By: Brittany Flaherty Theis

In Meridian Village Association v. Hamer, the Illinois Fifth District Appellate Court reiterates the statutory and constitutional requirements that must be met before an applicant qualifies for property tax exemptions. It also notes that satisfying the requirements for one type of exemption does not necessarily mean an applicant will receive approval of related exemptions.

Meridian Village Association and Meridian Village Association II (the “Associations”) operate senior housing facilities comprised of 133 independent-living units, assisted-living units, and skilled-nursing units. The Associations applied for charitable-use and religious-use property tax exemptions for tax years 2003 through 2006. The Illinois Department of Revenue (the “Department”) denied the Associations’ applications. In Meridian Village Association v. Hamer, both the circuit court and the Illinois Appellate Court affirmed the Department’s denial of Meridian Village’s property tax exemption applications, with the local school district and village as intervenors in the proceedings.

The appellate court reviewed the legal standards applicable to charitable-use tax exemptions. In doing so, the court explained that six criteria have been established by Illinois case law to determine whether a property meets the constitutional requirements for charitable use exemption. Those criteria were discussed in a prior blog post here. The constitutionally-based criteria must be met in addition to any applicable statutory requirements. The appellate court stated that the appellants’ use of the property does not satisfy even a majority of the criteria set forth in Illinois case law. The appellants failed to establish that their property is used exclusively for charitable purposes. In part, the Department and the appellate court considered the following facts: 1) the Associations provide charitable care only to their residents and within certain financial limits; 2) obstacles such as rental fees were placed in the way of seeking charity from the Associations; and 3) residents must pay substantial monthly fees.

Additionally, the Associations argued that the Department could not deny their applications for property tax exemptions because it had previously determined that one of the Associations is exempt from retailers’ occupation and use taxes on the basis that it is organized and operated exclusively for charitable purposes. The appellate court noted that although the same criteria apply for determining charitable exemptions for property tax exemption as for retailers’ occupation and use taxes, the fact that an applicant has been granted a charitable use exemption for one class of exemption does not mean the applicant must be granted a charitable use exemption for other purposes. Note that earlier Supreme Court cases suggest that this is because the applicability of sales and use tax exemptions do not necessarily provide the material facts needed to establish exclusive charitable use, which the applicant for a property tax exemption bears the burden of establishing.

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

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