By Michelle Crouch
State lawmakers looking for ways to reduce the tax burden for North Carolinians are holding off — for now — on legislation that would have scaled back two key tax exemptions that benefit nonprofit and public hospitals.
Based on the candid comments of one lawmaker co-chairing the committee debating the changes, it’s not hard to guess why:
“I think somebody told me I probably shouldn’t say this, but we were all bombarded with calls from lobbyists,” said Julia Howard, a Republican member of the state House of Representatives from Davie County, last week.
She quickly added, to laughter: “I’m not going to pick on the hospitals. I’m not going to even mention it.”
Another lawmaker shot back: “Yes, you were told not to bring that up.”
The exchange took place during a meeting of the House Select Committee on Property Tax Reduction and Reform, which was created to provide relief for homeowners faced with rising property taxes.
The two changes the committee proposed on hospital tax exemptions would have meant millions in added revenue for state and local governments.
The first proposal would have cut nonprofit hospitals’ 100 percent property tax exemption in half, requiring them to start paying taxes on a portion of their property. Local governments lose out on about $130 million in revenue in property taxes from hospitals because of the current 100 percent exemption, according to a legislative analysis.
The other measure would have sharply lowered how much the largest hospital systems can recoup in sales taxes. Under the current rules, hospitals pay sales tax up front but can later request a refund from the state, up to $45 million. A proposed bill would have lowered that cap to $14.2 million.
The proposal also would have closed a loophole that allows some hospitals to get the refund twice.
Previous reporting by NC Health News/The Ledger found that Charlotte-based Atrium Health sidesteps the cap by filing refund requests as two separate entities: Atrium Health Wake Forest Baptist and the Charlotte-Mecklenburg Hospital Authority, a government entity that does business as Atrium Health. (Atrium stressed that its filings are legal and that it invests billions in the community.)
Hospitals say losing or reducing their tax exemptions could strain services and patient care, with a disproportionate impact on rural hospitals that already operate on razor-thin margins.
At an April 7 meeting of the Joint Legislative Oversight Committee for Health and Human Services, executives with FirstHealth of the Carolinas, a four-hospital system serving the state’s Sandhills region, outlined the financial pressures they face: federal Medicaid cuts, higher chronic disease rates and other health inequities, and persistent struggles to recruit nurses and other providers.
“Rural hospitals also cannot afford a loss of property tax exemptions,” Chief Financial Officer Autumn McFann told lawmakers. “This would be a direct hit to a bottom line that, as I showed you, is already declining.”
The property tax committee did not vote on the hospital proposals. A 219-page report prepared by the committee after four meetings said the committee decided not to move forward because of “concerns about the potential impact on certain hospitals,” adding that it may “revisit the issue.”
The committee agreed to continue meeting for the rest of 2026.
Howard said she hopes the changes will continue to be discussed at future meetings. The millions allowed annually in tax exemptions are part of the reason homeowners across the state are facing large property tax increases, she said.
“I understand that hospitals are very intimidating and have a large lobby, but as we move forward and look at these exemptions, you’re going to have to have a big coat on and have the will to stop it,” Howard said. “We need to do what’s right, not what is politically favorable.”
Action on other property tax proposals
Although it took no action on the hospital tax exemption proposals, the House Select Committee on Property Tax Reducation and Reform did vote on April 15 to move ahead with two other measures:
- Closing a loophole that allows for-profit affordable housing developers to get tax breaks aimed at nonprofits.
- An amendment to the North Carolina Constitution that would limit how much local governments can increase property taxes. Local government leaders strongly oppose the proposal, arguing that . Charlotte leaders are speaking out against the property tax proposal, along with leaders from other counties.
Both measures would need the approval of the full House and the Senate. The constitutional amendment would also go before voters on the November ballot.
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