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April 16, 2020
2020-0995

New Florida law limits nonprofit hospital's property tax exemption to community benefit provided

Florida Statute section 193.019 (H.B. 7097), signed into law by Governor DeSantis on April 8, 2020, adds to state law certain community benefit reporting requirements for hospitals that apply for property tax exemption (applicants). The legislation effectively limits a tax-exempt hospital's property tax exemption to the amount of community benefit that the hospital provides to its residing location(s). The statute becomes effective on January 1, 2022.

New requirements

The new statute requires a county property appraiser, by January 15 each year, to calculate and submit to the Florida Department of Revenue (DOR) any property tax reductions as granted for each property owned by an applicant.

In addition, by January 15 each year, an applicant applying for property tax exemption must submit to the DOR:

  • A copy of the applicant's most recently filed Form 990, Schedule H
  • A schedule showing:
    1. The net community benefit expense attributed to each county in Florida in which properties are located
    2. The net community benefit expense attributed to each Florida county from another Florida county in which properties are located (Applicant can attribute up to 100% of its net community benefit expense to any county or counties within Florida.)
    3. The portion of net community benefit expense that the applicant reported on its most recently filed Form 990, Schedule H, attributable to services and activities provided or performed outside of Florida
    4. The sum of the amounts provided in 1, 2 and 3; this amount must equal the total net community benefit expense the applicant reported on its most recently filed Form 990, Schedule H
  • A statement signed by the applicant's CEO and an independent certified public accountant, attesting to their reasonable knowledge and belief, that the statement of total Florida county or counties net community benefit expense is "true and correct"

The new law requires the DOR to determine whether the county net community benefit expense attributed to an applicant's property located in a particular county equals or exceeds the tax reductions from the exemptions from that county. If the DOR determines in the second consecutive year that an applicant's county net community benefit expense does not at least equal the tax reductions from the exemptions, the DOR must notify the respective property appraiser by March 15 to limit the exemption for the current year by multiplying the exemption by the fraction: net community benefit expense over the tax reductions resulting from the exemptions.

The law requires the DOR to publish the data it collects for each applicant from county property appraisers, including the net community benefit expense reported on Form 990, Schedule H, and allows the DOR to adopt laws to administer the statute, including creating forms.

Implications

This statute places an additional tracking and reporting burden on tax-exempt hospitals to allocate and apportion their federal community benefit to the specific Florida counties in which their healthcare facilities are located and submit the information to the Florida Department of Revenue. Tax-exempt hospitals that are expecting to be affected by the new statute should consider the relative property tax reduction for each county in which their facilities reside when performing the community benefit allocation.

The statute does not indicate whether the healthcare facility will have the opportunity to appeal the opinion issued by the property appraiser. As the statute currently reads, affected hospitals may have their property tax exemption limited without any opportunity to appeal the determination.

Although the statute does not affect a hospital's nonprofit status in Florida, it does provide another example of a taxing authority's effort to tie the state's tax exemption benefits to the value the organization provides to the community. Thus, tax-exempt hospitals in other states should monitor the implementation of this statute and assess the potential application to their own operations.

Please contact your EY professional for further information.

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RELATED RESOURCES

— For more information about EY's Exempt Organization Tax Services group, visit us here.

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Contact Information
For additional information concerning this Alert, please contact:
 
Tax-Exempt Organizations Group
   • Terence Kennedy (tery.kennedy@ey.com)
   • Melanie McPeak (melanie.mcpeak@ey.com)
   • Vickus DeKock (vickus.dekock@ey.com)
   • Jack Miya (jack.w.miya@ey.com)
 

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