New Jersey Tax Court denies hospital’s property tax exemption

NJ Tax Court denies hospital’s property tax exemption

The Tax Court of New Jersey held that a hospital, that is exempt from federal income tax under section 501(c)(3), is not entitled to a real property tax exemption.

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The case is: AHS Hospital Corp v. Town of Morristown, No. 010900-2007 (NJ Tax Court, June 25, 2015).

The state’s tax court analyzed the “profit test,” of the three-part test under New Jersey law, and concluded that with limited exception (i.e., the auditorium, fitness center, and visitor’s garage), the hospital properties were substantially used for profit and did not qualify for a property tax exemption. The court cited a number of factors leading to its decision, including the hospital’s relationship with private for-profit physicians and for-profit entities, commercial contracts with third-parties, and executive salaries.

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This decision may have implications for hospitals and other tax-exempt organizations in New Jersey and in other states.

 

For more information, contact a KPMG tax professional:

D. Greg Goller | +1 (703) 286-8391 | greggoller@kpmg.com

Monica Coakley | +1 (615) 248-5639 | mcoakley@kpmg.com

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