After value of U. purchase from hospital drops, part of price becomes charitable contribution
Princeton formally donated $4.1 million to the University Medical Center of Princeton at Plainsboro in fiscal year 2012. The charitable contribution, however, did not function as a donation, but rather was used to complete the sale of a parking lot, whose price had been agreed upon before the recession and has since dropped dramatically.
Before moving to its current location on Route 1 in 2012, UMCPP was on Witherspoon Street, less than one mile north of the University. As part of the move, which was planned years in advance, the University bought a parking lot from the hospital for $5 million.
“We bought a parking lot on Franklin Avenue from the hospital for an agreed-upon price of $5 million, which at the time of contract we believed represented fair value for that property,” University Spokesperson Martin Mbugua said. Nevertheless, the University was not allowed to actually close on that property until the hospital formally relocated outside Princeton, Mbugua explained.
The property’s value dropped when it was re-assessed in 2010, when properties throughout the county were revaluated.
“By the time this happened,” Mbugua added, “the valuation had dropped, so we paid $5 million for a property that by then had declined in valuation to $1.3 million. The difference between the two numbers became, for tax purposes, a charitable contribution.”
Mbugua explained that the $4 million dollar difference between the property’s value at the signing of the contract in 2005 and the closing of the acquisition in 2012 made it a charitable contribution for filing purposes only.
However, between 2008 and 2010 the parking lot tax assessment actually increased from $229,000 to $691,000 according to Mercer County property records.
In 2012, the most recent tax property assessment available, the parking lot was assessed at $681,000.
The donation was disclosed in the University’s 2012 990 form, a return filed annually to the Internal Revenue Service by nonprofit organizations.
The University, considered a nonprofit institution by the IRS, does not pay taxes on its educational functions and does not pay income tax. While charitable contributions, such as this one, usually incur an income tax deduction, the fact that the University does not pay any income tax means that a tax deduction was not utilized in this case, Mbugua explained.
However, Mbugua also acknowledged that the University has provided financial assistance to the hospital in the past.
“We made an intentional decision to give $2 million to the hospital, and we are doing that over five years at $400,000 a year,” he said.
Princeton is not expected to receive any special treatment or favors as a result of its support. “This is not a conditional donation,” Mbugua explained.
In a statement provided by UMCPP President and CEO Barry Rabner, the hospital noted that these donations would help the hospital fulfill its mission and enhance the quality of its care. However, Rabner did not explain the purpose of the charitable donation in the statement.
The new UMCPP location is located 2.8 miles away from Frist Campus Center and cost more than $500 million to construct.