Morristown Medical Center has lost its property tax exemption case, according to published reports, and the judge’s ruling could dramatically affect New Jersey’s many hospitals.Multiple reports Friday evening said Judge Vito L. Bianco ruled in favor of the town of Morristown in the closely watched case, deciding the hospital should pay taxes on almost all of its property. The judge determined that the Atlantic Heath System center did not meet the legal test that it operated as a nonprofit, charitable organization in tax years 2006 through 2008.
While select facilities met the standard for exemption from assessment, the vast majority did not, Bianco said in his decision Thursday.
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Morristown had asked the judge to strip the hospital of its property tax exemption, or at the least allow it to collect the taxes on certain operations outsourced to for-profit entities. Atlantic Health, conversely, had argued that nonprofit hospitals have traditionally partnered with outside practices to deliver health care to the public.
Bianco sided with the town on that matter.
“If it is true that all nonprofit hospitals operate like (Morristown Medical Center) in this case, as was the testimony here, then for purposes of the property tax exemption, modern nonprofit hospitals are essentially legal fictions, and it is long established that ‘fictions arise from the law, and not law from fictions,’” the Daily Record quoted Bianco as writing in his ruling.
The decision could cost Morristown Medical Center upward of $2.5 million per year, NJ Advance Media said, as well as affect other nonprofits around the state, should municipalities challenge their exemptions in similar fashion.
“(The) decision by Judge Bianco regarding property taxes is disappointing, and has serious consequences for both Morristown Medical Center, as well as other health care systems in the state,” NJ Advance Media quoted hospital system spokesman Rob Seman as saying.
Legal experts had previously told NJBIZ that an appeal was likely, and the case could go as far as the state Supreme Court. NJ Advance Media quoted Seman as saying the hospital had not yet made a decision on any appeal.
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