Lawyer: Hospitals breathing 'sigh of relief' over Supreme Court's property tax exemption ruling

By John Breslin | Oct 31, 2018

SPRINGFIELD – Hospital groups are "breathing a sigh of relief" following a recent Illinois Supreme Court decision upholding the constitutionality of their tax-exempt status, an attorney says.

The groups have waited to be given a "clear path" regarding their property tax exemption status, according to Stephen Moore of the Hinshaw and Culbertson law firm in Chicago.

In an unanimous 7-0 opinion, the court found Sept. 20 that a 2012 law allowing tax exemptions for hospitals is constitutional when the "charity care" or "free or discounted services" they provide exceeds its estimated tax liability for any given year.

Plaintiff Constance Oswald argued the law contravened the Illinois state constitution, which allows exemptions only when a property subject to taxation - in this case, a hospital - is used "exclusively for charitable purposes."


Stephen Moore   Hinshaw & Culbertson

"The decision will help give to hospitals a more-clear path on property tax exemptions, certainly, than if it had been ruled unconstitutional," said Moore, who specializes in tax law.

The attorney described the legal argument as "very straightforward" whether the statute recognizes that a nonprofit hospital does operate for charitable purposes.

"The Supreme Court wisely acknowledged that this is the case," said Moore, adding that this ruling only impacts hospitals, not other organizations.

"A lot of hospitals are breathing a sigh of relief," he said.

The ruling should bring to an end some years of confusion for nonprofit hospitals, both before and after the passing of the 2012 law. It was enacted following a previous court ruling against Provena Covenant Medical Center. The court found that the center did not satisfy the exclusive use requirement because it treated too few uninsured patients for free or at a discount.

The 2012 law was designed to clarify when tax exemptions for certain classes of properties, including nonprofit institutions providing charitable services, and other benefits to the community.

Prior to its enactment, several municipalities in Illinois were making moves to assess taxes on nonprofit hospitals. The argument was made that it could bring in revenue and lower taxes for homeowners and businesses in their communities.

While the 2012 law did not include language mandating the exclusive use requirement, the Supreme Court ruled the legislature did indeed intend it to be the case and therefore in compliance with the constitution.

The panel, in its ruling, considered how the legislation was crafted in light of the language of the constitution. Lawyers arguing that the law was constitutional told the court that it was self-evident that nonprofit hospitals were used for "charitable purposes."

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