BILL REQ. #:  S-1133.2 

Read first time 02/03/11.   Referred to Committee on Health & Long-Term Care.

     AN ACT Relating to accountability for tax exempt hospitals; amending RCW 84.36.840 and 84.36.040; and creating a new section.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION.  Sec. 1   (1) The legislature finds that the property tax exemption for hospitals dates back as far as the year 1854 when benevolent, charitable, literary, and scientific institutions were first exempted from the tax base.
     (2) The legislature finds that a 2007 report on tax preferences from the joint legislative audit and review committee suggested that it was not clear how well nonprofit hospitals had met expectations for charitable services and community benefits as compared to the performance of private for-profit hospitals and also found mixed results as to whether nonprofit hospitals were providing more charity care as a percent of adjusted revenue than for-profit hospitals not receiving the tax exemption. The same report values the property tax exemption between fifty and sixty million dollars per year for the state's forty-five nonprofit hospitals.
     (3) The legislature finds that an exemption from property taxes for certain hospitals both: (a) Reduces state funds that would otherwise be available to fund the health care safety net; and (b) requires property owners in those communities to pay a greater share of the local tax burden.
     (4) It is therefore the intent of the legislature to recognize nonprofit hospitals that are providing essential community benefits while ensuring that compensation packages for nonprofit hospital employees are comparable with other public purpose entities.

Sec. 2   RCW 84.36.840 and 2007 c 111 s 305 are each amended to read as follows:
     (1) In order to determine whether organizations, associations, corporations, or institutions, except those exempted under RCW 84.36.020 and 84.36.030, are exempt from property taxes, and before the exemption ((shall be)) is allowed for any year, the superintendent or manager or other proper officer of the organization, association, corporation, or institution claiming exemption from taxation ((shall)) must file with the department of revenue a statement certifying that the income and the receipts thereof, including donations to it, have been applied to the actual expenses of operating and maintaining it, or for its capital expenditures, and to no other purpose. This report ((shall)) must also include a statement of the receipts and disbursements of the exempt organization, association, corporation, or institution.
     (2) Educational institutions claiming exemption under RCW 84.36.050 ((shall)) must also file a list of all property claimed to be exempt, the purpose for which it is used, the revenue derived from it for the preceding year, the use to which the revenue was applied, the number of students who attended the school or college, the total revenues of the institution with the source from which they were derived, and the purposes to which the revenues were applied, listing the items of such revenues and expenditures in detail.
     (3) A nonprofit hospital that claims an exemption under RCW 84.36.040 must file an unofficial copy of their federal Schedule H form 990 with the department within five days of filing the form with the internal revenue service. The department must make each unofficial copy of the federal Schedule H form 990 available for download on the department's web site.
     (4) The reports required under ((subsections (1) and (2) of)) this section may be submitted electronically, in a format provided or approved by the department, or mailed to the department. Except as otherwise provided in subsection (3) of this section, the reports ((shall)) must be submitted on or before March 31st of each year. The department ((shall)) must remove the tax exemption from the property of any organization, association, corporation, or institution that does not file the required report with the department on or before the due date. However, the department ((shall)) must allow a reasonable extension of time for filing upon receipt of a written request on or before the required filing date and for good cause shown therein.

Sec. 3   RCW 84.36.040 and 2010 c 106 s 305 are each amended to read as follows:
     (1)(a) The real and personal property used by, and for the purposes of, the following nonprofit organizations is exempt from property taxation:
     (((a))) (i) Child day care centers ((as defined in subsection (4) of this section));
     (((b))) (ii) Free public libraries;
     (((c))) (iii) Orphanages and orphan asylums;
     (((d))) (iv) Homes for the sick or infirm;
     (((e))) (v) Hospitals for the sick that meet the requirements in subsection (4) of this section; and
     (((f))) (vi) Outpatient dialysis facilities.
     (b) For the purposes of this subsection, "hospitals for the sick" does not include freestanding emergency rooms that advertise as an emergency room, yet are not physically connected or adjacent to a licensed hospital under chapter 70.41 RCW.
     (2) The real and personal property leased to and used by a hospital for hospital purposes is exempt from property taxation if the hospital is established under chapter 36.62 RCW or is owned and operated by a public hospital district established under chapter 70.44 RCW.
     (3) To be exempt under this section, the property must be used exclusively for the purposes for which exemption is granted, except as provided in RCW 84.36.805, and the benefit of the exemption must inure to the user.
     (4)(a) To be exempt under this section, a nonprofit hospital or public hospital district must:
     (i) Maintain the salary of its officers at levels comparable to the salary or compensation of like positions within the public service of the state;
     (ii) Ensure that all management contracts and third-party vendors are obtained at no greater than fair market value;
     (iii) Annually submit on or before March 31st of each year an independently conducted salary comparison for its five highest paid officers to the department to demonstrate compliance with subsection (a)(i) of this subsection (4); and
     (iv) Post the full salary detail, including all forms of wage and nonwage compensation, of its five highest paid officers on a public web site maintained by the Washington state hospital association.
     (b) The nonprofit hospital or public hospital district has the burden of proof on an annual basis to demonstrate that its five highest paid officers are compensated at levels comparable to like positions within the public service of the state and the department may require adjustment to the salary schedule for purposes of maintaining exempted status under subsection (1) of this section.
     (c) A nonprofit hospital or public hospital district that does not satisfy the requirements of this subsection (4) is not entitled to an exemption under this section.
     (5) For purposes of ((subsection (1) of)) this section, "child day care center" means a nonprofit organization that regularly provides child day care and early learning services for a group of children for periods of less than twenty-four hours.