IL Supreme Court gives hospitals win over property tax exemptions, but still not declared 'constitutional'

By Scott Holland | Mar 23, 2017

Hospital operators in Illinois have won a battle in the fight over a state law blocking local governments from making them pay property taxes, as the Illinois Supreme Court determined an appellate court had erred on procedural grounds in using the case to strike down the state law as unconstitutional. 

However, the high court did not go so far as to declare the 2012 law to be constitutional, setting the stage for more legal tussles to come on the question. 

On March 23, in a unanimous opinion, the state Supreme Court dismissed an appellate panel’s determination the law essentially allows hospitals to “buy a charitable exemption,” which the Illinois Fourth District Appellate Court justices  said violated constitutional language empowering the General Assembly to grant tax exemptions. 

The ruling comes a little over two months since justices for the state’s high court heard arguments over the appeal of the Fourth District court’s Jan. 5, 2016, opinion. 

Illinois Supreme Court  

The Fourth District court convenes in Springfield. 

The Supreme Court’s decision comes as the latest chapter in the long-running conflict over whether a hospital in downstate Urbana – and, by extension, other Illinois hospitals - should be required to pay property taxes. While the hospital’s owners, the Carle Foundation, hold nonprofit status, the city of Urbana, Champaign County and other local governments have argued a state law appearing to grant the hospital and others like it across the state tax exemptions should be stricken because it violates the state constitution. 

Justice Robert Thomas wrote the opinion for the state Supreme Court. When justices heard arguments on the case Jan. 12, Thomas was among the justices who focused on “procedural questions,” suggesting the case’s baggage could prevent them from ruling on the matter, as the case is a less inviting test for the 2012 law than a more streamlined case decided in the state’s First District Appellate Court in Chicago — a case that may not reach the Supreme Court docket for months. 

Thomas’ opinion focused first on whether the appellate court had jurisdiction in the Carle case. He cited Rule 304(a), and specifically established Supreme Court distinction “between judgments that dispose of ‘separate, unrelated claims,’ which are immediately appealable under Rule 304(a), and orders that dispose only of ‘separate issues relating to the same claim,’ which are not immediately appealable under Rule 304(a).” The distinction, he noted, discourages unnecessary piecemeal appeals. 

In the Carle matter, Thomas wrote the justices concluded the circuit court’s order granting the plaintiffs’ motion for summary judgment resolved only one issue and not an entire claim. With that being the case, the circuit court’s order would not be eligible for appellate review under Rule 304(a). 

The summary judgment affected count two of the fourth amended complaint. That count sought a declaration for what law governs counts two through 34 of the same complaint, which Thomas wrote makes it “a textbook example of an ‘issue’ that exists only because of and ancillary to a ‘claim.’ ” 

Thomas further detailed how proceedings between the two sides further showed how count two could not be separated from the larger complaint, including in the plaintiffs’ own motion for summary judgment, which asserted “cross-motions for summary judgment did not dispose of an entire cause of action.” 

The justices also, Thomas wrote, felt “compelled” to consider whether the plaintiffs made an exemption claim significantly distinct from the declaratory judgment claim the circuit court granted. That argument could only be made if count two were “a proper declaratory judgment count. In fact, it is not.” 

“The claimed right in this case is a right to a charitable-use tax exemption for the tax years in question,” Thomas wrote. “The circuit court’s order granting plaintiff’s motion for summary judgment on count two does nothing to determine whether such a right exists. Indeed, whether plaintiff possesses such a right is as open a question today as it was in 2007, when plaintiff first filed its complaint. And this is because, rather than asking the circuit court to determine whether such a right exists, plaintiff asked only for a declaration … 

“Obviously, a declaration of what law applies to the determination of a party’s rights is not itself a determination of that party’s rights. Yet a determination of what law applies is the only determination that count II of the fourth amended complaint seeks.” 

Ultimately, Thomas wrote the justices felt it “would be decidedly premature” to consider whether the law in question is constitutional. With the appellate court’s Rule 304(a) finding deemed improper, the case was remanded back to the circuit court for further proceedings.

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Organizations in this Story

Carle Foundation Hospital Champaign County Champaign County of Ohio City of Urbana Illinois First District Appellate Court Illinois Fourth District Appellate Court Illinois Supreme Court

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Robert (Bob) Thomas

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