Threats to Rural Hospitals in Tax Reform Proposals

Tax-exempt financing is facing the most hostile challenge to its existence since the 1986 revisions to the Tax Code. Tax-exempt financing is being threatened in the House of Representatives tax reform bill, the Tax Cuts and Jobs Act. Non-profit hospitals depend on tax exempt private-activity bonds (PABs) as a financing tool. PABs are tax exempt for certain entities, including qualified 501 (c)(3) organizations including hospital bonds, but under the new tax reform legislation being considered by Congress, the tax exemption will be removed. PABs play a critical role in helping not-for-profit hospitals and health systems access low-cost capital. Access to low-cost capital financing allows qualifying entities to keep infrastructure expenditures low. This increases the ability for qualifying hospitals and health system to use these savings to increase more efficient, more affordable care.

Federal tax-exempt financing is part of what continues to help health care providers and hospitals serve our nation and support rural communities. NRHA opposes removal of tax-exemption for PABs and urges Congress to consider the needs of small hospitals and rural communities as they continue to work to reform our tax code.

NRHA will continue to monitor this provision through the tax reform legislation debate and will update the blog. 

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