The city of Columbia is moving forward with a plan to charge business license fees to hospitals, other nonprofits and their subsidiaries who offer services that compete with for-profit businesses.
For instance, any doctor’s office that falls under the umbrella of a 501(C)3, or non-profit, health care group now doesn’t have to pay business license fees. However, an independent doctor’s office next door does.
That scenario would apply to the hospitals — Prisma Health (formerly Palmetto Health) Baptist and Prisma Health Richland — and any businesses at those hospitals. Some businesses within the University of South Carolina also would start paying, said Moe Baddourah, the city council member who has primarily pushed the measure.
Baddourah noted that 65 percent of property in the city is tax exempt. That is because of the preponderance of state government buildings, USC’s campus, Fort Jackson and property owned by churches, schools and charities in the city. As a result, only 35 percent of property owners foot the bill for the vast majority of city services like fire and police protection, he said.
“That’s just not fair,” Baddourah said.
Columbia City Council on Tuesday gave initial approval to the measure. The vote was 6-1, with Mayor Steve Benjamin voting no. Benjamin could not be reached for comment Thursday.
It will take a second vote for the measure, which is expected to raise $2 million to $4 million annually, to become city policy.
Under the proposal, businesses that have a 501(c) tax status from the IRS — but otherwise operate as a profitable company — would begin paying business license fees like the rest of the city’s businesses. Baddourah first made the proposal in 2015.
Charities and places of worship would remain exempt from business license fees unless they rent out space as an event venue or sell food, Baddourah said.
In addition to doctor’s offices, Baddourah said examples of other hospital-related businesses are flower and gift shops.
The two Prisma Health hospitals in the city would be subject to the fees because Providence Health became a for-profit business several years ago. The State has reached out to Prisma Health and Providence Health for reaction.
As for USC, Baddourah listed the on-campus McCutchen House restaurant as an example, because it competes with other restaurants. Baddourah was director of the McCutchen House for about a year, leaving that position in 2017. He also operated Moe’s Grapevine restaurant on Rosewood Drive from 2005 to 2015.
“For now, we are currently reviewing the proposal to determine what financial impact it would have on the university,” a USC spokesman said.
The City Council has for decades struggled with the disparity between taxable and non-taxable land, usually by transferring money from the water and sewer fund to pay for other city services. The city ended the transfers in 2016 after the state Supreme Court questioned the practice.
And for years City Council members have worked to find ways to dip into nonprofits’ pockets, such instituting a storm water fee and other measures to raise revenue from them.
Baddourah said city staff is presently exploring the legality of charging property taxes to the same subsidiaries of large nonprofits, but that would take an act of the General Assembly.
“That’s another set of research,” he said.
Editor’s note: This story has been updated to report that two Columbia hospitals — Palmetto Health Baptist and Palmetto Health Richland — would be charged business license fees under the city’s proposed ordinance. A previous version of this story was incorrect.