SPRINGFIELD — The Illinois Supreme Court recently agreed to hear arguments in another case addressing whether hospitals should be exempted from paying property taxes, marking the second time this year the court will tackle the question weighing on hospitals and local governments across the state.

In March 2017, in the case of Carle Foundation v. Cunningham Township, the Illinois Supreme Court declined to rule on the constitutionality of a state law granting tax exempt status to non-profit hospitals, instead sidestepping the question in that case, and sending it back to Champaign County Circuit Court for further proceedings. 

The Illinois General Assembly enacted the law in 2012 to allay concerns raised by hospital representatives over their facilities' tax exempt status following a 2010 decision by the Illinois Supreme Court allowing the Illinois Department of Revenue to revoke the tax exempt status of a hospital in Urbana essentially for failing to provide sufficient charity care. In the wake of that decision, Illinois lawmakers and then-Gov. Pat Quinn backed the legislation to grant hospitals tax exempt status should they provide enough benefits to the community, generally in the form of low-cost health care services for low-income community residents, to offset the tax revenue the hospitals would otherwise owe.

In the Carle Foundation case, a state appeals court found that law to be unconstitutional. However, on appeal, the state's high court found fault with the reasoning and overturned the decision without ruling on the constitutionality of the state law.

At the same time, another case also tackling that same question had landed at the Illinois First District Appellate Court. And in that decision, docketed as Oswald v. Hamer, an appellate panel ruled the law was constitutional, setting the stage for the Illinois Supreme Court to again potentially decide if the law violates the state constitution. The court granted leave to appeal in late September. A hearing for oral arguments in the case has not yet been slated.

If the law is ruled unconstitutional, hospitals have warned it could put patient care at many Illinois hospitals at risk, especially in rural and poorer communities.

“After declining jurisdiction in Carle Foundation v. Cunningham Township, the Illinois Supreme Court will likely decide whether 2012 legislation providing for hospital property tax exemptions violates the Illinois Constitution," said Stephen Moore, an attorney at Hinshaw & Culbertson LLP. "The ruling could finally give a clear path to property tax exemptions if the legislation is determined constitutional."

If not, Moore said, "the implications could bring back turmoil and uncertainty" similar to that faced by hospitals following the 2010 Illinois Supreme Court ruling.

Moore is hopeful the court will not sidestep the question yet again. 

“Hopefully, the court will rule on the constitutionality of the 2012 legislation," he said. "But it is difficult to predict what the court will do, especially since the court could have accepted jurisdiction in Carle Foundation.”

Moore agrees that hospitals need to prepare for the outcome of the Oswald case and may have cause to fear.

“Yes, there is reason for concern, but there is also reason for hope," he said. "A direct ruling may put the issue to rest, or [it] could signal to the legislature what changes are required to the law in order to pass constitutional muster.”

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