By: Brittany Flaherty Theis

On May 29, 2012, the Illinois Senate passed Senate Bill 2194, which was signed into law on June 14, 2012. Senate Bill 2194 responds to confusion created by the Illinois Supreme Court’s decision in Provena Medical Center v. Department of Revenue. The General Assembly found there was “considerable uncertainty surrounding the test for charitable property tax exemption, especially regarding the application of a quantitative or monetary threshold.” In Provena, the Illinois Department of Revenue denied Provena’s applications for property tax exemption. The Department’s primary basis for its decision was the hospital’s inadequate amount of charitable activity. The Department, however, had not articulated what does constitute an adequate amount of charitable activity.

At the Illinois Supreme Court’s prompting, the Legislature developed what it considers to be a “comprehensive combination of related legislation that addresses hospital property tax exemption, significantly increases access to free health care for indigent persons, and strengthens the Medical Assistance program.” Senate Bill 2194 established criteria to be applied on a case-by-case basis.

In part, Senate Bill 2194 establishes that hospital applications satisfy the requirements for a charitable exemption if the value of services or activities from a prescribed list equal or exceed the hospital’s estimated property tax liability. Generally speaking, the list covers services that address the healthcare needs of low-income or underserved individuals or relieve the burden of government with regard to healthcare services. In calculating the relevant value of services and activities, hospital applicants can consider the following:

Charity care, which includes free or discounted services provided pursuant to the hospital’s financial assistance policy.
Health services to low-income and underserved individuals, which includes unreimbursed costs related to providing goods, activities, or services for the purpose of addressing the health of low-income or underserved individuals.

Direct or indirect financial or in-kind subsidies of State or local governments that pay for or subsidize activities or programs related to the healthcare for low-income or underserved individuals.
Support for State health care programs for low-income individuals, as described in detail by Senate Bill 2194.
Therefore, under SB 2194, an Illinois non-profit hospital can qualify for a property tax exemption if the value of certain qualified services it provides within Illinois is equal to or exceeds the estimated value of the hospital’s property tax liability. While SB 2194 has the potential to clarify the standards for granting property tax exemptions to Illinois hospitals, its actual impact is yet to be seen.

For more information about property tax exemptions and how they might impact your taxing body, please contact Whitt Law Attorney Joshua Whitt.

(*It may be helpful to note that Provena was complicated for a number of other reasons. Specifically, two of the seven justices of the Illinois Supreme Court recused themselves. That left five to participate in the final decision. A majority joined in the conclusion and reasoning pertaining to the religious-use exemption (that Provena failed to demonstrate it was entitled to such exemption). However, two of the justices joined in the plurality opinion’s conclusion that Provena failed to establish it was a charitable institution, but did not join in the reasoning.)

The full text of Senate Bill 2194 can be found at the Illinois General Assembly’s website, or here.

Provena Covenant Medical Center v. Dept. of Revenue, 236 Ill. 2d 368 (2010) (plurality opinion).

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