Sarlo/Cryan/Vitale/Singleton Bill Would Protect Non-Profit Status, Provide for Consistent Municipal Payments 

Trenton – The Senate Budget Committee today approved legislation sponsored by Senator Paul Sarlo, Senator Joe Cryan, Senator Joe Vitale and Senator Troy Singleton that would protect the non-profit status of hospitals while ensuring that they compensate their communities for municipal services.

The bill, S-357/S-624/A-1135, would codify tax-exempt status for non-profit hospitals, as well as for certain satellite emergency care facilities, that had been called into question in a 2015 decision by the Tax Court of New Jersey in a case involving Morristown Memorial Hospital. Under the legislation, hospitals would retain their non-profit status, but would be assessed a community service contribution paid to the host municipality.

“This is an important bill that protects the non-profit status of hospitals at the same time it provides for consistent and reliable contributions to their home communities,” said Senator Sarlo (D-Bergen/Passaic), chairman of the Budget Committee. “They play an important role in the lives and livelihoods of the towns and cities they serve with medical care. The relationships between the hospitals and their communities will be strengthened by this legislation.”

“Non-profit health care facilities have long been part of the lifeblood of the communities they serve,” said Senator Cryan (D-Union). “They have answered the call time and again when their professional health care services were most needed. This legislation makes sure that special relationship – between a hospital and those it serves – is maintained in a way that is reasonable and fair to all parties involved.”

“Non-profit hospitals continue to make invaluable contributions to our communities through a vast array of health care services,” said Senator Vitale (D-Middlesex). “At the same time, they should be expected to make a meaningful annual contribution to the localities they call home, especially by helping to bolster the very services on which they depend, including operations for police departments, fire departments and EMS services.”

“Hospitals offer a substantial economic benefit to their communities through health care jobs and services. Equally as important, they are a significant presence in the community from donating to local charities and organizations to sponsoring local events,” said Senator Singleton (D-Burlington). “This community presence and generosity is bolstered by their non-profit status. Continuing to protect this status, as laid out in the bill, will ensure these hospitals remain major civic benefactors.”

Initially, the annual community service contribution for a hospital would be equal to $3.00 per day for each licensed bed at the hospital in the previous tax year; the contribution for a satellite emergency care facility would be equal to $300 for each day in the prior tax year. For tax year 2022 and thereafter, the community contribution would increase by 2 percent over the prior year.

The tax-exempt status would not be extended to any part of a hospital property considered a for-profit entity, such as an on-site rehabilitation center or a for-profit gift shop. The goal of the legislation is to maintain the high level of community health care service a non-profit hospital can provide, while at the same time making its annual payments to municipalities more predictable.

The bill would establish a permanent oversight body known as the Nonprofit Hospital Community Service Contribution Study Commission, which would be in but not of the Department of Health, to study and issue periodic reports to the Governor and the Legislature on the financial impact of the bill on the affected hospitals and host municipalities.

The bill was approved by the Senate Budget and Appropriations Committee with a vote of 9-2-1.