Charitable Hospital Exemptions

1
Charitable Hospital Exemptions

• William A. Rodda, CAE, RES
• Forsyth County Tax Assessor/Collector

2
G.S. 105-278.8 (Machinery Act)

• Real personal property held for or owned by a
  hospital organized and operated as a nonstock,
  nonprofit, charitable institution shall be
  exempted from taxation if actually and
  exclusively used for charitable hospital
  purposes.

3
G.S. 105-278.8 (Machinery Act)

• If part of a property that otherwise meets the
  above requirements is used for a purpose that
  would require exemption if the entire property
  were so used, the valuation of the part so used
  shall be exempted from taxation.

4
G.S. 105-278.8

• A charitable hospital purpose is a hospital
  purpose that has humane and philanthropic
  objectives it is a hospital activity that
  benefits humanity or a significant rather than
  limited segment of the community without
  expectation of pecuniary profit or reward.

5
G.S. 105-278.8

• The fact that a qualifying hospital charges
  patients who are able to pay for services
  rendered does not defeat the exemption.

6
Case Notes

• An applicant will not be rejected simply because
  it charges patients who are able to pay for their
  services. (In re Foundation Health Systems, 1989).

7
Case Notes

• What is a Hospital? an institution for the
  reception and care of sick, wounded, infirm, or
  aged persons (In re Foundation Health Systems,
  1989).

8
Case Notes

• Nonprofit outpatient surgical center with
  operating rooms designed to render hospital
  services was a hospital (In re Foundation
  Health Systems, 1989).

9
Case Notes

• Hospital day care center which assists in the
  recruitment and retention of hospital employees
  is entitled to exemption (In re Moses Cone
  Memorial Hospital, 1995).

10
G.S. 131A-21 (Medical Commission)

• If bonds or notes are issued by the Commission to
  provide or improve a health care facility, then
  until the bonds or notes are retired, the
  facility for which bonds or notes are issued is
  exempt from property taxes to the extent provided
  in this section.

11
G.S. 131A-21 (Medical Commission)

• Property may be exempt from property taxes as
  provided in this section if a timely application
  for the exemption is filed with the assessor of
  the county in which the property is located as
  required under G.S. 105-282.1.

12
G.S. 131A-21

• The property tax exemption under this section
  shall not exceed the lesser of the original
  principal amount of the bonds or notes or the
  assessed value for ad valorem tax purposes of the
  facility.

13
G.S. 131A-21

• If bonds or notes are issued to finance more than
  one health care facility, only that portion of
  the principal amount of the bonds or notes used
  to provide or improve the particular facility,
  including any allocable reserves and financing
  costs, may be considered for the purpose of
  determining the amount of the exemption allowable
  under this section.

14
G.S. 131A-21

• The exemption authorized by this section shall
  begin with the first full tax year of the
  taxpayer following the issuance of the bonds and
  notes. This section does not affect a health care
  facility's eligibility for a property tax
  exemption under Subchapter II of Chapter 105 of
  the General Statutes.

15
G.S. 105-282.1

• Application Every owner of property claiming
  exemption or exclusion from property taxes under
  the provisions of this Subchapter has the burden
  of establishing that the property is entitled to
  it.

16
G.S. 105-282.1

• Annual Review of Exempted or Excluded Property.
  Pursuant to G.S. 105-296(l), the assessor must
  annually review at least one-eighth of the
  parcels in the county exempted or excluded from
  taxation to verify that the parcels qualify for
  the exemption or exclusion.

17
Tips

• Who is the owner of the property?
• Owned by a nonstock, nonprofit charitable
  hospital
• Exemption by IRS under Section 501(c)(3) is not
  the sole determining factor!
• What do they do?
• an institution for the reception and care of
  sick, wounded, infirm, or aged persons

18
Tips

• What do they do?
• Is there an emergency room?
• Do they perform actual surgical procedures?
• Do they treat sick, wounded, infirm or aged
  people?
• Leasing space or treating patients?

19
Tips

• Does the facility have a charity care policy?
• Self executing?
• Application required? Other obstacles?
• Does the facility truly accept anyone without
  regard to their ability to pay?

20
Tips

• Are the prices charged for the uninsured patient
  the same as charges for insurance plans, Medicare
  and Medicaid?
• Does the facility accept Medicare and Medicaid?

21
Tips

• What was the amount of actual charity care
  provided by the facility?
• What is charity care?

22
Charity Care according to IRS

• free or discounted health services provided to
  persons who meet the organizations criteria for
  financial assistance and are thereby deemed
  unable to pay for all or a portion of the
  services

23
Charity Care according to IRS

• Does not include
• Bad debt
• Difference between the cost of Medicaid and
  Medicare and the revenue derived therefrom
• Contractual adjustments with third-party payers

24
Tips

• Many of these question will be answered by the
  IRS form 990 and accompanying Schedule H.
• Schedule H is required effective in 2009.
• www.guidestar.org

25
Wake Forest University Baptist Medical Center
26
Wake Forest University Baptist Medical Center
27
Forsyth Memorial Hospital
28
Medical Park Hospital
29
Downtown Health Plaza
30
Hawthorne Surgical Center
31
Salem Family Practice
32
Aegis
33
Piedmont Plaza
34
Hawthorne Inn
35
Policy Considerations

• Should a clear, concise definition for
  charitable hospital and charitable hospital
  purpose be developed?
• Should a minimum level of charity care (5 to 10
  of revenues) be required for exemption?

36
Policy Considerations

• Should local hospitals assist in covering the
  costs of local ambulance services, police and
  fire protection?
• Should the medical commission bond exemption be
  repealed?

37
Charitable Hospital Exemptions

• William A. Rodda, CAE, RES
• Forsyth County Tax Assessor/Collector