On February 19, 2016, the Township of North Bergen in New Jersey filed a complaint challenging the constitutionality of a nonprofit hospital’s – Palisades Medical Center – property tax exemption.  The complaint alleges that Palisades’ tax assessment was less than the true value of the property.  In addition, the complaint claims that Palisades is operating as a for-profit hospital in violation of New Jersey’s requirements for tax exemption as a non-profit hospital.  Palisades is affiliated with Hackensack University Health Network and has a yearly operating budget of $150 million.

The suit is the eighth in a series of filings against New Jersey non-profit hospitals following last year’s decision in AHS Hospital Corporation v. Town of Morristown.  The tax court in Morristown upheld the denial of three years of tax exemptions for Morristown Memorial Hospital due to its affiliation with a large number of private practitioners and for-profit entities.  In making the decision, the court examined the number of private practice physicians, as well as investment and insurance affiliates.  Morristown Memorial Hospital is a subsidiary of Atlantic Health System, Inc.  The Morristown decision is available here.

In response to the Morristown decision, the New Jersey legislature passed, with bipartisan support, the Hospital Community Service Contribution Bill.  The bill would have preserved tax-exempt status for non-profit hospitals with for-profit providers if the hospital paid community contributions to their host towns.  However, the governor of New Jersey pocket-vetoed the bill in January.  

Reporter, Paige Fillingame, Houston, +1 713 615 7632, pfillingame@kslaw.com.