Municipalities Fight for Back Taxes from Hospitals

By Brenda Flanagan

Some long-suffering homeowners in New Jersey towns like Summit — plagued by chronic high property tax rates — hope they can find at least a partial cure at their local hospital.

Overlook Medical Center claims to be nonprofit, but critics note out-patient clinics often make money and believe Overlook shouldn’t be granted total immunity from paying property taxes.

“It just doesn’t make sense, at least, to me, as a taxpayer in New Jersey, and I think, to a lot of taxpayers,” said Martin Allen.

Summit hired Attorney Allen — so did six other New Jersey municipalities — to convince tax courts that so-called nonprofit hospitals should pay back taxes from 2014 and 2015.

Hospitals in six townships had no comment but in Freehold Township Abbey Luterick The Public Relations and Communication Director of CentraState said they, “…already pay 1.7 million in total annual property taxes…[and provides] uncompensated care, free heath screenings and education.”

“When we learn that some of the institutions that provide us with the care are deriving revenues in the billions of dollars and then 0profits in the tens of millions of dollars, why should we subsidize them? The focus should be on the hospitals providing services as a not-for-profit institution, as they historically have,” Allen said.

Allen’s already won a case against Atlantic Health’s Morristown Memorial — which agreed to pay Morristown more than $15 million in back taxes and penalties. But New Jersey’s Hospital Association condemns a Band-Aid approach to a statewide affliction.

“Frankly, I’m concerned it’s abuse of the judicial process,” said NJHA President Betsy Ryan.

Ryan says many medical centers already pay taxes on auxiliary medical buildings. Her association had supported a bipartisan bill designed to let nonprofit hospitals make community contributions based on a formula, but Gov. Chris Christie pocket vetoed that prescription.

“We’re still looking for a solution, working with legislative leadership, the sponsors of the past bill, reaching out to the governor’s office. We do need a legislative solution. We think litigating it in court and looking towards the past is absolutely wrong-headed,” Ryan said.

But tweaking a hospital’s tax status could get complicated given New Jersey’s complex tax code lumps all nonprofits together. New Jersey’s League of Municipalities urges caution.

“Tax court takes a long time, and it’s a very expensive way to resolve these issues. So it’s much more efficient and it’s much more user-friendly for both the hospitals and the property taxpayers if we can do this legislatively,” said League of Municipalities Executive Director Michael Darcy.

Meanwhile, Allen has met with city officials in Newark and has appointments with a couple of other potential municipal clients. In lieu of a legislative remedy, the number of lawsuits could continue to proliferate.