Tax Reform Proposals Hit Hospitals Hard

John Commins, November 17, 2017

Provisions in both the House and Senate tax bills that would affect hospitals are raising alarms, as lobbyists for the hospital industry urge House and Senate leaders to reconsider.

If tax reform is a game of winners and losers, then right now hospitals – at least temporarily – occupy the losers’ column in both the House and Senate plans.

Several provisions in the sweeping tax plan approved by House Republicans this week will harm hospitals and the patients they serve, the American Hospital Association said.

The Tax Cuts and Jobs Act (H.R.1) "would eliminate hospitals' ability to access low-cost capital financing through tax-exempt private-activity bonds and advance refunding bonds," AHA said in a media release. "In addition, the bill would impose a 20% excise tax on pay for certain nonprofit hospital employees."

The bill passed 227-205 along partisan lines.

"For many communities, tax-exempt financing, such as private activity bonds, has been a key to maintaining vital hospital services," AHA Executive Vice President Tom Nickels said. "If hospital access to tax-exempt financing is limited or eliminated, hospitals' ability to make investments in new technologies and renovations in the future will be challenged."

As for the proposed 20% excise tax, Nickels said that "there is already a rigorous process prescribed by the Internal Revenue Service for setting up executive compensation."

"The process requires an impartial panel drawn primarily from the board of trustees, which is charged with setting CEO compensation based on the marketplace and documenting deliberations to attract the best talent," he said.

John Commins

John Commins is a senior editor at HealthLeaders Media.

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