Commission says 'no' to tax break for Rex Hospital
By Steve Herring
Published in News on December 21, 2014 1:50 AM
Breaking with what has been a pattern of routine approval, Wayne County commissioners Tuesday morning rejected a request by Rex Hospital for tax-exempt status for medical and office equipment at its N.C. Heart and Vascular Associates of Goldsboro office.
Commissioners not only rejected the request, but suggested as well that it is time for state legislators to close loopholes in the law providing some tax exemptions.
The hospital's application had been on the commissioners' consent agenda, which included several other individual applications for other tax relief programs. Those were approved.
The Rex application was removed from the consent agenda and placed on the regular agenda at the request of Commissioner Joe Daughtery.
Qualifying applications filed on time are automatically approved in the county tax office as provided by state law and do not require board approval. However, state law allows commissioners to approve late applications based on their finding of "good cause."
The law does not define "good cause."
Daughtery said it was his understanding the county had no choice but to approve the application.
"You have a choice for this year," County Attorney Borden Parker said. "You can deny it because they didn't timely file. Your practice has been if they file, and were compliant, you have been granting them.
"Next year if they timely file, it won't even be before you."
It is a growing trend for qualifying nonprofit hospitals, even Wayne Memorial Hospital, to claim tax-exempt status for private practices that they acquire, Tax Administrator Alan Lumpkin said.
"The hospital, per statute, is exempt from property taxation," Lumpkin said. "It appears that (Rex Hospital has) been expanding their hospital umbrella into private practices. They have been purchasing real estate and equipment. Local doctors' offices, they have sort of been taking those over. They are running under the hospital umbrella.
"Unfortunately, or fortunately for them, unfortunately for the tax base, is that we cannot tax them once that happens because per statute, and it has been tested in courts, and it was upheld that they would be tax exempt."
Rex Hospital filed for the status for equipment, but not real estate, in a doctor's office it has acquired in the county, Lumpkin said.
Lumpkin said he did not know the exact amount of taxes involved, but that it is only a few thousand dollars.
"It was not a huge impact, but still if you do this multiple times, it does become an impact -- especially when it starts involving real estate, which it has in the past here," Lumpkin said.
Rex Hospital would have qualified had it applied within the proper timeframe. But since it had not, it was now up to commissioners to decide, he said.
Daughtery said he was concerned about the practice, just as he was when he served on the Wayne Memorial Hospital board.
"That is when you are acquiring private practices and converting them over to under the umbrella of a nonprofit, the negative tax effect that it has on counties -- it is almost getting out of hand," he said.
That has a lot of effect "tax wise" on counties and municipalities, he said.
Daughtery said he thinks it has reached a point that the N.C. Association of County Commissioners needs to look at the law that allows the practice.
He said the association also should ask for help from the legislature because he thinks the practice is "almost being abused."
Daughtery said he understood hospitals having some tax exemptions, but that it is "getting pretty deep now."
Commissioner Ed Cromartie agreed and asked how nonprofit hospital qualify.
Being a nonprofit is not an automatic qualification for a property tax exemption, Lumpkin said. There is a laundry list of other criteria to be met, he said.
"In this case it is under the charitable hospital umbrella," Lumpkin said. "We have some medical practices that are not hospitals, but that do qualify. What it says is that if you are a nonprofit, and that over 50 percent of your clientele are underprivileged or are subsidized patients, you qualify. So there are other criteria."
Cromartie said that means that a private practice paying property tax would be at a disadvantage in competing with a practice operating under the umbrella of a qualifying nonprofit.
"In the 23 years I have been here, I have seen this exemption expand," Lumpkin said. "Like Mr. Daughtery alluded to, it would to take legislative change to tighten up some of these loopholes that you are seeing."