Ruling Could Put Nonprofit Hospitals on Hook for Millions in Property Taxes

Nonprofit hospitals across New Jersey could be liable for millions of dollars in annual property taxes, under a ruling by a tax-court judge that highlighted the difficulty in separating the charitable and for-profit activities of hospitals and other organizations.

The judge found that Morristown Medical Center had so intermingled its nonprofit and for-profit services and finances that it could no longer qualify for a tax exemption under state law. Morristown’s municipal government had tried to eliminate the exemption in 2006, prompting a case that’s been in court ever since.

Hospital officials had argued that the organization follows long-established and universal practices by hosting services offered by both doctors employed by the hospital and self-employed physicians who operate for-profit businesses.