North Carolina SB 895: Nonprofit Hospitals Tax Exemption.

Bill Text

GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION 2025
S 1
SENATE BILL 895

Short Title: Nonprofit Hospitals Tax Exemption. (Public)
Sponsors: Senators Burgin and Mayfield (Primary Sponsors).
Referred to: Rules and Operations of the Senate
April 30, 2026
*S895-v-1*
A BILL TO BE ENTITLED 1
AN ACT TO MODIFY THE PROPERTY TAX AND SALES TAX EXEMPTIONS 2
AFFORDED TO NONPROFIT HOSPITALS. 3
The General Assembly of North Carolina enacts: 4
SECTION 1. G.S. 105-278.8 reads as rewritten: 5
"§ 105-278.8. Real and personal property used for charitable hospital purposes. 6
(a) Real and personal property held for or owned by a hospital organized and operated as 7
a nonstock, nonprofit, charitable institution (without profit to members or their successors) shall 8
be exempted from taxation in an amount equal to the total actual cost of qualified charity care 9
provided by the hospital and determined in accordance with subsection (d) of this section if that 10
property is actually and exclusively used for charitable hospital purposes. 11
(b) Notwithstanding the exclusive-use requirements of subsection (a), above, if part of a 12
property that otherwise meets that subsection's requirements is used for a purpose that would 13
require exemption under that subsection if the entire property were so used, the valuation of the 14
part so used shall be exempted from taxation.taxation in accordance with subsection (d) of this 15
section. 16
(c) Within the meaning of this section, a charitable hospital purpose is a hospital purpose 17
that has humane and philanthropic objectives; it is a hospital activity that benefits humanity or a 18
significant rather than limited segment of the community without expectation of pecuniary profit 19
or reward. However, the fact that a qualifying hospital charges patients who are able to pay for 20
services rendered does not defeat the exemption granted by this section. 21
(d) The exemption allowed a hospital under this section is equal to the total actual cost 22
of qualified charity care provided by the hospital on the specific tax parcel or parcels of real 23
property for which the exemption is claimed during its most recently completed fiscal year. For 24
purposes of this subsection, the actual cost of qualified charity care shall be calculated by 25
applying the cost-to-charge ratio from the hospital's most recent Centers for Medicare and 26
Medicaid Services Form 2552 Hospital Cost Report to the gross charges of the healthcare 27
services provided by the hospital on the parcel or parcels qualifying for the exemption provided 28
by this subsection. For purposes of this subsection, qualified charity care means healthcare 29
services provided without expectation of payment to uninsured or underinsured patients who (i) 30
have a family income at or below three hundred percent (300%) of the federal poverty level, (ii) 31
have been screened and approved under a uniform application process, and (iii) have provided 32
documented proof of income or for whom the hospital has performed a third-party credit-based 33
presumptive eligibility screening. Qualified charity care under this subsection shall not include 34
bad debt, contractual allowances, or any portion of a bill for which payment was received from 35
a third-party payer, including payments from government-sponsored healthcare programs. 36

General Assembly Of North Carolina Session 2025
Page 2 Senate Bill 895-First Edition
(e) The difference between the taxes due under this section and the taxes that would have 1
been payable in the absence of this section is due and payable in accordance with Subchapter II 2
of this Chapter. 3
(f) An application for property tax relief provided by this section should be filed during 4
the regular listing period but may be filed and must be accepted at any time up to and through 5
June 1 preceding the tax year for which the relief is claimed. Hospitals may apply for this property 6
tax relief by entering the appropriate information on a form made available by the assessor under 7
G.S. 105-282.1." 8
SECTION 2. G.S. 105-282.1(a)(2)a. reads as rewritten: 9
"a. Property exempted from taxation under G.S. 105-278.2(a), 105-278.3, 10
105-278.4, 105-278.5, 105-278.6, 105-278.7, or 105-278.8.or 11
105-278.7." 12
SECTION 3. G.S. 105-164.14(b) reads as rewritten: 13
"(b) Nonprofit Entities and Hospital Drugs. – A nonprofit entity is allowed a semiannual 14
refund of sales and use taxes paid by it under this Article on direct purchases of items for use in 15
carrying on the work of the nonprofit entity. Sales and use tax liability indirectly incurred by a 16
nonprofit entity through reimbursement to an authorized person of the entity for the purchase of 17
tangible personal property and services for use in carrying on the work of the nonprofit entity is 18
considered a direct purchase by the entity. Sales and use tax liability indirectly incurred by a 19
nonprofit entity on building materials, supplies, fixtures, and equipment that