Appeals court: State can strip Glenview hospice's tax exempt status, because it does too little charity

By Dan Churney | Feb 27, 2019

Illinois First District Appellate Court  

An Illinois appeals panel has determined state tax officials were right to deny tax-exempt status to a suburban Chicago hospice center, because, even though it shares land with a sister palliative facility that is exempt, less than one percent of the hospice's $30 million annual revenue went to charity. 

The Feb. 25 ruling was penned by Justice John Griffin, with concurrence from Justices Daniel Pierce and Carl Walker, of Chicago-based Illinois First District Appellate Court. The decision supported the Illinois Department of Revenue in an action brought by Midwest Palliative Hospice and Care Center, of Glenview.

Midwest Palliative opened a facility in 2008 that provided in-home care to terminally ill patients. The Department of Revenue designated this facility a tax-exempt charity. In 2011, Midwest started building an inpatient care center, the Marshak Family Hospice Pavilion, on the same grounds and sought exempt status for this facility for the 2013 tax year. 

The Department of Revenue refused, saying the new hospice facility did not qualify, because it did not exclusively or primarily engage in charity. However, the original palliative facility remained exempt.

Midwest took the matter in July 2017 to Cook County Circuit Court, where Circuit Judge Daniel Kubasiak upheld the department. Midwest then appealed, arguing the only difference between the two facilities is the type of care furnished to patients

Justice Griffin noted 94 percent of Midwest’s revenue came from billing patients, of which 88 percent was paid through Medicare or Medicaid. Griffin pointed out Midwest did not relieve the government of burden, as many charities do, but instead, derived most of its revenue from the government.

Griffin also drew attention to the fact Midwest gave $157,000 in charitable care to 37 patients in 2013, but this represented less than one percent of its $30 million revenue that year, and only eight percent of its 470 patients.

In this connection, Griffin noted correspondence between Midwest and patients, regarding fees waived in 2013, showed Midwest ordinarily expects to be paid. Griffin said the limited charitable care Midwest provided, was an “incidental act of beneficence.”

Griffin acknowledged the original palliative center is exempt, but concluded the two centers can be treated differently for taxes, with each having to demonstrate it deserves exemption. Griffin added the Department of Revenue was not bound to grant exempt status to the hospice, merely because it had done so for the palliative facility.

In Griffin’s view, because an institution is willing to provide charitable care, doesn’t mean charity is its exclusive purpose.

“Almost none of Midwest’s revenue comes from charitable contributions, and almost none of the revenue Midwest generated was expended on providing charitable services. Midwest made out the case that it is a noble institution. But just because an institution is a non-profit and performs good deeds does not mean that the institution is using its real property exclusively for charitable purposes as that term is used in the Illinois Constitution,” Griffin said.

Midwest Palliative has been represented by the Chicago office of the firm of Jones Day, which is headquartered in Cleveland.

The Illinois Attorney General’s Office has represented the Department of Revenue.

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Illinois Attorney General Illinois Department of Revenue Illinois First District Appellate Court Jones Day

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