Excuse the bad headline pun – community benefits are indeed on the rise, literally, as hospitals invested a record $1.6 billion last year, and figuratively, as the tax exempt issue is once again on the rise in Annapolis.
At a hearing yesterday before the House Health & Government Operations Committee, I was joined by Dr. Sam Ross, President & CEO of Bon Secours Health System, Martha Nathanson, Vice President of Government Relations and Community Development for LifeBridge Health, and TJ Sullivan of Drinker Biddle, a federal tax law expert. We defended hospitals’ tax exempt status against SEIU, which wants to chip away at it by suggesting that the value of tax exemption exceeds the value of community benefits.
This is a comparison that is not only faulty on its face, but supports a direct assault on hospitals’ tax-exempt status. Already a bill has been introduced that would mandate that hospitals report the value of their tax exemptions alongside the value of their community benefits.
But, as you know, community benefits are just a part of the overall charitable purpose of not-for-profit hospitals. And a major reason for the hearing yesterday was so we could clear up some common confusion about tax exemption. In other states, like New Jersey and Illinois, politicians’ lack of understanding of tax exemption, community benefits, and not-for-profit status has been a factor that led to new tax assessments for some hospitals.
At the hearing yesterday, we reminded legislators that not-for-profit status (how organizations are incorporated in state law) is different from tax-exempt status (an IRS designation given to organizations that operate for a charitable purpose). Community benefits, of course, are simply a method to publicly report some of the activities in which hospitals engage that demonstrate their larger charitable purpose.
Despite the imperfect comparison, one of the positive messages that legislators heard yesterday came from the author of a study who, contrary to SEIU’s premise, confirmed what you already know: the value of the community benefits Maryland’s hospitals provide far exceeds – by two-and-a-half times – the value of their tax exemption.
You know what this tax exemption means to your hospital and your community: it means, in almost every case, survival. Imagine the financial situation your organization would find itself in if suddenly the tax man came knocking at the door! Imagine the services and jobs that you would have to cut. Imagine, for the people across Maryland, how much hospital rates would soar in an attempt to keep hospital care alive.
The impact of taxing hospitals as if they were for-profit entities would be so damaging that it’s hard to fathom why the issue is even up for discussion. But that’s why it is so important that MHA spend significant time and energy to proactively counter efforts that question the value you provide to your communities: so that we don’t even venture onto the slippery slope that this debate could lead to.
Hospitals do wonderful things every day, inside and outside their walls. Tax exemption allows much of that to happen. We will continue to engage legislators, to help them understand that it is their constituents and their communities that reap the benefits.