After years of publishing the Weekly Health Care Real Estate Briefing, Andrew Dick and Joel Swider will be making a few changes to the format. No, they aren’t throwing in the towel. For most of their professional careers, Andrew and Joel have represented hospitals and health systems around the country on real estate transactions. Now, they plan to tailor this content to hospital-related real estate news and trends.
Subscribe here to receive the Briefing every Monday morning via email. Once per month, Andrew and Joel will take one of the Briefings and focus on a particular topic facing hospitals and health systems. This week, we are showcasing the new format by including a short article on property tax exemption trends.
We hope you enjoy the changes to this Briefing and that it continues to add value.
Property Tax Exemption Trends
We routinely advise hospitals and health systems on property tax exemption matters. In most states, nonprofit and governmental hospitals are entitled by law to an exemption from property taxes. In recent years, it’s become harder in many states to secure and maintain property tax exemptions for hospitals and health care facilities. Local governments are stretched thin and are looking for ways to generate additional tax revenue.
One way to increase property tax revenue is to look for ways to deny or revoke property tax exemptions held by nonprofit and charitable organizations. A target in recent years has been nonprofit hospitals and health systems. In most communities, hospitals own a significant amount of real estate, their buildings have significant value that isn’t being taxed and the hospitals use municipal resources just like other businesses. There is also a perception by taxing authorities that hospitals should “pay their share” of property taxes.
Here are four trends that we are watching right now with respect to property taxes:
- Governmental Hospitals – It’s often easier to secure and maintain a property tax exemption for government-owned hospitals. In many jurisdictions, hospitals are owned and operated by the federal government, the county or other municipal entities. These government-owned hospitals often have an easier path to exemption because the standard for exemption for government agencies is more clear-cut. Often, the government agency must only prove that it is in fact a government agency and that it owns the property. End of story.
- Nonprofit Hospitals – It’s becoming more challenging to secure and maintain property tax exemptions for nonprofit hospitals. In many jurisdictions, nonprofit hospitals have been targeted by taxing authorities in an effort to deny or roll back their property tax exemptions. Hospitals are often an easy target because the standard for exemption is often tied to vague standards developed many years ago that require “charitable” ownership and use. A nonprofit hospital today looks very different than the nonprofit hospitals that paved the path to exemption many years ago. This gives taxing authorities an opportunity to open the door to negotiate with hospitals on the value of their exemptions.
- Legislative Initiatives – Over the past decade, we have seen a number of legislative initiatives gain traction that are designed to clarify or limit hospital-based property tax exemptions. States like Illinois and Texas have streamlined their statutes in order to provide more certainty around a path to exemption for hospitals. Other states have proposed bills that attempt to limit or eliminate property tax exemptions if the CEO’s total compensation exceeds a certain threshold. Last month, the Governor of our home state of Indiana signed an executive order asking for an investigation of hospital property tax exemptions. The goal of the executive order is to ensure that the value of any hospital’s charity care exceeds the value of its property tax exemption.
- New Hospital Projects – We have seen a number of new hospital projects get held up in the entitlement phase by planning and zoning authorities looking for the payment of property taxes in exchange for providing the approvals needed for the hospital project. While those requests are often unconstitutional, hospitals need to be aware that planning and zoning officials may ask for PILOT Agreements before the project is given the approval to proceed.
It’s our recommendation that hospitals carefully review and monitor property tax exemption trends at the applicable state and local levels. Hospitals should calendar the applicable filing dates to preserve their exemptions. A list of some of the filing dates around the country can be found here. The value of the property tax exemption often enables hospitals to do the good work they are designed to do—provide valuable health care in the communities they serve.
For questions or additional information, please contact:
- Andrew Dick at adick@hallrender.com or (317) 977-1491;
- Joel Swider at jswider@hallrender.com or (317) 429-3638; or
- Your primary Hall Render contact.
Hall Render blog posts and articles are intended for informational purposes only. For ethical reasons, Hall Render attorneys cannot give legal advice outside of an attorney-client relationship.
