IHC's tax-exempt status gets an OK

Intermountain Health Care and other nonprofit hospitals provide enough charity care and educational services to the community that they should keep their non-tax status, a state tax committee decided Friday.

The Tax Review Commission, made up of citizens, legislators and tax experts, voted to recommend to the Legislature that nonprofit hospitals should not, as a rule, be assessed property, income and sales taxes.

However, after studying the issue for two years the commission also said the non-tax status of nonprofit hospitals probably does give IHC and other nonprofit hospitals a competitive advantage over for-profit competitors.

Commission members couldn't decide if they should recommend to the Legislature that the State Tax Commission be directed to formulate a "test" that county assessors would apply each year to IHC and others as a way to see if they continue to meet nonprofit no-tax requirements.

"If it costs counties $2 million to assess (IHC facilities) when they know the outcome" — that the local nonprofit hospital gives more charity care than it would pay in taxes — then requiring county assessors to go through such an exercise each year just wastes taxpayers' money, said Mark Buchi, a former state tax commissioner and current TRC member.

IHC's non-tax status has been a political issue for years. Former tax commissioner and legislative staffer Roger Tew, now a lobbyist, said over the past 20 years he's been involved one way or another with the same issue 15 times.

Several years ago the Tax Commission wrote rules that basically say if a nonprofit hospital provides more charity care than it would generate in property taxes, it meets the nonprofit criteria. Challenged by several county assessors, the Tax Commission's standards were upheld by the Utah Supreme Court.

But legislators wondered in 2002 if nonprofit hospitals should pay something into Utah's education system or if nonprofit hospitals had a huge competitive edge over tax-paying for-profit hospitals. They assigned the TRC to look into those matters.

In the final report, the TRC says that IHC, were it a private, for-profit business, in 2001 would have paid $13.1 million in property taxes, $16.8 million in sales taxes and $3.4 million in corporate income taxes for a total of $33.5 million.