June 9, 2005 | Read Time: 1 minute
By Harvy Lipman
Two influential members of Congress are raising questions about the legal requirements nonprofit hospitals should meet in order to qualify for tax-exempt status.
Sen. Charles E. Grassley, Republican of Iowa and chairman of the Senate Finance Committee, has sent a letter to 10 major nonprofit hospitals and hospital chains seeking a broad range of information about their charitable activities.
In a written statement announcing his inquiry, Senator Grassley said, “It’s my duty to make sure charitable donations actually help those in need. It’s also my job to make sure charities are earning their generous tax breaks.”
Rep. Bill Thomas, the California Republican who chairs the House Ways and Means Committee, struck a similar chord at a hearing that his panel held on nonprofit hospitals. “Over time, less and less has been required for hospitals to maintain tax-exempt status,” said Mr. Thomas.
“Given the size of the federal [tax] benefit and the competitive advantages given to tax-exempt entities,” he said, “I believe it is incumbent on this committee to ensure the taxpayers are getting at least some commensurate relationship of benefit for the tax-exemption amounts.”
A legal scholar who has studied differences between nonprofit and for-profit hospitals told the hearing that how much charity care a hospital provides should not be the sole standard for defining whether it deserves tax-exempt status.
Jill R. Horowitz, an assistant professor at the University of Michigan Law School, said nonprofit hospitals are far more likely to provide services that are unprofitable, such as psychiatric emergency care.
“The best evidence,” she said, “shows that nonprofit hospitals provide unprofitable and essential services that are valuable to society.”
