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November 13, 2015

N.J. Hospital Sheds Part of Tax Break in Suit Settlement

A nonprofit New Jersey hospital will pay $15.5 million to its hometown and give up a tax exemption on nearly a quarter of its property as part of a deal to settle a long-running legal dispute, the Morris County Daily Record reports. The pact was announced Wednesday, four and a half months after a state Tax Court judge upheld  Morristown, N.J., officials' 2008 decision to deny Morristown Medical Center a municipal tax exemption because, the town said, the hospital effectively operated like a business.

The payment covers outstanding property taxes going back to 2006, plus penalties and interest. In addition, for the next decade 24 percent of the medical center's property will be subject to local taxation at an annual cost of $1.05 million. The settlement ends a series of appeals by the hospital and its parent organization, Atlantic Health System. Atlantic CEO Brian A. Gragnolati said the deal benefits the hospital as well as the town by "providing clarity around financial obligations."

In his June ruling, Judge Vito L. Bianco said it had become impossible to distinguish between nonprofit and commercial operations at Morristown Medical, which hosts services by both its own doctors and self-employed physicians with for-profit practices. The agreement could lead to broader efforts by New Jersey towns to secure revenue from nonprofit hospitals and will be closely read by medical facilities, local officials, and state lawmakers, NJ Spotlight and Becker's Hospital Review write.