When a good commentator writes a misleading column
Or, ‘why Shouldn’t Dartmouth and the Elliot Hospital pay their fair share?’
Brad Cook is not a bad writer – for a lawyer. His columns are generally informative, sometimes humorous, but occasionally totally off the mark.
His recent column about House Bill 569 (“When a good legislator sponsors bad legislation,” Feb. 20-March 5 NHBR) falls squarely in the latter category.
I am the prime sponsor of HB 569 – together with nine other veteran Democratic and Republican co-sponsors. The bill would close a large and growing tax loophole by expanding the tax base of the business enterprise tax to include a very small, discreet group of large 501(c)(3) business entities.
It would expand the tax base to add less than 100 of the largest such entities in the state – those which earn more than $10 million from fees (i.e. “income”) received for services and products rendered to customers.
In other words, for behavior that is identical in all respects to that of for-profit and all other nonprofit businesses that already pay this minimal tax. That’s right, all other nonprofits in New Hampshire, with the single exception of 501(c)(3) entities, already pay this tax.
The Internal Revenue Code has 29 categories of organizations exempt from federal taxation under Sec. 501(c). Organizations in 28 of those categories already pay the BET. Only 501(c)(3)’s are expressly exempt. And for no good reason:
1. These entities represent a substantial and growing sector of our total economy – currently estimated at 12 to 16 percent of our gross state product. Twelve of the largest 24 service sector employers in the state are 501(c)(3)s with more than 30,000 employees.
2. They are among the largest accumulators of wealth in our society today (just look at their buildings – including those three- and four-story atriums – and their accumulated assets).
3. Their chief executives are among the highest paid CEOs in the state.
4. They use labor and capital resources, the components of the BET, just like “for-profits.”
5. They utilize state and local services the same way as “for-profit” businesses.
6. Perhaps most importantly, many of these entities, most notably hospitals, are actually substantially shrinking the BET tax base by buying up physician practices and other providers and sweeping them under their tax-exempt umbrellas, thereby making the salaries and other compensation earned by these affluent professionals tax-free.
Furthermore, these entities often acknowledge, perhaps inadvertently, that they are in fact businesses. Thus the title of a recent op-ed piece in the Concord Monitor by the Chair of the New Hampshire College and University Council described higher education as “an industry.”
And in an article in this periodical on Sept. 20, 2013, the executive director of the New Hampshire Center for Nonprofits talked about “the nonprofit business model.”
The expansion of these conglomerates into new fields is also frequently reported. Thus the Jan. 30 edition of the Monitor headlined that “14 nonprofits apply for spots in the medical pot market”; and a front page story in the Union Leader on March 5 reported that five hospitals (all nonprofits) were partnering with the Tufts Health Plan to launch a new health insurance company in New Hampshire.
This bill focuses only on 501(c)(3)’s that look, act and generate revenue like for-profit businesses – organizations, for example, that engage in large, expensive public relation campaigns in order to expand or keep market share.
The bill exempts private foundations, churches and other “pure” religious organizations, public entities, all of the smaller, local, “Ma and Pa charities” and essentially volunteer organizations.
It also exempts all organizations that receive most of their income from gifts, donations, grants and contributions.
Finally, by setting the $10 million threshold for imposing the BET, this bill recognizes that these entities do provide some socially valuable services that complement, and in some instances supplant, publicly provided services.
But don’t be misled by Attorney Cook’s bald assertion that these “reserves” (the euphemistic term used to describe a nonprofit’s “surplus” or “profit”) are all devoted to providing or subsidizing socially beneficial services. And lest you shed a tear over subjecting these giant conglomerate 501(c)(3)’s to this very nominal tax of 0.7 percent, consider that a recent study by the New Hampshire Center for Public Policy Studies reported that charity care accounts for barely 5.5 percent of the total revenue of the 23 “nonprofit” hospitals statewide, that they already pay numerous taxes and other levies, including Social Security and FICA, and these entities are competing with two for-profit hospitals in the state that are already paying both the BET and the BPT.
In addition, in 2009, these 23 “nonprofit” hospitals paid just their 23 CEOs almost as much as they would have collectively paid the state in BET taxes that year had they been subject to the tax.
Don’t you agree that it’s about time these giant organizations begin to pay their fair share of a very nominal tax?
State Rep. David Hess, R-Hooksett, represents Merrimack District 24.