ANALYSIS AND COMMENTARY
On a recent article about the local healthcare system — and frankly, most of the time any article or opinion piece about them is posted — it’s not long before someone weighs-in saying Shannon is “cheating” everybody by not paying property taxes.
This is incorrect.
To make Shannon Health pay property tax would be exactly the same thing as making all of the doctors and nurses over there work a few hours each week filling-in potholes, or trimming trees, or going over purchase orders at City Hall.
It’s a wasteful idea that can only hurt the hospital’s ability to provide care.
Nonprofit hospitals are exempt from property taxes because they provide a public benefit, and assessing them with a property-tax bill the same as anyone else would bankrupt most charity hospitals in no time.
Humans are not solitary critters. For the most part, we live lives connected by bonds of family, location, worship and work.
And whether you dislike the word or not, all this stuff where human beings live together is what we call a “society,” and because it involves humans, there are social concerns that must be addressed.
“What to do about healthcare?” is one of the longer-standing questions in our society.
Up to this point, the hospital/tax exempt thing has been seen as a trade-off: The community “pays” for the hospital’s tax exemption through forgone tax revenue, and in return, the hospital provides services that benefit the community.
The tax exemption isn’t a free pass. Federal and state laws, including laws in Texas) require nonprofit hospitals to meet a “community benefit standard,” and this is also why they have the Certificate of Public Advantage, or COPA.
Nonprofit hospitals are expected to provide a range of services, including emergency care for all, regardless of a patient’s ability to pay, and provide free or discounted health services to uninsured and underinsured people who meet specific financial-assistance criteria.
The real question is whether the value of Shannon’s community services is equal to, or greater than, the value of the taxes the health system would otherwise pay.
We would argue that in today’s climate of rising costs, the benefits Shannon provides far outweigh the unrealized property-tax revenue.
What About Churches?
Historically, churches are untaxed for a somewhat different reason.
While some colonies taxed their citizenry directly for funds to support the church, like in Massachusetts, by revolutionary times, most of the colonies some form of tax relief for churches, as it was considered “unchristian” to require a payment from congregations, and tax exemption came to be seen as upholding the separation between church and state, preventing government entanglements.
However, since there were no federal taxes that applied to churches, it was a question left up to the states.
The 1894 Tariff Act first introduced formal tax-exempt status for charitable and religious groups, although it was struck down by the courts, but the Revenue Acts of 1909 and 1913 explicitly granted exemptions for religious, charitable, scientific, and educational groups, becoming the foundation after the 16th Amendment allowed federal income tax.
Today, most churches are recognized as 501(c)(3) non-profits, exempt from federal income tax, and donations to them are tax-deductible.
All 50 states offer property-tax exemptions for religious entities, with varying rules.
“Power to Tax is Power to Destroy”
This legal concept suggests that if the government could tax churches, it could effectively shut them down, infringing on the free exercise of religion.
Each state has specific laws (like Texas Tax Code § 11.20) allowing exemptions for property owned by religious organizations and used primarily for religious worship or reasonably necessary activities.
Churches must apply through the state and local appraisal district, proving their property meets the criteria for exemption, often requiring regular re-certification.
If a church uses property for significant commercial activities unrelated to its mission, some taxes may be assessed.
