SPRINGFIELD — The Illinois Supreme Court's decision earlier this year to punt on the question of whether hospitals should maintain property tax exemptions could yet prove costly for some hospitals, until the state high court ultimately clears up legal questions surrounding the exemptions for the nonprofit health care organizations.

In March, the Illinois Supreme Court handed hospitals a win - for now - using procedural grounds to overturn an appellate court's decision declaring unconstitutional a state law granting tax exemptions to hospitals. However, the high court justices stopped short of using the ruling to declare the law constitutional, setting the stage for further proceedings on that question. 

Following the court’s decision, the Illinois Department of Revenue reversed its previous position freezing its reviews of pending hospital tax exemption applications, and has agreed to rule on those applications. 

And that could prove costly should a hospital disagree with the department’s decision, said Stephen Moore, an attorney with Hinshw & Culbertson in Chicago.

“The decision that they will be making on these applications is whether or not a hospital is entitled to a property tax exemption,” said Moore. “Of course, if they were to rule that they are not, then that hospital could pursue the matter in court.”

However, the hospital would need to pay for the taxes and legal fees until the matter is decided.

“For some hospitals, it is extraordinarily burdensome, especially rural hospitals or inner city hospitals, which are operating on very thin margins and are very financially challenged,” Moore said. “So, there have been instances where the property tax would be so high that it could result in a failure of the hospital.”

Moore also said that the Supreme Court’s decision not to rule on the constitutional question was due to a technicality.

“It is a very technical analysis, but they made the decision that they did not have jurisdiction over the issue,” he said.

He said the process could take at least another year before the issue is decided. Shortly before the state Supreme Court ruled in the Urbana case, a different appeals panel in Chicago, ruling in a different case from Cook County, declared the law constitutional, potentially setting the stage for the state top court to again step in on the question.

For now, Moore said the Urbana case has been kicked back to circuit court in Champaign County for further proceedings. 

“It is not clear what procedurally will happen next, but it has been sent all the way back to the circuit court," Moore said.

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