facility, then until the bonds or notes are retired, the facility for which bonds or notes are issued is exempt from property taxes to the extent provided in this section.
G.S. 131A-21 (Medical Commission) • Property may be exempt from property taxes as provided in this section if a timely application for the exemption is filed with the assessor of the county in which the property is located as required under G.S. 105‑282.1.
G.S. 131A-21 • The property tax exemption under this section shall not exceed the lesser of the original principal amount of the bonds or notes or the assessed value for ad valorem tax purposes of the facility.
G.S. 131A-21 • If bonds or notes are issued to finance more than one health care facility, only that portion of the principal amount of the bonds or notes used to provide or improve the particular facility, including any allocable reserves and financing costs, may be considered for the purpose of determining the amount of the exemption allowable under this section.
G.S. 131A-21 • The exemption authorized by this section shall begin with the first full tax year of the taxpayer following the issuance of the bonds and notes. This section does not affect a health care facility's eligibility for a property tax exemption under Subchapter II of Chapter 105 of the General Statutes.
G.S. 105-282.1 • Application – Every owner of property claiming exemption or exclusion from property taxes under the provisions of this Subchapter has the burden of establishing that the property is entitled to it.
G.S. 105-282.1 • Annual Review of Exempted or Excluded Property. – Pursuant to G.S. 105‑296(l), the assessor must annually review at least one‑eighth of the parcels in the county exempted or excluded from taxation to verify that the parcels qualify for the exemption or exclusion.
Tips • Who is the owner of the property? • Owned by a nonstock, nonprofit charitable hospital • Exemption by IRS under Section 501(c)(3) is not the sole determining factor! • What do they do? • “…an institution for the reception and care of sick, wounded, infirm, or aged persons…”
Tips • What do they do? • Is there an emergency room? • Do they perform actual surgical procedures? • Do they treat “sick, wounded, infirm or aged” people? • Leasing space or treating patients?
Tips • Does the facility have a charity care policy? • Self executing? • Application required? Other obstacles? • Does the facility truly accept anyone without regard to their ability to pay?
Tips • Are the prices charged for the uninsured patient the same as charges for insurance plans, Medicare and Medicaid? • Does the facility accept Medicare and Medicaid?
Tips • What was the amount of actual charity care provided by the facility? • What is “charity care”?
“Charity Care” according to IRS “free or discounted health services provided to persons who meet the organization’s criteria for financial assistance and are thereby deemed unable to pay for all or a portion of the services”
“Charity Care” according to IRS • Does not include: • Bad debt • Difference between the cost of Medicaid and Medicare and the revenue derived therefrom • Contractual adjustments with third-party payers
Tips • Many of these question will be answered by the IRS form 990 and accompanying Schedule H. • Schedule H is required effective in 2009. • www.guidestar.org
Policy Considerations • Should a clear, concise definition for “charitable hospital” and “charitable hospital purpose” be developed? • Should a minimum level of charity care (5 to 10% of revenues) be required for exemption?
Policy Considerations • Should local hospitals assist in covering the costs of local ambulance services, police and fire protection? • Should the “medical commission bond” exemption be repealed?
Charitable Hospital Exemptions William A. Rodda, CAE, RES Forsyth County Tax Assessor/Collector
