Author: Russell B. Bershad

The legislative response to Morristown Hospital, Assembly Bill 1135, became law on February 22, 2021. Morristown Hospital, a Tax Court case decided in 2015, stripped Morristown Hospital of its property tax exemption. The case dealt at length with the modern reality that many nonprofit hospitals include for-profit operations within their walls, including private practice groups and ancillary facilities like restaurants and shops. The Tax Court found that, among other reasons, the hospital’s for-profit operations vitiated its property tax exemption in its entirety. The case put in question the realty tax-exempt status of almost every nonprofit hospital in the state and, by extension, the tax exemption of many educational, religious, and charitable institutions which, similarly to hospitals, combine nonprofit and for-profit uses. Morristown Hospital injected uncertainty regarding nonprofits’ property tax exemptions and spawned litigation. After much debate among competing factions, including municipalities on one side and nonprofits on the other, the legislature has finally acted to bring clarity to the landscape. The new law provides for nonprofit hospitals to pay community service contributions based on the number of licensed beds in a given hospital, or a flat, per-day rate for satellite emergency care facilities. However, if the hospital or satellite emergency care facility has previously entered into a voluntary agreement with a municipality, the hospital or...