Hospital’s Off-Site Physical Therapy Center Granted Property Tax Exemption
A New Jersey appellate court has held that Hunterdon Medical Center (“HMC”) is entitled to a local property tax exemption for that portion of an off-site Health and Wellness Center (“Wellness Center”) operated by HMC to provide physical therapy (“PT”) service. HMC also provides cardio-pulmonary rehabilitation (CP Rehab) at the Wellness Center, which is located more than nine miles from HMC’s hospital.
The Tax Court, in a decision upheld by the appellate court, held previously that the portion of the Wellness Center dedicated to CP Rehab was entitled to the exemption but rejected HMC’s claim for an exemption for the PT service. That decision, to the extent it held that the portion of the Wellness Center’s facility on the second floor dedicated to PT service was not entitled to an exemption, was reversed and the matter remanded in Hunterdon Medical Center v. Readington Township, 195 N.J. 549 (2008) (“HMC I”).
The Supreme Court in HMC I noted that the lower courts applied a test that examined the degree to which the activities at the Wellness Center were integrated and supervised by hospital medical staff. The Supreme Court found that while consideration of the operational integration was a relevant inquiry, it held that the first step in the analysis was to determine the meaning of “hospital purposes” under the tax exemption statute, N.J.S.A. 54:4-3.6. The high court held also that any medical or diagnostic service that a hospital patient might require, whether pre-admission, during a hospital stay, or post-admission, presumptively constituted a core “hospital purpose” under the statute. When an off-site facility provided such services, the test for tax exemption also required consideration of the degree to which the off-site facility’s activities operationally were integrated and supervised by hospital personnel. Another factor to consider was whether the facility primarily served patients and staff or the general public.
Because the high court in HMC I was uncertain whether the Tax Court would reach the same conclusion regarding the PT service under its revised methodology, the matter was remanded to the Tax Court for reconsideration. On remand, the Tax Court reached the same conclusion that the PT service was not exempt. Relying on the Supreme Court’s holding in HMC I, the appellate court in the more recent decision in Hunterdon Medical Center v. Readington Township, Docket No. A-4262-08T3 (App. Div. August 31, 2010)(Approved for Publication) (“HMC II”) reversed and held that HMC had met its burden of demonstrating that the PT service is sufficiently integrated into HMC’s delivery of its core hospital purposes to support the grant of a tax exemption.
