As we navigate the complexities of the healthcare industry in a post-COVID economy, we aim to keep you updated on the latest tax developments that could impact your operations. In this article, we focus on recent property tax issues and their effects on the healthcare sector based on our experiences and discussions with clients.
Over the past few months, there have been significant changes in property tax regulations that could potentially affect healthcare facilities. These changes are primarily driven by the need to generate additional revenue to support public services, including healthcare, in the wake of the COVID-19 pandemic.
One of the most notable changes is the reassessment of real property values. Many jurisdictions, including those in California and New York, have increased property tax rates, which could lead to higher operating costs for healthcare facilities. This could potentially impact the bottom line for many healthcare providers, particularly those operating in areas where real property values also have significantly increased. Whether owned or leased real property, filing an appeal of the assessor’s real property value should be considered a normal course of business. If an appeal is not filed regularly, the facility runs the risk of being over-assessed and paying more than its fair share of property taxes, with compounding effects over multiple years.
In addition to real property taxes, personal property taxes, which apply to movable assets such as medical equipment and office furniture, also have seen changes. Some states, like Michigan and Virginia, have increased personal property tax rates, which could further increase operating costs for healthcare providers. A review of the assets being included on the annual property tax return should be conducted to help ensure that only assets on site are being included.
Another significant change is the potential elimination or reduction of property tax exemptions for nonprofit healthcare providers. States such as Illinois, Pennsylvania, and New Jersey are considering legislation that would require nonprofit hospitals and other healthcare facilities to pay property taxes, a move that could significantly increase their operating costs. This change is driven by the need to increase tax revenues and the perception that many nonprofit healthcare providers operate more like for-profit businesses. We also have found some facilities do not receive the full balance of the exemptions they are due based on their nonprofit status. This is typically caused by the local assessor not fully granting an exemption or because of an administrative mishap at the assessor’s office.
These changes could have significant implications for the healthcare industry. Higher property taxes could lead to increased healthcare costs, which could be passed on to patients. In addition, the potential loss of property tax exemptions could force nonprofit healthcare providers to cut back on services or close their doors altogether.
We recommend that healthcare providers review their property tax assessments and consider appealing if they believe their property has been overvalued. In addition, nonprofit healthcare providers should monitor legislative developments in their states and consider lobbying against measures that would eliminate or reduce their property tax exemptions.
At Forvis Mazars, we are committed to helping our clients navigate these complex issues. Our team of nationwide professionals is available to provide guidance and support to help you manage your property tax obligations and understand the potential implications for your operations.
If you have questions or need assistance, please reach out to a professional at Forvis Mazars.
Important Property Tax Updates & Implications for Healthcare
Tax Planning • January 10, 2024
Healthcare providers should review their assessments as property taxes rise in many jurisdictions. This article examines tax issues that may affect healthcare.