Atlantic Health inks $15.5M agreement to settle landmark tax case

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Morristown, N.J.-based Atlantic Health System has entered an agreement with the city of Morristown to end a series of property tax appeals related to one of Atlantic Health's hospitals.

In June, a tax court judge ruled Morristown (N.J.) Medical Center failed to satisfy the legal test that it operated as a nonprofit, charitable organization for tax years 2006 through 2008. Due to that finding, the judge ruled the hospital should pay taxes on all of its property, with the exception of its auditorium, fitness center and visitors' garage. There was also a separate pending matter regarding tax years 2009 through 2015.

Under the terms of the agreement, Morristown Medical Center will pay the town $15.5 million, including $5.5 million of penalties and interest that will be paid in annual installments over the next 10 years. In addition, from 2016 through 2025, approximately 24 percent of the hospital property will be taxed at an assessed value of $40 million. This represents an annual tax payment of $1.05 million.

Morristown Medical Center being stripped of its property tax exemption caught the attention of other nonprofit hospitals in New Jersey and across the country. In July, Moody's Investors Services said the ruling may induce other New Jersey municipalities to file similar lawsuits to challenge the nonprofit status of hospitals.

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