CentraState Healthcare System, located in Freehold Township, is a private, not-for-profit health organization with 285 in-patient beds and 2,600 employees, making it one of western Monmouth County's biggest employers. Five of CentraState’s properties, ranging from the hospital to assisted-living facilities, are exempt from paying property taxes due to its nonprofit status. However, after a state Tax Court judge earlier this year ruled that Morristown Medical Center had so intermingled its nonprofit and for-profit services and finances that it could no longer qualify for a tax exemption under state law, many nonprofit New Jersey hospitals are concerned they will see similar fates. In this case, CentraState currently pays $1.7 million a year in property taxes, or about 43 percent of its maximum assessment, but could be on the hook for $2 million more.
In anticipation of an expected boom in new patients, some traditional hospital systems are shifting their expansion strategy toward mixed-use 'mini-districts,' bringing shopping, apartments, and hotels to hospital campuses. According to CoStar Group, nearly $100 billion in construction of new and expanded hospital medical office projects, both on and off the hospital campus, is under way across the U.S. In the current building boom, developers are as likely to be adding apartments, retail space and even hotels as more patient care facilities.
Morristown and the Atlantic Health System, owners of the Morristown Medical Center, finally reached a settlement, ending the closely-watched property tax battle dating back to 2006. The likelihood of a settlement increased significantly in June when Tax Court Judge Vito Bianco denied Morristown Medical Center's challenge to overturn the Morristown tax assessor's denial of tax-exempt status for portions of its operations, and ruled that the hospital would be responsible for paying taxes. The judge found that the medical center had so intermingled its nonprofit and for-profit services and finances that it could no longer qualify for a tax exemption under state law.
Issuing a decision that could have major statewide implications for the New Jersey health care industry, a New Jersey Tax Court judge has denied Morristown Medical Center's challenge to overturn the Morristown tax assessor's denial of tax-exempt status for portions of its operations. The ruling highlighted the difficulty in separating the charitable and for-profit activities of hospitals and other organizations, and nonprofit hospitals across New Jersey could be liable for millions of dollars in annual property taxes. The judge found that Morristown Medical Center had so intermingled its nonprofit and for-profit services and finances that it could no longer qualify for a tax exemption under state law.
In an effort to increase local government revenues in communities with a high number of tax-exempt properties, the Connecticut House passed a bill yesterday that would require hospitals and private colleges to pay property taxes. While several schools and hospitals have testified against the bill due to the financial burden, supporters of the legislation say the large entities are "nearly indistinguishable from traditional private sector businesses." House Bill 6965 is now headed to the Senate and then to Gov. Dannel P. Malloy, and if approved, towns with a lot of student housing could see a significant revenue gain.
Morristown, New Jersey has fired a lawsuit against Morristown Medical Center due to its non-profit status, which exempts the business from having to pay property taxes. The case could have ramifications for the millions of dollars in property tax exemptions that now benefit scores of hospitals statewide.