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Hunterdon Medical Center v. Township of Readington

24 N.J. Tax 421 (2009)

TAXATION; ASSESSMENTS; HOSPITALS — In order for physical therapy services to constitute a “hospital” purpose that would render a property eligible for a tax exemption, the physical therapy services need to be an integral part of the hospital’s core purposes.

A medical center owned a building nine and one-half miles from its main hospital campus. It claimed that portions of the building qualified for a property tax exemption because they were used by an association organized exclusively for hospital purposes. The municipality denied the medical center’s exemption claim. The medical center sued.

The Tax Court held that the wellness center, the pediatric practice, and physical therapy service did not qualify for the tax exemption. It granted the exemption claims as to the space which provided cardio-pulmonary rehabilitation services within the building. The Appellate Division affirmed. The medical center appealed to the New Jersey Supreme Court.

The Supreme Court remanded, to the Tax Court, the matter as it related to a determination of tax exemption for the physical therapy space. It held that it was uncertain that the Tax Court’s finding with respect to this portion of the building should be upheld because: (I) that the integration of that service with the main medical center “seemed” to be co-extensive with that found for the cardio-pulmonary rehabilitation service; and (ii) its definition of “core hospital purposes” would include the delivery of physical therapy services, which were at one time provided at the main hospital center.

On remand, the Tax Court held that the medical center failed to demonstrate that, for the years in issue, the portion of the building devoted to physical therapy service qualified for the “hospital services” exemption under the statute. It noted that in order to utilize the physical therapy service, neither a hospital admission nor a prescription from a physician was required. Further, although it concluded that physical therapy services constituted a “hospital purpose,” it believed that it was not enough to find that the space qualified for a tax exemption. If found that concerns about hospital integration and supervision are more pronounced for off-site medical care facilities than for on-site facilities. It thus strictly applied the factors relating to the grant of the tax exemption and found that the exemption did not apply under the facts presented.

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