No New Taxes on Nonprofit Hospitals

Be curious, not judgmental.  

The line delivered by Ted Lasso in a now famous scene serves as a gentle reminder about drawing conclusions without context. 

In that spirit, we were curious to find that a presentation on the tax exemption for nonprofit hospitals was a featured agenda item at the February North Carolina House Select Committee on Property Tax Reduction and Reform meeting. It was also curious that the presentation – which included no input or commentary from the nonprofit hospital community at all – not only outlined the current nonprofit hospital property tax exemption but also the nonprofit hospital sales tax exemption, despite being in a committee tasked with identifying potential property tax relief for individuals.  

And it was even more curious to find two, separate legislative drafts presented at the March meeting that would allow localities to tax up to half of the assessed value of a nonprofit hospital’s real property (yes, including previously untaxed property being used for charitable purposes) and to place draconian restrictions on and drastically lower caps for existing sales tax exemption refunds. 

Were these proposals discussed with a single hospital or health system to understand potential impacts prior to being dropped in committee? No. 

Curious. 

Factual examinations have merit. They can surface truths that have been overlooked or misunderstood. But the arrangement of details and proposals presented here serve a decidedly more judgmental purpose. Falsely described as loopholes and generalized in a manner that omits more than a few pertinent details, the legislative proposals take a sledgehammer to resources for both the bigger health systems and the smaller, independent and community hospitals alike. 

The current exemptions were characterized in terms of estimated revenue losses to local governments – even though these dollars were never assumed in the first place. The broader community benefit provided by nonprofit hospitals, which leverage these exemptions to improve access and expand the types and qualities of services available, was paid little more than lip service.  

When reinvestment is reframed as “lost revenue,” rather than community investment, the policy conversation shifts. It stops being about how hospitals serve communities and starts becoming a search for money to plug unrelated gaps. 

And we try not to pass judgment ourselves. But the trajectory felt so familiar and visceral – the first notes of a tune nonprofit hospitals recognize almost instantly: policy reform disguised as a hunt for offsetting revenue and incomplete information presented as solely controlling fact. 

As noted above, these exemptions were not established in statute in exchange for nothing. Money not otherwise directed for taxable purposes is reinvested by nonprofit hospitals to support local communities and the state. They serve as economic engines, major employers, and centers of innovation, creating both physical and virtual care access points, regardless of geography. Nonprofit hospitals are already required under federal law to report on these activities – including their charity care – as part of publicly available community benefit reports.  

The federal definition of community benefit is also intentionally broad. Why? Because circumstances change. Communities evolve. Needs shift. And like other incentives within the tax code, flexibility exists to avoid unintentionally stifling future opportunities and ideas as our environment and community needs grow more complex. 

So, as these conversations unfold and head toward an anticipated vote, we ask that you be curious before passing judgment or reaching conclusions from any source that doesn’t include a nonprofit hospital.  

Numbers can paint a picture, but usually only in black and white. The real world, where nonprofit hospitals operate every day, is full of color: from the steady and routine to the urgent and lifesaving.  

It’s the hospital’s story to tell. We should let them do it as only they can, with time and due care. Not rushed and not driven by preconceived judgment.  

And you know what? They’ve been telling it for a long time, but there has been a disconnect between that storytelling and policymaking. That isn’t just the responsibility of the storyteller. 

The answers are right there. Be curious. 

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