The Utah State Tax Commission released tax-exempt standards for non-profit hospitals Wednesday.
And, except for a few changes noticeable only to a county assessor or a hospital administrator, the final standards are the same as proposed standards released last fall.So, of course, people are as satisfied or dissatisfied with the final standards as they were with the ones proposed. Intermountain Health Care officials praised the standards, calling them tough but workable.
Robert Ladenburger, president of Holy Cross Hospital, said he hadn't had an opportunity to analyze the new suggestions, but "I feel confident we will be able to meet the criteria."
Doug Hammer, IHC attorney, said IHC believes the standards are the toughest in the nation; certainly much tougher than federal standards.
IHC proposed the standards to the Tax Commission because they were the standards the public wanted, he said. After the public defeated a 1986 referendum that would have given Utah non-profit hospitals permanent tax-exempt status, IHC hired pollster Dan Jones to find out what kind of standards the public preferred.
The standards IHC and other hospitals proposed to the Tax Commission were molded from public response to the poll, Hammer said.
But Utah Tax Commissioner Roger Tew made it clear that the Tax Commission, not non-profit hospitals, wrote the final standards.
"This effort at establishing standards was directed by the Tax Commission, not the non-profit hospitals," he said.
The commission asked non-profit hospitals to submit proposed tax-exempt standards, Tew said. The commission adopted some standards as the hospitals wrote them. Others were changed or not adopted, he said.
The standards received both praise and criticism in a Sept. 7 public hearing. As a result of some of the criticism, the Tax Commission clarified Standard 4. Previously, the standard required hospitals to respond to public expectations but did not specify how that should be done. The final standard outlines three ways hospitals must do that. (See box.)
The Salt Lake and Cache county attorneys have criticized the standards as too lenient. Salt Lake County Attorney Karl Hendrickson noted that under the new standards, a hospital could conceivably get out from under a $1.5 million tax liability if someone donated $1 million the hospital. The standards allow the hospital to count the donation as a $1 million "benefit" to the community when it is donated and again when it is spent. Hospitals could then count the $1 million donation as their own $2 million gift to the community and hence, get out from under their property tax burden.
Chris Allen, director of Utah Citizens for True Tax Reform, believed the commission ignored his group's complaints.
"These standards are not responsive to the interests of the taxpayers," Allen said. "They don't assure that taxpayers get their money's worth in charity care from non-profit hospitals."Tew said the commission did not respond to many complaints voiced in the hearings because those complaints did not deal with the standards themselves but, rather, the philosophy behind the standards.
"Many complaints addressed the underlying philosophy of the standards. We saw no reason to alter philosophies addressed in the standards," he said.
In recent years, several counties have denied tax-exempt status to nonprofit hospitals. The hospitals appealed those denials to the Tax Commission. Now that the commission has set standards for determining tax-exempt status, those appeals will be sent back to the county boards of equalizations for new hearings, Tew said.
"Counties will have to review the cases based on these standards," Tew said. That's likely to happen in Salt Lake County in the Spring.
If counties or hospitals don't like the outcome of those and subsequent decisions, they can appeal them to the Tax Commission, Tew said. Agencies that don't like the Tax Commission's decision may appeal that to the Utah Supreme Court.
Tew is confident appeals of the standards will eventually be argued before the Utah Supreme Court. After the court reviews the appeals, the commission plans to make them into rules, he said.
The Tax Commission released the standards at a time when a national health magazine suggested Utah non-profit hospitals wrote the very standards they are now calling "the toughest in the nation."
Modern Healthcare published an article in its latest issue called: "Utah providers offered tax rules they now criticize."
The article said IHC and other hospital groups are calling the State Tax Commission's proposals to authorize tax-exempt status the most stringent in the country. But, the article says, the complaints come after IHC led other not-for-profit hospitals in proposing those standards.
What hospitals must do:
- Meet federal tax-exemption standards.
- Provide care to the public, regardless of race, religion, gender or ability to pay.
- Let the public know care for the indigent is available.
- Operate in a fashion that responds to public needs by meeting annually with public officials, having community representation on hospital boards and establishing charity plans.
- Benefit the community annually in ways that dollar value exceeds what a hospital would owe in property taxes. That benefit can be composed of: free care, donations made to the hospital, donations spent by the hospitals, volunteer time, community education programs and any differences between what hospitals might charge for a service given to those on government programs and what the program pays them for it.
Hospitals' satellite facilities may be tax-exempt if their function supports the hospital's mission.