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‘Atrium rule’ in N.C. budget aims to end a multi-million-dollar sales tax ‘loophole’ that allowed ‘double-dipping’
North Carolina’s new budget includes a provision that prevents Atrium Health and other large hospitals from claiming sales tax exemptions for multiple entities. (Ledger file photo)
by Michelle Crouch
Co-published with N.C. Health News
A little-noticed provision in the state budget that was approved last week aims to shut down a tax strategy used by at least one hospital to exceed the state’s sales tax refund cap.
The change would require nonprofit and public hospital systems to file a single sales tax refund claim for all their related entities.
The proposal follows reporting by The Charlotte Ledger/NC Health News last year that found Atrium Health was filing separate sales tax refund claims — one as Atrium Health Wake Forest Baptist and the other as the Charlotte-Mecklenburg Hospital Authority, which does business as Atrium Health.
Critics said the arrangement allowed the health system to effectively sidestep the state's $45 million annual sales tax refund cap; they said Atrium was "double dipping."
“The hospitals were taking a very unfair advantage,” said Rep. Julia Howard (R-Mocksville), who chairs the House Finance Committee. “They found a loophole and they were using it. … We put it in the budget so they can’t do that anymore.”
The one-year, $34.4 billion state budget was approved by both chambers of the General Assembly last week. Gov. Josh Stein has until July 12 to veto or approve it. If he takes no action, it will become state law without his signature.
An exception for UNC Health
The sales tax refund provision on page 608 of the 634-page budget bill requires all of the related facilities of a nonprofit or public hospital to be treated as one entity when applying the refund cap.
The legislation makes one exception: It allows the University of North Carolina Health Care System and its affiliates to be treated as separate organizations for purposes of the cap, allowing each to qualify for its own annual limit.
In an email, UNC Health spokesman Alan Wolf said each UNC entity has historically filed its own sales tax refund request, “a standard practice reflecting each organization’s independent tax identification and audit structure.”
He added, “Our filings are compliant and current. We will continue to follow applicable state law.”
Wolf was not able to say Monday whether the system’s total sales tax refunds exceed the state’s annual $45 million cap on what can be refunded from state and local sales tax collections.
It was not immediately clear whether any other hospital system has filed multiple sales tax refund claims, whether any other systems are large enough to exceed the state's cap, or how much the state would save from the change.
Rep. Donny Lambeth (R-Winston-Salem) said some lawmakers informally referred to the sales tax refund provision as the “Atrium rule” because Atrium was believed to be the system most affected.
Atrium, the state’s largest hospital system, combined with Midwest-based Advocate Aurora Health in 2022 to become Advocate Health, the country’s third largest nonprofit hospital system. With 162,000 employees across six states, Advocate posted annual revenues of $38.9 billion in 2025.
Atrium’s response
Atrium Health did not directly answer questions about the impact of the provision and whether it would change the way it files sales tax refund claims.
In an emailed statement, the hospital said, “We are committed to full compliance with all applicable laws and regulations. Our focus remains on serving patients and supporting the communities that depend on us.”
Previously, the hospital system said it filed separately “due to its legal structure.”
Nonprofits and public hospitals in North Carolina pay sales tax up front but can later request a refund from the state. Hospitals are, by far, the biggest beneficiaries of the program.
Lawmakers put the $45 million cap in place in 2013 in an effort to rein in nonprofit hospitals they said were flush with cash but were receiving increasingly large sales tax refunds.
At the time, no hospital was even close to that limit, Lambeth said, but as hospital systems grew through mergers and acquisitions, some began bumping up against the cap.
A way to reduce the tax burden on residents?
The sales tax refund was first discussed during meetings of the House Select Committee on Property Tax Reduction and Reform earlier this year, as lawmakers looked for ways to reduce the tax burden on state residents.
The committee considered not only closing the sales tax refund loophole, but also lowering the annual cap from $45 million to $14.2 million. They also discussed cutting the property tax break for large hospital systems in half, to 50 percent.
After what committee members described as intense lobbying from hospitals, neither change was included in the final budget.
Howard, the committee chair, said members plan to continue discussing both proposals.
She previously cited The Ledger/NC Health News’ reporting when discussing closing the sales tax refund loophole, which she described last week as “low-hanging fruit.” But she said she is hopeful the committee will support other changes in the future.
"If we are ever going to do anything to help with property tax, we have got to start looking at the billions of dollars in exemptions that we have," she told NC Health News. —North Carolina Health News reporters Ashley Fredde and Rose Hoban contributed to this article.
Michelle Crouch covers health care. Reach her at [email protected].
This article is part of a partnership between The Ledger and North Carolina Health News to produce original health care reporting focused on the Charlotte area.