(TRENTON) – A 2015 decision by the Tax Court of New Jersey ruled that nonprofit hospitals are not entitled to a property tax exemption due to the challenge in distinguishing between nonprofit and for-profit hospital property uses.
To ensure that nonprofit hospitals contribute to their communities, long-awaited legislation (A-1135) establishing a fair and predictable community contribution system was signed into law Monday by Governor Phil Murphy. The measure previously received final legislative approval in December, passing the Assembly 66-10-3 and the Senate 24-14.
Under the new law, hospitals are required to pay annual community service contributions to offset the costs of public safety, such as local police and fire departments in the municipalities. Pre-existing financial agreements between hospitals and municipalities will remain in force until expiration of those agreements.
The law also establishes a permanent commission known as the Nonprofit Hospital Community Service Contribution Study Commission to study the system created under the law. The Commission will issue reports every three years to the Governor and Legislature.
The sponsors of the new law, Assembly Speaker Craig Coughlin (D-Middlesex), Assemblyman Robert Karabinchak (D-Middlesex) and Assemblywoman Valerie Vainieri Huttle (D-Bergen) released the following joint statement:
“Nonprofit hospitals have a mission and are working to fulfill a need in the communities they are serving as well as communities throughout the state. It is only fair that there is an opportunity for them to be eligible for tax predictability. In turn, they must make meaningful contributions to their communities’ support systems such as police and fire departments— services that also directly benefit them. The law creates a fair system that will work for nonprofit hospitals and communities alike.”