Poster #41 - State variation in nonprofit hospital tax exemption value

• In Event: Friday Poster Reception

Abstract

Introduction
Nonprofit hospitals in the U.S. are exempt from paying most taxes, a benefit estimated to be worth $28B-$54B. As states have become key players in nonprofit hospital regulation, highlighting variation in tax exemption value (TEV) is beneficial for policymakers looking to improve accountability.     

Purpose
Describe nonprofit hospital TEV and state variation for fiscal year ending (FYE) 2023.

Data
Data sources were CMS hospital cost reports (HCRIS), IRS Form 990s, county property assessments, and AHA data. 

Research Design and Methods 
Cross-sectional analysis of nonprofit hospital TEV. Hospitals were included if they had both IRS and HCRIS data available and were open as of March 2026. We linked CMS hospital data to IRS tax filings by creating a crosswalk through an address-mapping algorithm.  
TEV included federal income, federal unemployment, state income, sales, and property taxes, and value of tax-exempt donations and bonds, based on methods from previous TEV evaluations. Income taxes were calculated using net income from HCRIS, adjusting for prior year losses and other taxes paid. Sales tax was calculated based on supply expenses from AHA hospital surveys, using state/local tax rates. Donations were pulled from IRS Form 990, excluding in-kind donations and government grants, with a marginal tax rate of 23% applied. The difference between tax-exempt and non-exempt bonds was calculated using historical bond values and applied to the total bond liability from IRS Form 990. Unique to this analysis is the collection of hospital real estate data from county assessment portals, a more detailed and accurate measure including all hospital-owned tax-exempt parcels. 

Results
Preliminary results include 1,764 hospitals in 30 states. Total TEV was $21.5B, ranging from  $68M in Vermont to $3.2B in California. On average, hospitals received $12.2M in TEV; average per-hospital TEV ranged from $1.8M in Montana to $27.1M in Florida. Average TEV per hospital bed was $75,164; TEV/bed ranged from $15,253 in Alabama to $174,385 in Massachusetts. In five states, TEV/bed was at least $100,000. Across states, the standard deviation for TEV/bed was $33,679 (CoV 44.8%), indicating high variability. Overall, the largest contributor to TEV was federal income tax, comprising 32.3% of the total, followed by property (21.0%), sales (15.1%), and state income (12.1%). In 18 states, federal income tax was the largest contributor; in 9 states, property tax was the largest. 

Implications
In 2023, nonprofit hospitals in 30 states received $12.2M in TEV on average, similar to previous estimates. However, TEV varied widely across states, with hospitals in some states receiving 10 times the TEV/bed than in other states. While federal income tax was the largest singular TEV category, state and local taxes together made up about half of total TEV, and property values were the largest contributor in about one third of states. Policymakers in states with higher TEV may consider financial assistance requirements, local payments in lieu of taxes, or community benefit thresholds to ensure hospitals give back enough to communities.

Author

• Judith Garber, Lown Institute
  Presenting Author