A tax appeal case out of Morristown sparked the frenzy of litigation
TRENTON -- A state senator said he has come up with a solution to halt the flurry of tax appeals that communities are filing to challenge the nonprofit status of a dozen hospitals.
Last year's precedent-setting tax court ruling and settlement requiring Morristown Medical Center to pay Morristown $15.5 million in lieu of property taxes has created an environment "anarchy," said Sen. Joseph Vitale (D-Middlesex).
A dozen municipalities in the last two months responded by appealing the nonprofit status of the hospitals in their communities, hoping for a similar windfall to mitigate property tax hikes.
"I don't think the towns are wrong, but there has to be some level of fairness," Vitale said. "If we don't fix the law, there will be more lawsuits."
Vitale said he has introduced legislation that would preserve the tax-exempt status of nonprofit hospitals, but apply an IRS formula weighing each hospital's community contributions against its community expenses.
If its value of its community benefits, like charity care, and community-building contributions, and mentoring programs don't reach specific thresholds outweighing the hospital's expenses, the hospital would be obliged to make a payment in lieu of taxes or pay taxes outright, according to the bill, (S1306).
Any payments hospitals make would be shared proportionately between the municipality, school district, fire district and county, Vitale added.
"We have to get the bill done or someone else's. We can't have this system of anarchy we have now," Vitale said.
The legislature passed a bill last session that would have imposed a $2.50 per day hospital bed fee and a $250 per day for each satellite emergency care facility. Fees would have risen 2 percent annually to cover inflationary costs. Without explanation, Gov. Chris Christie declined to sign it into law last month and it expire.
Attorney Alan Hammer, who represents Barnabas Health hospitals in the tax appeal cases, said he hoped elected officials take action soon. There's four-year backlog in tax court.
"This whole thing is crazy. Hospitals are taking care of the people of New Jersey," Hammer said. "Hospitals are working on a very tight budget, and someone tells them they may have to pay hundreds of thousands."
Hammer lamented the governor's decision to veto the bill "because he was running for president."
Towns challenge hospitals' tax-free status
The disputes involve:
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New Brunswick vs. Robert Wood Johnson University Hospital;
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Freehold vs. Centrastate Medical Center;
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Summit vs. Overlook Hospital;
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Belleville vs. Clara Maass Medical Center;
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Raritan Township vs. Hunterdon Medical Center;
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Long Branch vs. Monmouth Medical Center;
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Rahway vs. Robert Wood Johnson University Hospital;
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Newark vs. Newark Beth Israel Medical Center;
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Livingston vs. St. Barnabas Medical Center;
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Long Branch vs. Monmouth Medical Center;
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Pequannock vs. Medical Center;
- Red Bank vs. Riverview Medical Center;
- Holmdel vs. Bayshore Community Hospital.
West Orange also filed a tax appeal against Barnabas Health's administrative office building, Hammer said.
Susan K. Livio may be reached at slivio@njadvancemedia.com. Follow her on Twitter @SusanKLivio. Find NJ.com Politics on Facebook.