A recent trial court decision could have significant, long-term consequences for the financial models of Pennsylvania nonprofit health care providers. Ruling that three nonprofit Chester County hospitals of the Reading, Pennsylvania-based nonprofit Tower Health system are not tax exempt “charities,” a judge has ordered them to begin paying millions in annual local property taxes that fund local school districts. The Tower Health decision has led local municipalities and school districts across the commonwealth to consider tendering property tax notices to nonprofit health care entities that have long been deemed exempt from such expenses.

Background

Hospitals have long organized as nonprofit corporations and received recognition as tax-exempt organizations by the IRS. More than two decades after for-profit hospitals entered the market, there are still twice as many nonprofit hospitals as there are for-profits in the United States. In Pennsylvania, the ratio is even higher: more than 75% of all hospitals are organized as nonprofits. Generally speaking, the motivation for being a nonprofit hospital is straight-forward: by avoiding cash-draining dividends and some (but not all) taxes, the nonprofit has more money to devote to improving the delivery of health care.

The Tower Health Opinion

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]