Historically, not-for-profit (NFP) hospitals evolved from either religious groups or philanthropic foundations and provided health care to individuals that could not afford to pay the doctor to come to their home (Cutler, 2000), hence, they provided a service to the community that the community would otherwise be required to provide. These organizations generated little income and as such were granted tax exempt status (Cutler, 2000). Modernization of healthcare has transformed hospitals from places for the poor to seek care to places for society to receive care and as such the historical support for the tax exempt status has grown less relevant and in actuality, it can difficult in today’s healthcare environment to easily distinguish between for-profit (FP) and not-for-profit (NFP) organizations and the care and services they provide.
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The value of NFP tax exempt status is the ability to avoid the significant financial burden of paying taxes. In addition to not paying taxes, which can account for upwards of 34 percent of net income, tax-exempt status also releases NFP organizations from paying most business fees and licenses and provides the ability to issue tax-exempt bonds (Nowicki, 2015). NFP also have the advantage of charitable contributions being tax deductible for the donor; this can be an additional incentive to giving by providing a tax benefit to the donor (Cutler,
The value of NFP tax exempt status is the ability to avoid the significant financial burden of paying taxes. In addition to not paying taxes, which can account for upwards of 34 percent of net income, tax-exempt status also releases NFP organizations from paying most business fees and licenses and provides the ability to issue tax-exempt bonds (Nowicki, 2015). NFP also have the advantage of charitable contributions being tax deductible for the donor; this can be an additional incentive to giving by providing a tax benefit to the donor (Cutler,