The Tax Benefits of Not-for-Profit Hospitals
In: The Changing Hospital Industry: Comparing For-Profit and Not-for-Profit Institutions
This paper investigates three special tax provisions for not-for-profit (NFP) hospitals. First taxes -- both income and property taxes. Second, they issue tax-exempt bonds so lenders do not pay income taxes on interest received. Third, donors deduct charitable contributions from their income tax bases. The rationale for these policies is that the NFP hospitals provide community benefits, the definition of which is often loosely-specified. The value of capital tax exemptions depends on the capital intensity of NFP hospitals, and for income taxes, the hospitals' profitability. For 1995, the aggregate value of the exemption from income taxes is $4.6 billion; the median hospital receives benefits of 1.8 percent of total assets. For the property tax exemption, we estimate an aggregate value of $1.7 billion. The value of the property tax exemption varies across hospitals depending on state and local tax policies and the hospital asset mix. Tax-exempt bonds and deductible contributions are concentrated among larger hospitals. Only 19.7 percent of NFP hospitals had outstanding tax-exempt debt in 1994. Almost half of existing bond debt could be replaced by using hospital endowments; we calculate an annual aggregate benefit of $354 million from using tax-exempt bonds. For charitable contributions, roughly four percent of hospitals receive 71 percent of the contributions. We estimate that the lost tax revenue from these contributions is $1.1 billion in 1994.
(This abstract was borrowed from another version of this item.)
|This chapter was published in: ||This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number
6769.||Handle:|| RePEc:nbr:nberch:6769||Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Fama, Eugene F & Jensen, Michael C, 1983. "Agency Problems and Residual Claims," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 327-349, June.
- Timothy J. Goodspeed & Daphne A. Kenyon, 1993. "The Nonprofit Sector's Capital Constraint: Does It Provide a Rationale for the Tax Exemption Granted To Nonprofit Firms?," Public Finance Review, , vol. 21(4), pages 415-433, October.
- Gulley, O. David & Santerre, Rexford E., 1993. "The Effect of Tax Exemption on the Market Share of Nonprofit Hospitals," National Tax Journal, National Tax Association, vol. 46(4), pages 477-86, December.
- Shoven,John B. & Whalley,John, 1992.
"Applying General Equilibrium,"
Cambridge University Press, number 9780521266550.
- Shoven,John B. & Whalley,John, 1992. "Applying General Equilibrium," Cambridge Books, Cambridge University Press, number 9780521319867.
- Gulley, O. David & Santerre, Rexford E., 1993. "The Effect of Tax Exemption on the Market Share of Nonprofit Hospitals," National Tax Journal, National Tax Association, vol. 46(4), pages 477-486, December.
- Fama, Eugene F & Jensen, Michael C, 1983. "Separation of Ownership and Control," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 301-325, June.
- Randolph, William C, 1995. "Dynamic Income, Progressive Taxes, and the Timing of Charitable Contributions," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 709-738, August.
- Wedig, Gerard J & Hassan, Mahmud & Morrisey, Michael A, 1996. " Tax-Exempt Debt and the Capital Structure of Nonprofit Organizations: An Application to Hospitals," Journal of Finance, American Finance Association, vol. 51(4), pages 1247-1283, September.
- Richard G. Frank & David S. Salkever, 1994. "Nonprofit Organizations in the Health Sector," Journal of Economic Perspectives, American Economic Association, vol. 8(4), pages 129-144, Fall.
- Clotfelter, Charles T., 1985. "Federal Tax Policy and Charitable Giving," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226110486, December.
- Charles T. Clotfelter, 1985. "Federal Tax Policy and Charitable Giving," NBER Books, National Bureau of Economic Research, Inc, number clot85-1, December. Full references (including those not matched with items on IDEAS)