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Judge Rules Disputed Hospital Tax Unconstitutional


A Superior Court Judge has ruled that a state tax paid by New Hampshire hospitals is unconstitutional.

Northeast Rehabilitation Hospital in Salem paid $1.4 million to the state in 2011 under what’s called the Medicaid Enhancement Tax. Hospitals pay a set percent based on revenues.

Northeast Rehab argues it’s unfair that it has to pay the tax while other medical providers that do the same procedures--but aren’t classified as hospitals--don’t.

“Northeast Rehabilitation Hospital is very pleased that the Rockingham Superior Court has recognized that New Hampshire’s Medicaid Enhancement tax violates both the United States and New Hampshire constitutions,” says Gordon MacDonald, a lawyer with Nixon Peabody, is representing the hospital.

The state is ordered to refund a portion of the $1.4 million.

The tax is a major source of revenue for the state, which says it is considering an appeal. A similar lawsuit involving three other hospitals is also working its way through the legal system.  

Correction: A previous version of this story said the state is ordered to refund the entire $1.4 million received in taxes from Northeast Rehab.

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