SENATE, No. 3299

STATE OF NEW JERSEY

216th LEGISLATURE

 

INTRODUCED DECEMBER 7, 2015

 


 

Sponsored by:

Senator  STEPHEN M. SWEENEY

District 3 (Cumberland, Gloucester and Salem)

Senator  ROBERT W. SINGER

District 30 (Monmouth and Ocean)

Senator  JOSEPH F. VITALE

District 19 (Middlesex)

 

 

 

 

SYNOPSIS

     Maintains property tax exemption for certain nonprofit hospitals with on-site for-profit medical providers; requires these hospitals to pay community service contributions to host municipalities; establishes Nonprofit Hospital Community Service Contribution Study Commission.

 

CURRENT VERSION OF TEXT

     As introduced.

   


An Act concerning the property tax status of certain nonprofit hospitals, supplementing chapter 48 of Title 40 and chapter 4 of Title 54 of the Revised Statutes, and amending R.S.54:4-3.6.

 

     Be It Enacted by the Senate and General Assembly of the State of New Jersey:

 

     1.    (New section)  a.  The owner of property used as an acute care hospital, which property is exempt from taxation pursuant to R.S.54:4-3.6 and section 2 of P.L.    , c.    (C.        ) (pending before the Legislature as this bill), shall, except as otherwise provided under this section, annually be assessed a community service contribution to the municipality in which the licensed beds of the exempt acute care hospital are located and, in the case of a satellite emergency care facility, to the municipality in which such facility is located, which contributions shall be remitted to the municipalities to which the community service contributions are assessed.

     b.    The annual community service contribution required pursuant to subsection a. of this section shall be equal to $2.50 a day for each licensed bed at the exempt acute care hospital property in the prior tax year, except that in the case of a licensed satellite emergency care facility the contribution shall be equal to $750 a day in the prior tax year for each such facility; provided, however, that the amount shall be reduced by the amount of any payments remitted to the municipality in which the licensed beds of the exempt acute care hospital or licensed satellite emergency care facility, as the case may be, are located pursuant to a voluntary agreement operative in the prior tax year between the owner and the municipality to compensate for public safety services provided that benefit the occupants and premises of the exempt acute care hospital property.  The annual community service contribution shall be payable in equal quarterly installments.  The first installment shall be payable on February 1, the second installment on May 1, the third installment on August 1, and the fourth installment on November 1.

     c.     The obligation to remit a community service contribution pursuant to subsection a. of this subsection is legal, valid, and binding.  If an annual community service contribution installment is not paid as and when due pursuant to subsection b. of this section, interest shall accrue and be due to the municipality on the unpaid balance at the rate of one and one-half percent per month until the unpaid balance and all interest accrued thereon is fully paid to the municipality; and the municipality may, in a civil action, recover the unpaid balance and all interest accrued thereon, together with attorney’s fees and costs, in a court of competent jurisdiction.

     d.    A municipality that receives a community service contribution pursuant to subsection a. of this section, or a payment under a voluntary agreement that reduces the amount of such contribution pursuant to subsection b. of this section, shall forthwith upon receipt remit five percent of the contribution or voluntary payment, as the case may be, to the county in which the municipality is located.

     e.     The proceeds from a community service contribution, and any interest accrued on any unpaid balance thereof, collected pursuant to this section, shall be used solely to fund police or fire protection; first aid, emergency, rescue, or ambulance services; any other public safety purpose; or to reduce the property tax levy.

     f.     An owner required to remit a community service contribution pursuant to subsection a. of this section may, by February 1, apply to the New Jersey Health Care Facilities Financing Authority in the Department of Health for the issuance of a certificate exempting the owner from that requirement for the current tax year for exempt property used as an acute care hospital in a municipality, if that acute care hospital had a negative operating margin in the prior tax year or the owner is not in full compliance with the financial terms of any bond covenants related to that acute care hospital.  An application pursuant to this paragraph shall include the audited financial results for the acute care hospital from the prior tax year or other financial records showing that the owner is not in full compliance with its bond covenants related to that acute care hospital.  If audited financial results from the prior tax year are not available by February 1, a certification of the chief financial officer of the acute care hospital shall be submitted by that date, and audited financial results shall be submitted within 15 days of such results being completed.  The authority shall issue a determination on an application submitted pursuant to this subsection by April 1, or within 60 days of receipt of the audited financial results if such results are submitted after February 1.

     If the authority determines that an acute care hospital that is the subject of an application submitted pursuant to this subsection had a negative operating margin in the prior tax year based on the audited financial results for that acute care hospital from that tax year or that the owner is not in full compliance with the financial terms of any bond covenants related to that acute care hospital, the authority shall grant the application and issue a certificate exempting the owner from the community service contribution otherwise required for the acute care hospital to the municipal tax collector of the municipality otherwise owed the contribution.  A certificate issued pursuant to this paragraph shall be valid for the current tax year.

     If the authority denies an application, any community service contribution owing shall bear interest from the original payment date pursuant to subsection c. of this section.

     g.    The Commissioner of Health, in consultation with the New Jersey Health Care Facilities Financing Authority in the Department of Health and the Director of the Division of Local Government Services in the Department of Community Affairs, shall adopt regulations necessary to effectuate the provisions of this section pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.).

     h.    As used in this section:

     “Acute care hospital” means a hospital, other than a hospital the property of which is exempt from taxation pursuant to R.S.54:4-3.3, which maintains and operates organized facilities and services as approved and licensed by the Department of Health for the diagnosis, treatment, or care of persons suffering from acute illness, injury, or deformity and in which all diagnosis, treatment, and care are administered by or performed under the direction of persons licensed to practice medicine or osteopathy in the State of New Jersey, and includes all land and buildings that are used in the delivery of health care services by such hospital and its medical providers or that are used for the management, maintenance, administration, and security of such hospital and its medical providers, and any licensed satellite emergency care facility of such hospital.

     “Licensed bed” means one of the total number of beds for which an acute care hospital is approved for patient care by the Commissioner of Health.

     “Medical provider” means an individual or entity which, acting within the scope of a licensure or certification, provides health care services, and includes, but is not limited to, a physician, physician assistant, psychologist, pharmacist, dentist, nurse, paramedic, respiratory care practitioner, medical or laboratory technician, ambulance or emergency medical worker, orthotist or prosthetist, radiological or other diagnostic service facility, bioanalytical laboratory, health care facility, and further includes administrative support staff of the individual or entity.

     “Owner” means an association or corporation organized as a nonprofit pursuant to Title 15 of the Revised Statutes or Title 15A of the New Jersey Statutes exclusively for hospital purposes that owns an acute care hospital.

 

     2.    (New section)  a.  Property, including land and buildings, used as an acute care hospital, which is owned by an association or corporation organized as a nonprofit association or corporation pursuant to Title 15 of the Revised Statutes or Title 15A of the New Jersey Statutes exclusively for hospital purposes, shall be exempt from taxation, provided that, except in the case of a lease to or use by a profit-making medical provider for medical purposes, if any portion of the property is leased to a profit-making organization or otherwise used for purposes which are not themselves exempt from taxation, that portion shall be subject to taxation and the remaining portion only shall be exempt from taxation.  If any portion of an acute care hospital is leased to or otherwise used by a profit-making medical provider for medical purposes, that portion shall be exempt from taxation.

     b.    The owner of property used as an acute care hospital exempt from taxation pursuant to subsection a. of this section shall be assessed a community service contribution pursuant to section 1 of P.L.    , c.    (C.        ) (pending before the Legislature as this bill).

     c.     As used in this section:

     “Acute care hospital” means a hospital which maintains and operates organized facilities and services as approved and licensed by the Department of Health for the diagnosis, treatment, or care of persons suffering from acute illness, injury, or deformity and in which all diagnosis, treatment, and care are administered by or performed under the direction of persons licensed to practice medicine or osteopathy in the State of New Jersey, and includes all land and buildings that are used in the delivery of health care services by such hospital and its medical providers or that are used for the management, maintenance, administration, and security of such hospital and its medical providers, and any licensed satellite emergency care facility of such hospital.

     “Medical provider” means an individual or entity which, acting within the scope of a licensure or certification, provides health care services, and includes, but is not limited to, a physician, physician assistant, psychologist, pharmacist, dentist, nurse, paramedic, respiratory care practitioner, medical or laboratory technician, ambulance or emergency medical worker, orthotist or prosthetist, radiological or other diagnostic service facility, bioanalytical laboratory, health care facility, and further includes administrative support staff of the individual or entity.

 

     3.    (New section) a.  There is established a commission to be known as the Nonprofit Hospital Community Service Contribution Study Commission.  The commission shall consist of nine members as follows: the Commissioner of Health, ex officio; two members of the Senate to be appointed by the President of the Senate, who shall not both be of the same political party; two members of the Assembly to be appointed by the Speaker of the Assembly, who shall not both be of the same political party; two members, appointed by the Governor, who are mayors of municipalities receiving community service contributions pursuant to section 1 of P.L.    , c.    (C.        ) (pending before the Legislature as this bill); and two members, appointed by the Governor, who are chief executive officers of nonprofit hospitals assessed community service contributions pursuant to section 1 of P.L.    , c.    (C.        ) (pending before the Legislature as this bill).  Each member may designate a representative to attend meetings of the commission, and each designee may lawfully vote and otherwise act on behalf of the member who designated that individual to serve as a designee.  The members shall serve until the commission submits its report to the Governor and the Legislature pursuant to subsection e. of this section.  Vacancies in the membership of the commission shall be filled in the same manner as the original appointments.

     b.    The members shall be appointed within 60 days following the effective date of P.L.    , c.    (C.        ) (pending before the Legislature as this bill).  The commission shall organize as soon as practicable after the appointment of its members and shall select a chair and a treasurer from among its members, and a secretary who need not be a member of the commission.  The presence of five members of the commission shall constitute a quorum. The commission may conduct business without a quorum, but may only vote on the issuance of the report required to be submitted to the Governor and the Legislature pursuant to subsection e. of this section, and on any recommendations, when a quorum is present.

     c.     All commission members shall serve without compensation, but shall be eligible for reimbursement of necessary and reasonable expenses incurred in the performance of their official duties within the limits of funds appropriated or otherwise made available to the commission for its purposes.

     d.    The commission may meet and hold public hearings at the place or places it designates during the sessions or recesses of the Legislature.

     e.     The commission shall study the implementation of P.L.    , c.    (C.        ) (pending before the Legislature as this bill) and shall issue a report to the Governor and the Legislature, pursuant to section 2 of P.L.1991, c.164 (C.52:14-19.1), within one year following the effective date of P.L.    , c.    (C.        ) (pending before the Legislature as this bill).  The report shall include an analysis of the financial impact of P.L.    , c.    (C.        ) (pending before the Legislature as this bill) on both nonprofit hospitals assessed community service contributions thereunder and the municipalities receiving such contributions, and an analysis of the administration and equity of these contributions.  The report shall include any recommendations that the commission determines would improve the administration, equity, or any other aspect of the nonprofit hospital community service contribution system established by P.L.    , c.    (C.        ) (pending before the Legislature as this bill).

     f.     The commission shall expire 90 days after the issuance of the report pursuant to subsection e. of this section.

 

     4.    R.S.54:4-3.6 is amended to read as follows:

     54:4-3.6.     The following property shall be exempt from taxation under this chapter: all buildings actually used for colleges, schools, academies or seminaries, provided that if any portion of such buildings are leased to profit-making organizations or otherwise used for purposes which are not themselves exempt from taxation, said portion shall be subject to taxation and the remaining portion only shall be exempt; all buildings actually used for historical societies, associations or exhibitions, when owned by the State, county or any political subdivision thereof or when located on land owned by an educational institution which derives its primary support from State revenue; all buildings actually and exclusively used for public libraries, asylum or schools for adults and children with intellectual disabilities; all buildings used exclusively by any association or corporation formed for the purpose and actually engaged in the work of preventing cruelty to animals; all buildings actually and exclusively used and owned by volunteer first-aid squads, which squads are or shall be incorporated as associations not for pecuniary profit; all buildings actually used in the work of associations and corporations organized exclusively for the moral and mental improvement of men, women and children, provided that if any portion of a building used for that purpose is leased to profit-making organizations or is otherwise used for purposes which are not themselves exempt from taxation, that portion shall be subject to taxation and the remaining portion only shall be exempt; all buildings actually used in the work of associations and corporations organized exclusively for religious purposes, including religious worship, or charitable purposes, provided that if any portion of a building used for that purpose is leased to a profit-making organization or is otherwise used for purposes which are not themselves exempt from taxation, that portion shall be subject to taxation and the remaining portion shall be exempt from taxation, and provided further that if any portion of a building is used for a different exempt use by an exempt entity, that portion shall also be exempt from taxation; all buildings actually used in the work of associations and corporations organized exclusively for hospital purposes, provided that , except in the case of an acute care hospital as provided in section 2 of P.L.    , c.    (C.        ) (pending before the Legislature as this bill), if any portion of a building used for hospital purposes is leased to profit-making organizations or otherwise used for purposes which are not themselves exempt from taxation, that portion shall be subject to taxation and the remaining portion only shall be exempt; all buildings owned or held by an association or corporation created for the purpose of holding the title to such buildings as are actually and exclusively used in the work of two or more associations or corporations organized exclusively for the moral and mental improvement of men, women and children; all buildings owned by a corporation created under or otherwise subject to the provisions of Title 15 of the Revised Statutes or Title 15A of the New Jersey Statutes and actually and exclusively used in the work of one or more associations or corporations organized exclusively for charitable or religious purposes, which associations or corporations may or may not pay rent for the use of the premises or the portions of the premises used by them; the buildings, not exceeding two, actually occupied as a parsonage by the officiating clergymen of any religious corporation of this State, together with the accessory buildings located on the same premises; the land whereon any of the buildings hereinbefore mentioned are erected, and which may be necessary for the fair enjoyment thereof, and which is devoted to the purposes above mentioned and to no other purpose and does not exceed five acres in extent; the furniture and personal property in said buildings if used in and devoted to the purposes above mentioned; all property owned and used by any nonprofit corporation in connection with its curriculum, work, care, treatment and study of men, women, or children with intellectual disabilities shall also be exempt from taxation, provided that such corporation conducts and maintains research or professional training facilities for the care and training of men, women, or children with intellectual disabilities; provided, in case of all the foregoing except for an acute care hospital , the buildings, or the lands on which they stand, or the associations, corporations or institutions using and occupying them as aforesaid, are not conducted for profit, except that the exemption of the buildings and lands used for charitable, benevolent or religious purposes shall extend to cases where the charitable, benevolent or religious work therein carried on is supported partly by fees and charges received from or on behalf of beneficiaries using or occupying the buildings; provided the building is wholly controlled by and the entire income therefrom is used for said charitable, benevolent or religious purposes; and any tract of land purchased pursuant to subsection (n) of section 21 of P.L.1971, c.199 (C.40A:12-21), and located within a municipality, actually used for the cultivation and sale of fresh fruits and vegetables and owned by a duly incorporated nonprofit organization or association which includes among its principal purposes the cultivation and sale of fresh fruits and vegetables, other than a political, partisan, sectarian, denominational or religious organization or association.  The foregoing exemption shall apply only where the association, corporation or institution claiming the exemption owns the property in question and is incorporated or organized under the laws of this State and authorized to carry out the purposes on account of which the exemption is claimed or where an educational institution, as provided herein, has leased said property to a historical society or association or to a corporation organized for such purposes and created under or otherwise subject to the provisions of Title 15 of the Revised Statutes or Title 15A of the New Jersey Statutes.

     As used in this section ["hospital] :

     “Acute care hospital” means the same as that term is defined in section 2 of P.L.    , c.    (C.        ) (pending before the Legislature as this bill).

     “Hospital purposes" includes acute care hospitals, health care facilities for the elderly, such as nursing homes; residential health care facilities; assisted living residences; facilities with a Class C license pursuant to P.L.1979, c.496 (C.55:13B-1 et al.), the "Rooming and Boarding House Act of 1979"; similar facilities that provide medical, nursing or personal care services to their residents; and that portion of the central administrative or service facility of a continuing care retirement community that is reasonably allocable as a health care facility for the elderly.

(cf: P.L.2011, c.171, s.4)

 

     5.    This act shall take effect on January 1, 2016, except the Commissioner of Health may take any anticipatory administrative action in advance as shall be necessary for the implementation of this act.

 

 

STATEMENT

 

     This bill would maintain the property tax exempt status of a nonprofit hospital with for-profit medical providers on site as long as the hospital remains organized as a nonprofit institution under State law, and would require nonprofit hospitals to, in lieu of property taxes, pay an annual community service contribution to their host municipalities.  The bill would clarify that complex, modern nonprofit hospitals, which provide nonprofit medical services while also hosting for-profit medical activities, remain exempt from property taxation for the portions of hospital property used for medical purposes, but are responsible for providing some financial support to their host communities to offset the costs of public safety services, such as police and fire safety services, that benefit these hospitals.  This bill would establish a clear and predictable system by which all nonprofit hospitals make a reasonable contribution to their host communities.

     The Tax Court recently held that a nonprofit hospital was not entitled to a property tax exemption because profit-making medical services were provided throughout the hospital, and there was no separate accounting of nonprofit and for-profit medical activities to delineate exempt property from non-exempt property.  Since for-profit medical services are commonly provided at nonprofit hospitals, this ruling could potentially be applied to many other nonprofit hospitals throughout the State.  This bill would eliminate any uncertainty over the property tax exempt status of nonprofit hospitals that lease space to or share space with for-profit medical providers, but still qualify as nonprofit institutions, while ensuring that a readily calculable fair share contribution is made to the host communities that expend significant sums providing essential services that benefit these hospitals.  Any voluntary payments made by a nonprofit hospital for the same purpose would count towards the obligation to provide a community service contribution.

     The bill would require municipalities to provide five percent of a nonprofit hospital community service contribution, or voluntary payment that counts against such contribution, to the county in which the municipality is located to offset public safety services expenses borne by the county which benefit the hospital.

     In addition, the bill requires that all community service contribution proceeds be used to fund public safety services such as police and fire protection, and emergency medical services, or be used to reduce the property tax levy.

     The bill also permits a nonprofit hospital to apply to the New Jersey Health Care Facilities Financing Authority for an exemption from a community service contribution if the hospital had a negative operating margin in the prior tax year or is not in full compliance with the financial terms of any bond covenants to which it is subject, to help ensure that these hospitals may continue to operate and serve the community.

     Hospitals owned by the State or any political subdivision thereof would not be subject to the community service contribution required by the bill.

     The bill would also establish a commission, known as the Nonprofit Hospital Community Service Contribution Study Commission, to study and issue a report on the community service contribution system created by the bill.  The report may include any recommendations on how to improve the administration, fairness, or any other aspect of this system.