Property tax pressures on nonprofit and for-profit hospitals

On Behalf of | May 21, 2020 | tax law | 0 comments

Property taxes are a push and pull kind of game. The Illinois government wants to leverage what they can, as these taxes go to public expenses in need of funding. But as a hospital, costs are some of the most important factors to consider in order to provide top-tier healthcare at a reasonable price. 

While hospitals serve the same purpose no matter if they are for profit or otherwise, there are key differences that change how they approach the problem of property taxes. According to Healthleaders Media, there are two strategies: nonprofits focus on a service strategy while for-profits focus on a business-driven strategy. 

Nonprofit hospitals
Nonprofits may seem like they have it easier on paper. According to Illinois law, nonprofits are exempt from many taxes including property tax, but sometimes the requirements for meeting that definition puts undue pressure on organizations. At WJS, we discussed in an earlier article this year how these organizations must consider hurdles like qualified charitable care, since the reasoning behind their exempt status is that not paying property tax frees them up to provide valuable public service. 

For-profit hospitals
For-profits, like any business, have to contend with property taxes for their land and buildings. This can strain a hospital’s resources as that money could afford for better equipment, higher paid doctors or a larger work-force instead. Tactics to overcome this may include cutting redundant spending or doing more with less. 

The pressures on both incentivize different behaviors. With a correct assessment, nonprofits do not have to worry and, according to the Illinois Health and Hospital Association, continue to provide over $6 billion in community benefits. A for-profit cannot avoid property taxes, but a lower assessment can lead to more funds to reroute to better resources. In the face of an incorrect assessment, it is vital to appeal for fairer or exempt property tax.