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Health Aff (Millwood). 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.

Author information

1
Sara Rosenbaum (sarar@gwu.edu) is the Harold and Jane Hirsh Professor of Health Law and Policy at the Milken Institute, School of Public Health, the George Washington University, in Washington, D.C.
2
David A. Kindig is an emeritus professor in the Department of Population Health Sciences, School of Medicine and Public Health, University of Wisconsin-Madison.
3
Jie Bao is a director in the data analytics practice at Avalere Health, in Washington, D.C.
4
Maureen K. Byrnes is a lead research scientist at the Milken Institute School of Public Health, the George Washington University.
5
Colin O'Laughlin is a senior associate in the data analytics practice at Avalere Health.

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

PMID:
26085486
DOI:
10.1377/hlthaff.2014.1424
[Indexed for MEDLINE]

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