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It is now time to conclude our prolonged debate about the tax-exempt status of nonprofit hospitals. The contemporary nonprofit hospital is a commercial enterprise, materially indistinguishable for tax purposes from its profit-making, taxed competitor. The federal income tax and the states’ income, sales and property taxes should treat all hospitals alike, regardless of whether such hospitals are nonprofit or for-profit enterprises. In the interests of equity and efficiency, these similar institutions should be taxed similarly.

As a political matter, nonprofit hospitals will continue to defend their tax-exempt status. Like any other lucrative, vested interest, nonprofit hospitals will continue to fight hard to protect their valuable tax benefits. But, on the substantive merits, the case for taxing the contemporary nonprofit hospital is compelling, given the commerciality of today’s nonprofit hospitals. Such nonprofit hospitals are not materially distinguishable for tax purposes from their profit-making, taxed competitors.

Publication Date

Spring 2023




Virginia Tax Review

First Page



hospitals, tax exemption, nonprofit hospitals, for-profit hospitals, community benefit, religious hospitals, income taxes, property taxes, St. Jude Hospital, Shriners Childrens, disguised dividends, capital expenditures, loss carrybacks


Health Law and Policy | Law | Nonprofit Organizations Law | Taxation-State and Local | Tax Law