Illinois hospitals could lose tax exemption

State appeals court rules 2012 law is unconstitutional
Tools

It's unclear whether non-profit hospitals in Illinois are exempt from paying taxes.

A state appeals court has ruled that 2012 legislation that exempts non-profit hospitals from paying taxes is unconstitutional. The issue will likely go to the Illinois Supreme Court, the Associated Press reported

Meanwhile, the applications of several hospitals and healthcare systems for exemptions are in limbo: Peoria-based Methodist Services; NorthShore University Health System in Lake Forest; Mercy Hospital and Medical Center in Chicago; and Swedish Covenant Hospital, also in Chicago.

The state appeals court ruling a case involving Carle Foundation Hospital and the city of Urbana, Illinois. The hospital had been looking for an exemption from taxes between 2004 and 2011. It won in the lower court, but the appeals court ruled that only enterprises that exclusively engage in charities can take advantage of the exemption, the AP reported.

The Illinois statute, signed into law by then Gov. Pat Quinn in 2012, was the result of heavy influence from the state's hospital lobby, and included a variety of loopholes that permit even for-profit hospitals to obtain exemptions in some circumstances.

It was drafted partly in response to the Illinois Department of Revenue cracking down on some not-for-profit hospitals and denying them tax exemptions for not providing enough charity care.

"The Legislature could wait (until the Supreme Court rules), but issues will continue to mount," Lawrence Msall of the non-partisan Civic Federation told the AP. "The Illinois Department of Revenue needs some direction from both the Legislature and the governor on how to handle pending applications."

To learn more:
- read the Associated Press article

Related Articles:
Illinois hospitals papered over charity care problems
Regulators continue crackdown on hospitals' tax-exempt status 
Little difference between for-profit, nonprofit hospitals 
Hospital CEO shares why nonprofits deserve tax exemptions