HB3526, An Act Relative to Community Tax Relief

Joint Committee on Revenue

The Massachusetts Health & Hospital Association (MHA), on behalf of its member hospitals, health systems, physician organizations, and allied health care providers appreciates the opportunity to offer testimony in strong opposition to HB3526. This legislation would improperly permit communities to impose one-size-fits-all payment in lieu of taxes (PILOT) programs on charitable organizations.

For those entities that HB3526 defines as “large public charities” (those public charities where the  combined compensation of the five highest paid employees is greater than $2.5 million – according to new redundant reporting requirements included in this legislation) such as hospitals, this legislation would dramatically change long-standing tax policy by requiring charitable, non-profit organizations to pay property taxes for four years on any property it acquires on or after January 1, 2018– even when the property in question is used squarely in furtherance of the non-profit’s charitable mission. The costs associated with this proposal would adversely affect a host of programs and services that our member institutions are able to offer to their patients. Additionally, for those properties owned by large public charities prior to January 1, 2018, this legislation would allow a city or town to tax these entities at 50% of the commercial tax rate for the first three years following the passage of this legislation and at a 25% of the commercial tax rate in the fourth year and all years thereafter. 

All nonprofit organizations are already required to file a report (called the Form PC) with the Massachusetts Attorney General’s office that includes information related to the compensation levels for the top five paid employees at their organizations, as well as information on investments, charitable donations, and state/federal grants and contracts. A similar report (the IRS 990 form), with even greater financial information, is also submitted to the federal Internal Revenue Service. Further, M.G.L. Chapter 12C, Section 8C also requires similar reporting for hospitals to the Center for Health Information and Analysis (CHIA). In particular, both the IRS and the CHIA reporting criteria outline the exact same information for the senior management of a hospital - including other reported compensation - but they use different time periods and criteria for analyzing and reporting this information. The amount of time and effort it takes to analyze and develop reports of this magnitude is already substantial for health care providers – and adding a fourth duplicative report to the Attorney General, as proposed by HB3526, would only serve to duplicate current state and federal processes.

In addition to around-the-clock emergency services, non-profit hospitals provide a significant amount of charity care, community benefits, and care coordination for local residents from the acute care to post-acute care settings. In times of a disaster, hospitals are always at the ready to provide emergent, urgent, and behavioral health services for all residents. Many of these services are provided without compensation and are a small portion of the benefits that non-profit hospitals, as public charities, provide to the cities and towns where they are located. 

Municipal discussions with local charities related to property taxes or payments in lieu of taxes must be done on a case-by-case basis that takes into account each unique and specific service/benefit that a non-profit entity brings to the community. Currently, community leaders conduct these discussions with local non-profit hospitals and health centers and regularly develop reasonable agreements in addition to distinct community benefit programs. Such discussions should continue without the interference of a one-size-fits-all template for the taxation of charitable organizations. 

Non-profit hospitals, like all charitable organizations, are each unique. The various ways that local communities establish payments in lieu of taxes (PILOT) programs and other community benefit arrangements should also remain unique. Instead, HB3526 allows municipalities to choose a hard starting point as a punitive threat – and a decidedly arbitrary one at that. In essence, this legislation empowers municipalities to decide which organizations should be taxed and which shouldn’t, regardless of state and federal tax laws, oversight and permissible charitable structure. 

In Fiscal Year 2016, hospitals in the commonwealth provided more than $644 million in community benefits programs for local residents and their communities. These benefits included free cancer screenings, mammograms, in-school health programs, support for local health and social services, and more. In addition, hospitals also provided over $298 million in net charity care for local patients who could not afford the cost of medical care. As a result of this unique care and attention that hospitals provide to our communities, MHA believes that the various ways that local communities and charitable organizations currently establish PILOT programs and other community benefit arrangements should remain intact and not be forced to change by further strengthening the heavy hand of government. 

Any bill that creates a one-size-fits-all approach to payments in lieu of taxes is a move in the wrong direction that would restrict the ability of many charitable institutions to appropriately meet the needs of their communities and limit important conversations between municipalities and their local charities. Such an inflexible standard is both improper and unnecessary. For this reason, MHA urges the committee to strongly oppose HB3526. 
Thank you for the opportunity to offer comments on this important matter. If you have any questions or require further information, please contact MHA's Vice President of Government Advocacy, Michael Sroczynski, at (781) 262-6055 or msroczynski@mhalink.org.