Illinois Supreme Court Upholds Nonprofit Hospital Exemption

The Illinois Supreme Court upheld the constitutionality of the state’s property tax exemption for nonprofit hospitals. Lower courts also concluded that the exemption was constitutional.

Background

The Illinois Constitution limits the power of the legislature to enact property tax exemptions. It authorizes an exemption for property “used exclusively for charitable purposes.”

Illinois law grants eligible nonprofit hospitals a property tax exemption. A nonprofit hospital “shall be” issued a charitable property exemption if it provide services that:

– address the health care needs of low-income or underserved individuals; or

– relieve the government burden for health care services.

The value of those services must equal or exceed the hospital’s estimated property tax for the tax year.

The plaintiff claimed the law was unconstitutional on its face because it:

– mandates the exemption; and

– violates the exclusive charitable use requirement.

Conclusion

The court’s analysis and conclusion relied on rules of statutory construction. It admitted that the law does not explicitly refer to exclusive charitable use. But a law, the court said, carries a strong presumption of constitutionality. The court was certain that the legislature was aware of the constitutional limitation when it enacted the law. It stated its intent to establish a charitable exemption for nonprofit hospitals in the law.

Finally, the court ruled that the exemption is permissive and not mandatory. A hospital must document the services or activities that meet the exemption criteria. The hospital must also show that the property meets the constitutional test of exclusive charitable use.

Oswald v. Hamer, Illinois Supreme Court, No. 122203, September 20, 2018, released February 5, 2019, ¶403-390

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CCHTaxGroup

All stories by: CCHTaxGroup