NJ Advocates and Unions Join Lawsuit Against Hospital Tax Exemption Statute

An alliance of New Jersey advocacy organizations working with impacted state residents announced intervention in an ongoing lawsuit to stop the implementation of a recently passed state law exempting non-profit hospitals from property taxation even if for-profit business is conducted on hospital property. Plaintiff interveners NJ Citizen Action and the American Federation of Teachers NJ (AFTNJ) argue the law violates the State Constitution’s uniformity and exemption clauses.

“The preferential treatment being given to hospitals that engage in for-profit activities is unfair to NJ taxpayers, local governments, and other non-profit organizations,” said Maura Collinsgru, Health Care Program Director at NJ Citizen Action. “In addition to violating the state constitution, this statute further increases the for-profitization of health care in New Jersey, which drives up costs for all residents and patients. It is a dangerous, ongoing trend also seen in the takeover of state hospitals by Carepoint and Prime, and the restructuring of Horizon BCBS.”

The groups are joining as plaintiffs, with NJ Appleseed serving as counsel, an existing lawsuit currently involving the municipalities of Elizabeth, Plainsboro, Vineland, and Livingston v. the State of New Jersey. In lieu of property taxes the statue in question requires non-profit hospitals to make a community service contribution.

When the law granting an enormous tax benefit to huge hospital corporations was quickly passed through into legislation, without notice to or input from healthcare advocates, New Jersey resident’s interests were not represented,” commented Debbie White, RN and President at Health Professionals and Allied Employees (HPAE), a union in support of the lawsuit. “We applaud NJCA, Appleseed and AFTNJ for giving New Jersey taxpayers their day in court. These advocates are challenging a law that does little to bring taxpayers the justice they deserve or the financial relief they need.”

Allowing non-profit hospitals to shelter for-profit partners and ventures on their campuses tax-free reduces revenue to local governments that funds crucially needed services. In effect, local homeowners and governments are subsidizing these for-profit entities by making up the difference in lost revenue with higher property taxes.

“Permitting hospitals to keep their charitable exemption from real estate taxes even when they allow for-profit businesses to operate on hospital property hurts local governments that depend on that tax revenue – and, by extension, taxpayers, who have to make up the lost revenue or face cuts in services,” said Renee Steinhagen, Executive Director at NJ Appleseed. “It also makes it more likely that hospitals will contract out entire departments and even nursing staff, moving us further toward the privatization of health care, which increases cost and lowers quality.”

The NJ Constitution uniformity clause dictates that property be assessed for taxation according to the same standard of value, and taxed at the district’s general tax rate. Furthermore, the Constitution’s exemption clause forbids this privileged tax exemption unless the entity is “not operating for profit”.

“We decided to join this lawsuit to ensure that industries profiting from working people in New Jersey contribute their fair share to the educational health and economic well-being of the state,” added AFTNJ President Donna M. Chiera.