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The value of a nonprofit hospital's tax exemption?

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Donald Planey

Good evening to the IMPLAN community and staff,

I have been using IMPLAN to model the tax impacts of nonprofit hospitals, and had a question:

I was wondering how I could estimate the value of a nonprofit hospital's tax exemption, when using Impact Analysis (Detailed)?  Would this be a matter of running two scenarios- one where instead of entering 0 for Taxes on Production & Imports and Other Property Income, and a second scenario where I leave these boxes blank, with the differences between tax revenue between the two scenarios representing an estimate of the tax exemption's value? Or would there be a better way of estimating the tax exemption's value, using IMPLAN?

The guide I am using, for reference:

https://support.implan.com/hc/en-us/articles/360034818153-Hospitals-Modeling-Public-Nonprofit-Hospital-Impacts-with-Analysis-by-Parts

 

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    Candi Clouse, PhD

    Don - 

    The method you outline sounds great! The first scenario leaves all the taxes in, but you can still zero out Proprietor Employment, Proprietor Income, and Other Property Income (although this does include Corporate Profits Tax and Dividends Tax). Then the second scenario, enter a zero additionally for Taxes on Production and Imports. You will still see taxes on Employee Compensation (payroll), but you won't see any Sales Tax, Property Tax, Motor Vehicle License Tax, Severance Tax, Excise Tax, Customs Duties, Other Taxes.

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    Donald Planey

    It just dawned on me that in the second scenario, I would still want proprietor employment and income still set to $0, with only TOPI and OPI set as blank. 

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    Donald Planey

    Dr. Clouse-

    Thank you, this helps a lot!

    I do think I may see a potential issue (but is potentially fixable).  When I filter for direct impacts in the tax results, I still see 115014-Social Insurance Tax- Employee Contribution and 15015-Social Insurance Tax- Employer Contribution show up as Federal and State tax impacts. Is this the equivalent of the payroll tax?  If so, I might want to deduct this (direct) tax impact, given that 501c(3) organizations do not pay Federal (and most state) payroll taxes.

    I also noticed that there are direct tax impacts listed for households (of varying income brackets) in the "personal tax: property taxes" category.  Wouldn't the tax impacts of households be classified as induced tax impact, to the exclusion of direct tax impact?  Or are these property tax impacts listed this way because the affected personal property would be direct employees of the modeled hospital?

     
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    Candi Clouse, PhD

    Don - 

    Social Insurance Tax is payroll tax and it's paid by employers and employees. If you know one entity isn't paying this, I would go ahead and manually remove it from the results.

    As for personal tax - property: 
    Employees pay payroll tax on their Labor Income and then pay personal income tax on their Household Income, which may include more than just employment-based income. Personal income taxes are also paid on other types of income (e.g., rental income, dividend income, interest income, capital gains, retirement income). 

    The article Where's the Tax has all the information about what tax shows up where.

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    Donald Planey

    This is also tremendously helpful, thank you!

    I do have one additional clarifying question, if you can help. For the "first scenario" (the for-profit scenario), you suggested setting OPI to "0" instead of leaving it blank. What is the reason for setting OPI to 0 for both the for-profit and non-profit scenario?  I'd be inclined to assume that leaving OPI blank would make sense for the for-profit scenario, but perhaps I am missing something.

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