Weekend Legal Discussion – Hospitals should pay property taxes

For the lawyers, from Lexology:

Pretty sure that hospitals and doctors don’t need to have subsidized property taxes.

New Jersey Tax Court decision may signal a troubling trend in challenges to non-profit entitie

The New Jersey Tax Court’s decision in AHS Hosp. Corp. v. Town of Morristown, DOCKET Numbers.: 010900-2007, 010901-2007, 000406-2008 (Decided June 25, 2015), has triggered widespread concern among hospital enterprises and other non-profit entities benefiting from property tax exemptions. The issue in the case was whether Morristown Memorial Hospital (MMH) should benefit from the New Jersey real property tax exemption for non-profit organizations. The town of Morristown contended that MMH’s use of the property did not fit the definition of tax exempt activities under N.J.S.A. 54:4-3.6, which provides an exemption from real property tax for:

all buildings actually used in the work of associations and corporations organized exclusively for hospital purposes, provided that if any portion of a building used for hospital purposes is leased to profit-making organizations or otherwise used for purposes which are not themselves exempt from taxation, that portion shall be subject to taxation and the remaining portion only shall be exempt … . (emphasis added).

The court embarked on a lengthy discussion of the history of hospitals in the United States, which concluded that hospitals largely have evolved from eleemosynary institutions for the poor that were by definition charitable into fee based profit-making enterprises bearing little resemblance to their predecessors. The court then reviewed the statute under existing precedent, and delved into whether three criteria were satisfied:

(1) [the owner of the property] must be organized exclusively for the [exempt purpose]; (2) its property must be actually and exclusively used for the tax-exempt purpose; and (3) its operation and use of its property must not be conducted for profit.

(citations omitted). The court held that in and of itself, an exempt purpose (i.e. operation of a hospital) is not sufficient to support an exemption. The entity also must demonstrate that the property for which the exemption is granted is “exclusively used for the exempt purpose” and does not undertake “for profit” activities.

New Jersey and New York are among a number of states where municipalities, struggling to find needed funds, are looking for ways to raise revenue. The AHS decision is particularly damaging to claims for property tax exemption. It remains to be seen whether appellate review or legislative action will alter the decision. While the New York statute appears more advantageous for hospitals, Crouse Health seems to open the door to the distinction between hospital activity and the commercial private practice of medicine. It thus behooves hospitals to review how their real estate is used and, to the greatest extent possible, be prepared to demonstrate what portion of a property is used exclusively by the hospital and what portions are used by physicians engaged in private practice. Undoubtedly, the question of what constitutes for profit activity is going to become a prevalent aspect of tax exemption cases. Hospitals must clearly separate traditional hospital activities from those that may be more akin to profit making enterprises and take care to ensure that there is no commingling of assets. Furthermore, hostpitals will need to be prepared with a thorough analysis to support that executive compensation is not excessive and that physician compensation is linked to measurements that will not be characterized as demonstrating a “profit-making purpose.”

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37 Responses to Weekend Legal Discussion – Hospitals should pay property taxes

  1. The Great Pumpkin says:

    This sounds about right. Such a joke.

    “WASHINGTON — President Obama elicited howls of laughter from Democratic women Friday when he compared Republicans to the “Grumpy Cat” Internet meme featuring pictures of frowning felines.

    “Why is it that Republican politicians are so down on America? Have you noticed that?” Obama said.

    “I mean, they are gloomy. They’re like Grumpy Cat,” he said, making a mock grimace. “Everything is terrible, according to them. ‘We’re doomed!’ I mean, I know it’s political season, but you listen to them and they’ve constructed this entire separate reality — it’s like the Twilight Zone.””

  2. The Great Pumpkin says:

    Glad you are laughing. I’m dead serious.

    leftwing says:
    October 24, 2015 at 8:02 am
    “The high tax towns are all lovely too, some of them fairy tale like”

    Bwahahaha. Hahahahahaha. LOLOL.

    Thar’s millionaires in them thar hills, I tell ya…….

  3. grim says:

    5-10 million is the new millionaire.

  4. The Great Pumpkin says:

    My two cents, why in the world does anyone get special tax exemptions? Why? You know damn well people are just going to take advantage of the loop hole. Everyone pays, it’s that simple. Not this guy pays and this guy doesn’t.

  5. grim says:

    Fix that by taxing consumption, not assets.

    However, then the arguments shift to the “rich” being too frugal compared to everyone else.

  6. The Great Pumpkin says:

    There is something about taxes that causes people to avoid them at all costs. I guess people get the feeling that money is being stolen from them or something. I don’t know, but it’s def a messed up mindset that really hurts society when they don’t pay their share of taxes on what they made. So if you did put out a consumption tax, these bastards will just develop a black market and avoid the tax. Human suck. They are quick to call police when in trouble. Quick to sign their kids up for public school. Quick to look to the govt when a disaster hits. Quick to look for the govt to take care of them when they are old. This stuff costs money, you are not being robbed, your taxes are going to society. It’s not going to some infamous man sitting in govt looking to take all your tax money. There might be a few cases, but it’s def not the norm like some people make it out to be. Plus, we have the best military in the world. Do you have any idea how much money that costs? Taking care of the elderly and military are where the majority of your taxes go. The other taxes go to infrastructure, education, and emergency services. Do you know how much all this stuff costs? Yes, taxes are going to be high, look at all the shit you are getting! People suck.

    grim says:
    October 24, 2015 at 8:26 am
    Fix that by taxing consumption, not assets.

    However, then the arguments shift to the “rich” being too frugal compared to everyone else.

  7. The Great Pumpkin says:

    Can’t stress it enough, you don’t have to live in America. You can go to some Somalia and not even have to worry about taxes. Just remember, you are on your own there. From your own security, to teaching your own kid. If you have money, good luck not getting shaken down by the local war lords. This applies to all the other low tax/ no tax locations in the world. They are dangerous places. High tax areas in the world are the safe places, I wonder why?

  8. The Great Pumpkin says:

    Why do Russian billionaires or billionaires in general flee to high tax places like England or the U.S.? They can go to some cheap South American country, but why don’t they?

  9. The Great Pumpkin says:

    ““Hey Phil,” Gov. Rick Perry of Texas wrote in a Twitter message, “Texas is home to liberty and low taxes … we would love to have you as well!!” Tiger Woods later said that he had left California for Florida for just that reason years ago. Mr. Mickelson can “vote with his Gulfstream,” a Wall Street Journal editorial noted, and warned California to “expect a continued migration.”

    It’s an article of faith among low-tax advocates that income tax increases aimed at the rich simply drive them away. As Stuart Varney put it on Fox News: “Look at what happened in Britain. They raised the top tax rate to 50 percent, and two-thirds of the millionaires disappeared in the next tax year. Same things are happening in France. People are leaving where the top tax rate is 75 percent. Same thing happened in Maryland a few years ago. New millionaire’s tax, the millionaires disappeared. You’ve got exactly the same thing in California.”

    That, at least, is what low-tax advocates want us to think, and on its face, it seems to make sense. But it’s not the case. It turns out that a large majority of people move for far more compelling reasons, like jobs, the cost of housing, family ties or a warmer climate. At least three recent academic studies have demonstrated that the number of people who move for tax reasons is negligible, even among the wealthy.

    Cristobal Young, an assistant professor of sociology at Stanford, studied the effects of recent tax increases in New Jersey and California.

    “It’s very clear that, over all, modest changes in top tax rates do not affect millionaire migration,” he told me this week. “Neither tax increases nor tax cuts on the rich have affected their migration rates.”

    The notion of tax flight “is almost entirely bogus — it’s a myth,” said Jon Shure, director of state fiscal studies at the Center on Budget and Policy Priorities, a nonprofit research group in Washington. “The anecdotal coverage makes it seem like people are leaving in droves because of high taxes. They’re not. There are a lot of low-tax states, and you don’t see millionaires flocking there.””

    http://www.nytimes.com/2013/02/16/business/high-taxes-are-not-a-prime-reason-for-relocation-studies-say.html?_r=0

  10. The Great Pumpkin says:

    9- So please explain to me why they go to high tax locations.

    “Despite the allure of low taxes, Mr. Depardieu hasn’t been seen in Russia since picking up his passport and seems to be hedging his bets by maintaining a residence in Belgium. Meanwhile, Russian billionaires are snapping up trophy properties in high-tax London, New York and Beverly Hills, Calif.

    “I don’t hear about many billionaires moving to Moscow,” said Robert Tannenwald, a lecturer in economic policy at Brandeis University and former Federal Reserve economist. Along with Nicholas Johnson, he and Mr. Shure are co-authors of “Tax Flight Is a Myth,” a 2011 research paper.

    Of course, some people do move for tax reasons, especially wealthy retirees, athletes and other celebrities without strong ties to high-tax locations, like jobs and families. In renouncing his French citizenship, Mr. Depardieu follows other French celebrities, the chef Alain Ducasse, the singer Johnny Hallyday and Yannick Noah, a former tennis star. Several Paris hedge fund managers have decamped to London and the fashion mogul Bernard Arnault applied for Belgian citizenship, though not, he has said, for tax reasons.””

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  12. Juice Box says:

    #8 – you really need to give it a rest already. Do you remember Cyprus? Two years ago the so called hair cut on bank deposits? WaS that a tax? No it was a taking. Anyone with assets will do their best to avoid taxes legally and avoid taking where possible. The Russian money the billionaires move it around and out of Russia was all funneled through companies in Cyprus, and the Europeans went after it.

  13. leftwing says:

    2. Punkin

    I know you are serious. About ‘fairy tale settings’ and ‘towns of millionaires’ being important to you.

    That is what makes it so funny.

    Your life compass is so far off I’m going to start showing your postings to my soon-to-be 18 year old and instruct him “Follow this guy judiciously. Then think and do exactly the opposite.”

  14. leftwing says:

    Re: taxes and mobility.

    Punkin, get your facts straight. ‘Russian billionaires’ or other migrants less in wealth but greater in number are able to move to ‘high tax’ areas like NY or London without being subject to income taxation in those locales.

    Foreign national and keep it under 163 days residence or so (Nom likely has the exact numbers) and you are only taxed on that portion of your income actually earned here.

    Of which, I can assure, there is none.

    Similar for state to state moves in the US.

  15. leftwing says:

    My biggest regret and likely largest financial error was not remaining in London for another six months after which we would have been eligible for EU passports.

  16. The Great Pumpkin says:

    Important to me? I was explaining why nj has high property taxes.

    leftwing says:
    October 24, 2015 at 10:06 am
    2. Punkin

    I know you are serious. About ‘fairy tale settings’ and ‘towns of millionaires’ being important to you.

    That is what makes it so funny.

    Your life compass is so far off I’m going to start showing your postings to my soon-to-be 18 year old and instruct him “Follow this guy judiciously. Then think and do exactly the opposite.”

  17. The Great Pumpkin says:

    This is exactly what you and the fast eddie types do. Make stupid arguments for the rich.

    “Yet the tax flight myth remains surprisingly persistent, fanned by media coverage of celebrities, who are among those most likely to have the means and motive to choose a home based on tax considerations. “You can always find an anecdote.” Mr. Shure said. “Many people want this to be true as a way to discourage tax increases. The rich are always trying to find ways to make the middle class make their arguments for them.””

    leftwing says:
    October 24, 2015 at 10:15 am
    Re: taxes and mobility.

    Punkin, get your facts straight. ‘Russian billionaires’ or other migrants less in wealth but greater in number are able to move to ‘high tax’ areas like NY or London without being subject to income taxation in those locales.

    Foreign national and keep it under 163 days residence or so (Nom likely has the exact numbers) and you are only taxed on that portion of your income actually earned here.

    Of which, I can assure, there is none.

    Similar for state to state moves in the US.

  18. leftwing says:

    Nope. What FastEddie and I do is fact check your poor and biased sources and total lack of logic and reason.

  19. leftwing says:

    If the left acknowledges tax flight they then are forced to confront the unpleasantness of the consequences of their taxes and tax policy. No way they win that argument on reason so they rely on their sycophants (eg, NYT, you) to make subjective emotional appeals like ‘fair share’ and such to obfus<ate facts and reason, a task at which you are truly a 1%er.

    I worked in Vienna in the early 90s. My time there was minutely managed by the company and accountants for income tax purposes. One year I clicked close to 163 days and was moved to Prague, then back here, to ‘cool off’ for taxes. I was just through six figure comp, hardly wealthy.

    Not surprisingly there is an entire industry to assist in preventing the government from picking your pocket unnecessarily.

  20. The Great Pumpkin says:

    Yes, and then you wonder why they need to raise taxes. It’s a cat and mouse game, where the honest man with ethics is left holding the bag.

    “Not surprisingly there is an entire industry to assist in preventing the government from picking your pocket unnecessarily.”

  21. The Great Pumpkin says:

    Come on. I listed many ways that we benefit from our taxes. You seem to blow off these services as if they were a given. They cost lots of money.

    “If the left acknowledges tax flight they then are forced to confront the unpleasantness of the consequences of their taxes and tax policy. No way they win that argument on reason so they rely on their sycophants (eg, NYT, you) to make subjective emotional appeals like ‘fair share’ and such to obfus<ate facts and reason, a task at which you are truly a 1%er."

  22. homeboken says:

    Pumpkin – I agree that there are many services that my tax dollars pay for and that I benefit from. But will you agree that not everyone of my tax dollars is spent in the best possible manner? Moreover, probably 20% of my tax dollars are lost through fraud, graft and unearned payments (pension scams, insurance fraud, housing subsidy fraud, etc etc).

    So knowing this, are you really defending the position that we should consider ourselves lucky to be able to pay taxes? If I gave my 10 year old niece my paycheck and told her to cover my monthly bills, she would surely get some payments right, but there is a very good chance that she would not be as skilled or as efficient as I am in my spending my money.

    That is the issue we are discussing – I believe that I am better than spending my money than some legislative body, state assembly, town council you name it. I understand there is some amount that I should contribute to keep the the machine moving – but I can’t fathom how an educated person believes that tax reform and spending cuts, at any level, is not a good option.

  23. nwnj says:

    Come on, I’ve read some BS on the internet but this is absurd. From what I can tell that gold essay that he wrote in the Ayn Rand newsletter was written when he was around 40 years old.

    Most people’s world outlook has long been cemented by then. To speculate that he stuck to that position for popularity is ridiculous.

    The more likely truth is that he still believes in a gold standard of some kind and is playing the part of the central banker because it paid so well. I would bet that he still owns significant gold today.

    Ragnar says:

    October 23, 2015 at 2:32 pm

    nwnj,
    Sure. I know people who dealt with Greenspan, and even worked for him way back.
    Smart guy but a political social climber way back from the early 70s. Ayn Rand had a pretty big circle in the 60s and he had some status in that crowd as a young man, but that was also in a sense social climbing. His economics consulting business wasn’t particularly accurate or even principled but it helped him move up the political ranks. He was more or less a Keynesian/Monetarist. Being a political operator, he probably led Ayn Rand to think he was on her side while conversing with her. I think for a long time, he liked to think that he held free markets and the gold standard as an ideal, but one divorced from reality and divorced from his actual political actions and political principles. Much the same way that some mobsters like to think of themselves as good Catholics and go to confessional on Sundays as some sort of atonement for living a life entirely in contradiction to their professed principles.

  24. D-FENS says:

    Pretty sure that Norcross is very involve in the hospital “business”in the Camden area and he has people (including Steve Sweeney) in Trenton. I predict that the resolve this via legislation that favors the hospital’s tax exempt status.

  25. It’s wasteful not to use the entire cow.

  26. Grim says:

    Look, it’s wrong, but I’d be lying if I said my mouth wasn’t watering over the prospect of that rare filet.

  27. NJT says:

    I used to know a hunter that only took the tenderloins and a couple other cuts from deer. Left the carcass’ in the woods (unless it was a buck then he took the antlers, too). He gave me some every year (he was often hunting on my property). DELICIOUS.

    *At first coyotes would scavenge the body(s) and keep me up at night. He ‘silenced’ them after I complained. Damn, some of them were the size of German Shepherds!

    Out in Ohio dead deer are often found with just the liver removed.

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  29. Njescapee says:

    We attended the Trump rally Friday night in Doral – Miami. The place was immaculate had dinner at the hotel restaurant. Everyone we encountered was very friendly. Restaurant bill even has a provision for a donation to St Jude which was a nice touch. Oh and the rally was. a lot of fun.

  30. phoenix says:

    25. Humans can be disgusting creatures.

  31. Essex says:

    31. I can see Trump continuing to surprise a lot of people, and essentially taking Florida easily. Cept for maybe Metro Dade.

  32. Njescapee says:

    33 agree although there were a lot of hot Latinas in attendance. Lots of young people in the crowd kinda interesting. Trump is the aspirational candidate.

  33. Fabius Maximus says:

    Trump is the Ron Paul of this race. Nice to listen to, but not electable.

    My predication is that he will do reasonable in the first few primaries, a lot of third and fourths on Super Tuesday and he’ll hit the exits, with a “my job is done” speech.

  34. Fabius Maximus says:

    Rags,

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