By Michelle Crouch
As North Carolina lawmakers search for ways to reduce the tax burden for state residents, they’re taking aim at the generous tax breaks the state’s nonprofit and public hospitals have long enjoyed.
Proposals discussed by a House committee on March 18 would significantly scale back two key tax exemptions. If passed, they would mark one of the most significant efforts in years to reduce hospital tax breaks and could send millions to the state and local governments.
Under current law, nonprofit and government hospitals are exempt from property taxes and can receive up to $45 million a year in sales tax refunds. The proposed legislation would cut the property tax break in half, meaning only 50 percent of a hospital’s property would remain tax-exempt. A separate bill would lower the sales tax refund cap from $45 million to $14.2 million.
The Ledger/NC Health News has spotlighted both types of tax breaks:
- Our analysis of property tax exemptions in 2023 found that hospitals own exempt property valued at $6.3 billion in North Carolina’s five most populous counties, based on 2022 assessed values. That includes more than $2.4 billion owned by Atrium Health and Novant Health in Mecklenburg County alone — which would bring in at least $23 million a year to local governments if the land were not exempt from property taxes.
- A 2025 investigation revealed that Atrium Health sidesteps the state’s $45 million cap on sales tax refunds by filing refund requests as two separate entities: Atrium Health Wake Forest Baptist and a government entity that does business as Atrium Health. (Atrium stressed that its filings were legal and that it invests billions in the community.)
Rep. Julie Howard, R-Davie, who co-chairs the House Select Committee on Property Tax Reduction and Reform, cited the Ledger/NC Health News’s reporting on Atrium at a February committee meeting when discussing the need for sales tax reform.
At the March 18 meeting, she said that even though the practice of filing for sales tax refunds under two separate entities is legal, it’s “a loophole that is costing taxpayers money.”
“It was not the intent,” she said, adding that Atrium has “real good legal counsel. That was not the way it was supposed to be.”
The proposed legislation would close the loophole by requiring all the affiliate organizations of a nonprofit or public hospital to be treated as one entity when applying the refund cap.
Hospitals raise concerns about impact
Stephanie Strickland, a spokeswoman for the North Carolina Healthcare Association, which represents hospitals, said last week that the group is reviewing the bill proposals and looks forward to “continued dialogue” with the committee and the General Assembly to ensure that hospitals can continue meeting patients’ needs.
“Many hospitals in North Carolina, particularly those serving rural and underserved communities, operate on very small margins,” she said in an email. “Proposals that further strain hospital resources raise serious concerns about the potential impact on patients, access to care and hospitals’ ability to reinvest in critical services, both within their facilities and in the communities they serve.”
Asked separately for comment last week, Atrium Health emailed a short response that it doesn’t “speculate on proposed or draft legislation.”
The House committee was formed to examine ways to ease rising property taxes, which lawmakers say are forcing some residents out of their homes, particularly seniors on a fixed income and people with disabilities. Members also discussed a draft constitutional amendment that would limit how much local governments can increase property taxes each year.
The committee is expected to vote in April on which bills to send to the full state House of Representatives; any legislation would also need Senate approval.
The effort to restrict hospital tax breaks comes as medical costs keep soaring for patients and many hospitals have grown into big businesses that report double-digit earnings growth and pay their top executives millions.
Atrium, the state’s largest hospital system, is part of Advocate Health, a $32 billion company with 162,000 employees in six states.
Hospitals claim huge share of tax breaks
Hospitals have long been the biggest beneficiaries of the state’s sales tax refunds, collecting about $280 million — or 71 percent — of the roughly $400 million of sales tax refunded each year, according to a legislative report.
When lawmakers created the sales tax refund cap in 2013, they were trying to rein in large nonprofits they said were flush with cash but still collecting generous tax refunds, the Ledger/NC Health News reported. But after heavy lobbying from the hospitals, the $45 million limit was set so high that it was largely considered symbolic. Nonetheless, some hospital systems are now hitting it.
At the same time, local governments are missing out on increased property tax revenue as hospitals aggressively expand by buying doctor’s offices, imaging centers and clinics which, as a result, are removed from the tax rolls.
The value of nonprofit hospital property across the state has jumped about 40 percent in four years, according to the legislative report. Analysts said that translates to roughly $130 million a year that cities and counties could be collecting, but aren’t.
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What hospital property should be exempt?
As hospitals expand and take more property off the tax rolls, lawmakers are also questioning what types of hospital-owned property should qualify for a tax exemption.
Legislative analysts told the committee in February that some states exclude certain types of hospital property such as medical office buildings, retail space on hospital grounds, administrative buildings and recreational facilities.
A 2023 Ledger/NC Health News article highlighted a PDQ chicken restaurant on Atrium Health property in Cornelius that was exempt from property taxes — and still is, according to Mecklenburg County tax records accessed and examined last week. (Atrium stressed in 2023 that it voluntarily pays property taxes on other parcels that it could claim exemptions on.)
Renewed interest in a facility fee ban
Separately, a different legislative committee on recently revisited hospital facility fees — charges meant to cover hospital overhead that are increasingly added to medical bills, even for care miles away from a hospital.
A Senate bill to ban the fees in nonhospital settings stalled in a House committee last year.
The Joint Legislative Oversight Committee on Health and Human Services heard arguments from supporters and critics of the fees on March 10. One presentation cited a Charlotte Ledger story about a patient who was hit with a $5,300 facility fee for a colonoscopy. It also highlighted a Ledger/NC Health News article that told the story of a patient who was charged $200 more per visit after UNC Health started coding his visits to a doctor’s office as “hospital outpatient” care.
Want to weigh in? You can email your feedback to the members of the committee reviewing the legislation using their publicly available contact information.
This article is part of a partnership between The Charlotte Ledger and North Carolina Health News to produce original health care reporting. You can support this effort with a tax-deductible donation.
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