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Berger wants non-profit N.C. hospitals to pay sales tax

RALEIGH The state Senate voted Thursday to cap sales tax refunds for nonprofits, a move that could eventually cost hospitals, universities and other charities $235 million in revenue a year.

The state House did not include a similar cap in its tax bill, so the outcome will be decided in negotiations between the two chambers.

Leading the charge against the provision is the N.C. Hospital Association, which estimates that the Senate measure would eventually force the state’s nonprofit hospitals to pay $220 million a year in sales tax.

Sen. Phil Berger, the president pro tem, spoke sharply Thursday about hospitals and large entities that are “business entities organized as nonprofits.”

“These are business entities that pay their executives millions of dollars, business entities that have millions of dollars in reserves, business entities that don’t pay property tax, business entities that don’t pay income tax,” Berger said.

The Senate bill would begin by capping sales tax refunds at $7.5 million, and eventually lower that to $100,000 beginning in July 2017.

A series last year by The Charlotte Observer and The News & Observer of Raleigh explored how hospital lobbyists easily killed more modest efforts to limit sales tax refunds. Hospital critics pointed to entities such as Duke University Medical Center or Carolinas Medical Center, which have booked profits of hundreds of millions of dollars in some years while paying executives million-dollar salaries.

The Senate bill would probably affect about 250 of the 1,600 members of the N.C. Center for Nonprofits, according to David Heinen, the organization’s lobbyist.

Those potentially affected would be most hospitals, larger universities and colleges, and churches and other nonprofits engaged in big building projects, Heinen said.

If passed, the bill would force hospitals to consider cutting back on community services, said Don Dalton, spokesman for the hospital association.

“Our hospitals are already facing $780 million per year in decreased payments every year for the next 10 years for serving Medicare patients,” Dalton said in a statement. “The State has not yet chosen to expand Medicaid or provide alternative coverage options for the state’s poor. Hospitals will continue to serve these uninsured patients without adequate compensation.”

Neff: 919-829-4516
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