Hospital Tax

Historically, federal and state governments have treated hospitals as tax-exempt entities, recognizing the vital role they play in strengthening the health and well-being of the communities they serve. While not-for-profit hospitals are exempt from corporate, sales and use, and property taxes, they are one of the state’s largest providers of tax revenue through the provider tax, known as the “hospital tax.”

The hospital tax is a major source of funding for Connecticut’s Medicaid program and is used to access federal matching funds, freeing up General Fund revenue for other purposes. Disputes over the state filling budget holes with hospital tax revenue resulted in a historic settlement between the state and Connecticut hospitals in 2019. The settlement, which gradually reduced the tax burden on hospitals while preserving revenue gains for the state, expires in June 2026.

Amid new federal provider tax restrictions that may worsen Medicaid underpayment, it is imperative that the state works with hospitals to ensure the tax sustains and strengthens the Medicaid program and supports critical services for Medicaid beneficiaries.

Learn more about the hospital tax:

Connecticut’s Hospital Tax Fact Sheet