An Empirical Examination of State and Local Revocations of Tax-Exempt Status for Nonprofit Hospitals

Posted: 5 Sep 2010

See all articles by Ran Barniv

Ran Barniv

Kent State University - Department of Accounting

Kreag Danvers

Indiana University of Pennsylvania

Joanne Healy

affiliation not provided to SSRN

Date Written: 2005

Abstract

In recent years, many states and local authorities have revoked the tax exemptions for several nonprofit hospitals. In this study we examine whether hospital-specific and governmental revenue-need characteristics, organized by four underlying constructs, affect state and local tax authorities' decisions to revoke nonprofit hospitals' tax-exempt status. Based on analyses of state and local tax laws, we distinguish three types of taxes paid by hospitals: Medicaid taxes; state revenue-based taxes; and local taxes. We separately examine the effects of these characteristics on the revocation of the tax-exempt status for each type. We use survivorship analysis and fit logistic regressions that employ panel data to study the risk of revocation for each type of tax. Our results suggest that the likelihood that state authorities assess Medicaid taxes increases with the size of the tax base (i.e., patient revenue) and ability to pay, but decreases with lower revenue needs. We find that the likelihood of revocation for hospitals paying state revenue-based tax increases with the size of the tax base (i.e., total operating revenue), but decreases with public health benefits provided (e.g., charity care) and lower revenue needs. Finally, we show that the size of the tax base (public health benefit provided) increases (decreases) the likelihood of revoking the tax-exempt status for hospitals that pay local tax. Implications for local tax authorities and hospital managers are briefly discussed.

Keywords: Revocation of Tax-Exempt Status, Nonprofit Hospital, Survivorship Analysis and Logistic Regressions Panel Data

JEL Classification: E62, H25, H29, C23, C25

Suggested Citation

Barniv, Ran and Danvers, Kreag and Healy, Joanne, An Empirical Examination of State and Local Revocations of Tax-Exempt Status for Nonprofit Hospitals (2005). Journal of American Taxation Association, Vol. 27, No. 2, 2005, Available at SSRN: https://ssrn.com/abstract=1671967

Ran Barniv (Contact Author)

Kent State University - Department of Accounting ( email )

P.O. Box 5190
Kent, OH 44242-0001
United States
330-672-1112 (Phone)
330-672-2548 (Fax)

Kreag Danvers

Indiana University of Pennsylvania ( email )

Eberly College of Business Department of Accounting
Indiana, PA 15705
724-357-5514 (Phone)
724-357-3776 (Fax)

Joanne Healy

affiliation not provided to SSRN

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