Lawsuits Surrounding Hospitals Paying Taxes Up to 35 in NJ

By Erin Delmore

“This is one aspect of lowering the taxes of other taxpayers by for-profits that may not be entitled to an exemption,” said Martin Allen, partner at DiFrancesco Bateman.

New Jersey’s nonprofit hospitals are still battling with the municipalities in which they reside, a year after what attorney Allen calls a precedent-setting case. A tax court judge required Morristown Medical Center to send millions to its namesake municipality. Now, the number of lawsuits in the state is up to 35.

“When you look at the salaries that are being paid, whether it be the CEO or the top management, clearly the not-for-profit tag on hospitals, with all of the mergers that have occurred over the last 10 years, has changed the focus and commitment of hospitals from nonprofit and just serving the local communities to a money-making operation,” said Elizabeth Mayor Chris Bollwage.

Trinitas Regional Medical Center in Elizabeth took in $320 million in revenue last year, netting $4 million or 1.2 percent operating income, according to the hospital’s vice president of public relations.

“If you’re making that kind of money, clearly you’re not a nonprofit. In Trinitas, we have an office building which is filled with medical doctors. That building is being taxed. We have a parking deck. That building has been taxed because it’s a revenue-generating building. But there are other buildings that have not been taxed. The Morris County decision said you have to look at that and so therefore we did,” Bollwage said.

Bollwage worked out an arrangement with Trintias: a payout of $250,000 a year for the next four years. With a slew of cases pending, the New Jersey Hospital Association says litigation isn’t the answer.

“We don’t need a patchwork approach of litigation to solve this problem. We need thoughtful statewide legislation,” said Vice President of Communications Kerry McKean Kelly.

The New Jersey Hospital Association supported a bill to have hospitals provide voluntary contributions to their towns. Gov. Chris Christie pocket-vetoed that legislation.

“However, the governor did come back and he offered his thoughts that we would like to see a study commission on this issue and while that study commission did its work we would have a moratorium on the lawsuits. We also think that’s a good approach, and it has been introduced in legislation in Trenton and we support that bill,” Kelly said.

Allen is representing the municipalities in five of the 35 active cases.

“No matter what legislation comes up, if the entity — be it a church, be it a school, be it a hospital — is also being run as a profit-making business, it then still has to pay taxes,” he said.

Three municipalities, including Elizabeth, have come to agreements outside of court. While everyone we spoke with said the legislation needs to be clarified, no one expects it to happen soon.