The California's Joint Legislative Audit Committee voted Wednesday to conduct an audit of the state's hospitals to see if they meet the public benefits requirements needed to maintain their tax-exempt status.
It joins other states, like Illinois, that are reviewing hospitals to see if they meet Internal Revenue Service requirements.
A court upheld a decision by the Illinois Department of Revenue in March to deny three Chicago-area hospitals their property-tax exemptions for failing to provide sufficient charity care.
States began taking a closer look at hospitals after the IRS conducted a survey in 2009 of 500 hospitals and found that the average community benefit for a nonprofit hospital to be relatively small. The IRS has since instituted new tax reporting requirements for nonprofit hospitals that took effect in 2010.
Hospitals also face fiscal challenges from federal health care reform and cuts to grant programs. The tax-exempt status also provides other perks such as the ability to issue tax-exempt bonds.
California hospitals receive $250 million in tax breaks, said Alameda County Supervisor Wilma Chan.