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Healthcare, Property Tax Exemptions and Implications from Recent Court Cases
Unformatted Document Text:  31 In the physician practice cases, the health systems pointed to the open door policy of the practices that did not discriminate against patients regardless of ability to pay for services. The taxing authorities however, noted that both clinics provided minimal free care; that the clinics were no different from for-profit physician group practices; and that participation in Medicare and Medicaid programs did not lessen the burden of government. Where the courts concurred that too little charity care had been delivered to warrant property tax exemption, the courts also did not provide guidance on how much charity care is required. The Michigan Supreme Court however, struck down the indeterminate charity threshold because it was not specified in the exemption statute. In exemption applications subsequent to the Bethesda decision, the Ohio tax commissioner had attempted to narrow the scope of charitable use exemptions. However, a recent decision by the Ohio Board of Tax Appeals rejected the tax commissioner’s application of a charity care floor. 86 In several of the cases, there was speculation about whether legislation would be desirable in order to clarify exemption requirements or definitions related to health care institutions. There also was recognition among some of the parties that legislation might be too constrictive if it delineated what types of activities conducted by nonprofits should not be exempt (Nebraska) or what charity threshold should be imposed for exemption (Michigan). It was preferable therefore, to let the courts resolve the issues. There is a problem, however, with having courts establish policy by default as pointed out by Horowitz. 86 Alan Duffy, Ohio Tax Decison May Have Major Impact on Charity Care Standards for Hospital Real Property Tax Exemptions, June, 2006, Available: http://www.bricker.com/ublications/articles/956.asp, July 2.

Authors: Fanning, Mary.
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31
In the physician practice cases, the health systems pointed to the open door policy
of the practices that did not discriminate against patients regardless of ability to pay for
services. The taxing authorities however, noted that both clinics provided minimal free
care; that the clinics were no different from for-profit physician group practices; and that
participation in Medicare and Medicaid programs did not lessen the burden of
government.
Where the courts concurred that too little charity care had been delivered to
warrant property tax exemption, the courts also did not provide guidance on how much
charity care is required. The Michigan Supreme Court however, struck down the
indeterminate charity threshold because it was not specified in the exemption statute. In
exemption applications subsequent to the Bethesda decision, the Ohio tax commissioner
had attempted to narrow the scope of charitable use exemptions. However, a recent
decision by the Ohio Board of Tax Appeals rejected the tax commissioner’s application
In several of the cases, there was speculation about whether legislation would be
desirable in order to clarify exemption requirements or definitions related to health care
institutions. There also was recognition among some of the parties that legislation might
be too constrictive if it delineated what types of activities conducted by nonprofits should
not be exempt (Nebraska) or what charity threshold should be imposed for exemption
(Michigan). It was preferable therefore, to let the courts resolve the issues. There is a
problem, however, with having courts establish policy by default as pointed out by
Horowitz.
86
Alan Duffy, Ohio Tax Decison May Have Major Impact on Charity Care Standards for Hospital
Real Property Tax Exemptions, June, 2006, Available: http://www.bricker.com/ublications/articles/956.asp,
July 2.


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