Tax Planning and Compliance for Tax-Exempt Organizations, 2024 Cumulative Supplement, 6th Edition

CHAPTER 4Charitable Organizations

• 4.6 Promotion of Health

4.6 Promotion of Health

p. 92. Add at end of introduction:

In recent years states have begun develop new laws that allow hospitals to reduce programs and increase fees that provide community benefit. Clearly their concern is to control costs, but that results in reductions in healthcare services for the needy. Some hospitals operate like business conglomerates. For example, a hospital in Pennsylvania faced a lawsuit to restore services to the needy. The ruling sent a warning shot to all nonprofit hospitals, highlighting that their state and local tax exemptions, which are often greater than their federal income tax exemptions, can be challenged by state and local courts. The public school system in Pottstown, Pennsylvania, had to scramble in 2018 when the local hospital, newly purchased, was converted to a tax‐exempt nonprofit entity. The takeover by Tower Health meant the 219‐bed Pottstown Hospital no longer had to pay federal and state taxes on any profits it made. Additionally the community hospital no longer had to pay local property taxes, taking away more than $900,000 a year from the already underfunded Pottstown School District. The school district, about an hour's drive from Philadelphia, had no choice but to trim expenses. It cut teacher aide positions and eliminated middle school foreign language classes. “We have less curriculum, less coaches, less transportation,” said Superintendent Stephen Rodriguez. ...