Spencer Tracy’s hometown, Wauwatosa, a Milwaukee, Wisconsin suburb has successfully challenged the tax-exemption, at least as it applies to property taxes, of local powerhouse Covenant Healthcare System.
The strategy is interesting. Here’s what happened.
The City assessed property taxes against one of Covenant’s ambulatory clinics asserting that it was a doctor’s office and not really an extension of the tax-exempt hospital. Covenant challenged the assessment in court and ultimately, a Wisconsin Court of Court of Appeals, overturning the trial court, found that the St. Joseph Outpatient Center was indeed operated as a doctors’ office and not as a hospital and therefore does not qualify for property tax exemption under Wisconsin law.
This trend of attacking the property tax exemptions of exempt hospitals began more than a decade ago. As states and localities, hit hard by the recent economic downturn, search high and low for more revenues, exempt hospitals should expect this trend to accelerate.
Health care executives should be alert to this trend, review the organization’s operations to insure this exposure is minimized and, if necessary, consider establishing a tax reserve if the requirements of generally accepted accounting principles are met.
The full case may be viewed at http://www.leagle.com/unsecure/page.htm?shortname=inwico20100810a44
Filed under: Recent Posts Tagged: | Property taxes, Tax-Exempt Hospitals
