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. 2015 Jul;34(7):1225-33.
doi: 10.1377/hlthaff.2014.1424. Epub 2015 Jun 17.

The Value Of The Nonprofit Hospital Tax Exemption Was $24.6 Billion In 2011

Sara Rosenbaum  1 , David A Kindig  2 , Jie Bao  3 , Maureen K Byrnes  4 , Colin O'Laughlin  5
Affiliations

The Value Of The Nonprofit Hospital Tax Exemption Was $24.6 Billion In 2011

Sara Rosenbaum et al. Health Aff (Millwood). 2015 Jul.

Abstract

The federal government encourages public support for charitable activities by allowing people to deduct donations to tax-exempt organizations on their income tax returns. Tax-exempt hospitals are major beneficiaries of this policy because it encourages donations to the hospitals while shielding them from federal and state tax liability. In exchange, these hospitals must engage in community benefit activities, such as providing care to indigent patients and participating in Medicaid. The congressional Joint Committee on Taxation estimated the value of the nonprofit hospital tax exemption at $12.6 billion in 2002--a number that included forgone taxes, public contributions, and the value of tax-exempt bond financing. In this article we estimate that the size of the exemption reached $24.6 billion in 2011. The Affordable Care Act (ACA) brings a new focus on community benefit activities by requiring tax-exempt hospitals to engage in communitywide planning efforts to improve community health. The magnitude of the tax exemption, coupled with ACA reforms, underscores the public's interest not only in community benefit spending generally but also in the extent to which nonprofit hospitals allocate funds for community benefit expenditures that improve the overall health of their communities.

Keywords: Access To Care; Health Reform; Hospitals; Nonprofit/For-Profit Status.

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Figures

Exhibit 2
Exhibit 2. Average Tax Benefits Per Tax-Exempt Hospital For The Top And Bottom 10 States And US Average, Millions Of Dollars, 2011
SOURCE Authors’ analysis of data from 2011 cost reports from the Healthcare Cost Report Information System and 2011 Form 990s from the Internal Revenue Service. NOTE The US average for tax benefits per tax-exempt hospital (orange dashed line) was $8.26 million.
Exhibit 3
Exhibit 3. Total Tax Benefits For Tax-Exempt Hospitals, By State, 2011
SOURCE Authors’ analysis of data from 2011 cost reports from the Healthcare Cost Report Information System and 2011 Form 990s from the Internal Revenue Service. NOTE The national median aggregated tax benefits for tax-exempt hospitals per state was $285 million.
Exhibit 4
Exhibit 4. Total Tax Benefits Per $1,000 In Revenues Of Tax-Exempt Hospitals, By State, 2011
SOURCE Authors’ analysis of data from 2011 cost reports from the Healthcare Cost Report Information System and 2011 Form 990s from the Internal Revenue Service. NOTE The national average total tax benefit per $1,000 revenue was $45.
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References

    1. Staff of the Joint Committee on Taxation. Present law and background relating to the federal tax treatment of charitable contributions [Internet]. Washington (DC): US Congress; 2013. February 11 [cited 2015 Apr 27]. Available for download from: https://www.jct.gov/publications.html?func=startdown&id=4506
    1. Congressional Budget Office. Nonprofit hospitals and the provision of community benefits [Internet]. Washington (DC): CBO; 2006. December 6 [cited 2015 Apr 27]. Available from: http://www.cbo.gov/sites/default/files/12-06-nonprofit.pdf
    1. Somerville MH. Community benefit in context: origins and evolution—ACA §9007 [Internet]. Baltimore (MD): University of Maryland, Baltimore County, Hilltop Institute; 2012. June [cited 2015 Apr 27]. Available from: http://www.hilltopinstitute.org/publications/CommunityBenefitInContextOr...
    1. Rosenbaum S, Frankford DM, Law SA, Rosenblatt RE. Law and the American health care system. 2nd ed New York (NY): Foundation Press; 2012. Chapter 22.
    1. Internal Revenue Service. 2014 instructions for Schedule H (Form 990) [Internet]. Washington (DC): IRS; 2014. December 22 [cited 2015 Apr 27]. Available from: http://www.irs.gov/pub/irs-pdf/i990sh.pdf

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