By: Brittany Flaherty Theis

Today, the Illinois Supreme Court upheld the constitutionality of section 15-86 of the Property Tax Code in a lawsuit where the plaintiff argued section 15-86 violated section 6 of article IX of the Illinois Constitution, on its face. Both the circuit court and the Illinois Appellate Court ruled in favor of the defendants and the constitutionality of section 15-86, which applies to property tax exemptions for hospitals.

As you might recall from prior News & Knowledge blog posts, section 6 of article IX of the Illinois Constitution limits the power of the legislature to enact property tax exemptions. It provides, in pertinent part, as follows:

The General Assembly by law may exempt from taxation only the property of the State, units of local government and schools districts and property used exclusively for agricultural and horticultural societies, and for school, religious, cemetery and charitable purposes.

The legislature may place additional restrictions, limitations, and conditions on property tax exemptions, but it has no authority to grant exemptions beyond those authorized by section 6 of article IX of the Illinois Constitution.

In Oswald, the court described section 15-65 of the Property Tax Code and its legislative history. Through section 15-65, the Illinois legislature created a charitable use property tax exemption in which it also added the restriction that the property at issue be owned by a charitable organization – thereby creating both charitable use and charitable ownership requirements. In Provena, discussed here and here, there was discussion of the extent to which an organization must provide charity care. The dissent in that case argued that it was not the court’s place to impose a quantum of care or monetary requirement. It is against that backdrop that section 15-86 was adopted by the Illinois legislature in 2012.

Section 15-86(c) provides, in part:

  1. c) A hospital applicant satisfies the conditions for an exemption under this Section with respect to the subject property, and shall be issued a charitable exemption for that property, if the value of services or activities listed in subsection (e) for the hospital year equals or exceeds the relevant hospital entity’s estimated property tax liability, as determined under subsection (g), for the year for which exemption is sought.

Plaintiff challenged the constitutionality of this provision on its face because section 15-86 does not provide that the subject property must be used exclusively for charitable purposes as a condition for receiving the charitable property tax exemption. Using multiple theories of statutory construction, the Illinois Supreme Court determined that “while section 15-86(c) does not expressly provide that the hospital charitable property tax exemption is limited to applicants that satisfy the constitutional requirement of exclusive charitable use, section 6 of article IX of the Illinois Constitution does say so, and we presume that the legislature intended to comply with this constitutional limitation.”

Notably, the court went on to state:

Therefore, a hospital applicant seeking a section 15-86 charitable property tax exemption must document the services or activities meeting the statutory criteria. Additionally, the hospital must show that the subject property meets the constitutional test of exclusive charitable use.

Hospitals and units of local government have been waiting for a decision in this case, and will likely find guidance in today’s opinion. The fact remains, however, that the Carle Foundation case (discussed here), which also challenged the constitutionality of the 2012 law, is still pending after being remanded back to the trial court. Whitt Law will continue to monitor development regarding section 15-86. Our attorneys have vast experience in property tax exemption and assessment matters. If you have any questions regarding the Illinois Supreme Court’s opinion in Oswald or would like to discuss a property tax exemption or assessment matter, please contact Whitt Law Attorney Brittany Flaherty Theis.

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