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Governor Christie Introduces Property Tax Exemption Study Commission

Governor Christie Introduces Property Tax Exemption Study Commission

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Following Governor Chris Christie’s “pocket-veto” of The Hospital Community Service Contribution Bill in January, and the introduction of Senate Bill No. 1306 in February, the State of New Jersey has been working to develop a solution to the ongoing property tax exemption issues between local municipalities and tax-exempt hospitals in the State of New Jersey.

On March 18, 2016 Governor Christie introduced a Property Tax Exemption Study Commission to develop a permanent solution to an old State of New Jersey property tax exemption statute.

Background and History

The Hospital Community Service Contribution Bill

On December 7, 2015, Senate President Steve Sweeney (D), Senator Robert Singer (R) and Senator Joe Vitale (D) introduced The Hospital Community Service Contribution Bill.

On January 19, 2016, the Governor pocket-vetoed The Hospital Community Service Contribution Bill which would have required New Jersey tax-exempt acute-care hospitals to make payments, or annual service contributions, to offset the cost of services provided by the municipality in which they are located. This Bill was introduced in response to the recent Morristown Medical Center tax court decision.

The Bill would have required New Jersey tax-exempt acute-care hospitals to make an annual service contribution of $2.50 per day for each licensed hospital bed and $250 per day for each facility providing satellite emergency care. The fees collected would have been used to fund services provided by the local municipalities such as emergency services, police and fire protection or to reduce any existing property tax levies. In addition, a hospital would have had the ability to reduce its annual service contribution by any amount that it already contributes to the municipality through a voluntary payment.

Senate Bill No. 1306

Senator Joe Vitale (D) introduced Senate Bill No. 1306 on February 8, 2016 which, in order for a tax-exempt hospital to maintain its property tax exemption in the State of New Jersey, would require it to enter into a payment in lieu of taxation agreement in certain circumstances.

Under this Bill, a hospital’s property tax exemption would have been tied to the amount of community benefit and community building activities performed by the hospital as reported on Schedule H of its Form 990.

The Property Tax Exemption Study Commission

On March 18th, Governor Christie announced that the State of New Jersey would be creating a “Property Tax Exemption Study Commission” (“Commission”). The Commission is tasked with developing proposals to present to the State’s executive branch and legislature in an effort to adopt legislation that would resolve this ongoing property tax exemption issue that tax-exempt hospitals in the State of New Jersey are facing. The Commission will consist of nine members consisting of the State Treasurer, the Commissioner of Health, the Commissioner of Community Affairs, the Secretary of Higher Education, The Executive Director of New Jersey Health Care Facilities Financing Authority and four members appointed by the Governor all of which will have expertise in property taxes.

Importantly, while the Commission is developing proposals, there will be a freeze on all property tax assessments until January 1, 2018. Accordingly, all tax-exempt hospitals residing in the State of New Jersey will maintain their current property tax exempt status until then.

Conclusion

The formation of the Commission is the latest action taken by the State of New Jersey in an attempt to resolve the property tax exemption issues faced by tax-exempt hospitals in the State of New Jersey.” Governor Christie was quoted stating that “The subject of property tax exemptions is a complex issue that has not been comprehensively reviewed or legislatively modified in more than seven decades.  While I applaud the Legislature for taking quick action to address the urgent needs of these non-profits, this is a matter that deserves more careful study from everyone who would be impacted and a thoughtful policy discussion. The Property Tax Exemption Study Commission will develop proposals for consideration by the executive branch and the Legislature to resolve the tax-exemption matter in a way that is fair to the hospital, the municipality and local taxpayers. In the meantime, property tax assessments will be frozen for previously exempt hospitals for 2016 and 2017.”

New Jersey Hospital Association President and Chief Executive Office Betsy Ryan thanked the Governor “This approach allows our state to take a deep breath and work carefully and collaboratively to address the uncertainty created by the tax court decision on nonprofit hospitals’ tax exemptions.”

Ask Our Experts

Please contact a member of Withum’s Healthcare Services Group at healthcare@withum.com for further questions or assistance.

The information contained herein is not necessarily all inclusive, does not constitute legal or any other advice, and should not be relied upon without first consulting with appropriate qualified professionals for your individual facts and circumstances.

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