Illinois Supreme Court justices on Thursday unanimously upheld a 2012 state law that established specific and relatively easy-to-meet rules for not-for-profit hospitals to avoid paying property taxes.
The 7-0 ruling turned aside a challenge from Cook County property taxpayer Constance Oswald, who had argued the law was unconstitutional because it didn’t explicitly mention that hospitals granted exemptions must be used “exclusively” for “charitable purposes,” as the Illinois Constitution provides.
Despite that omission, Justice P. Scott Neville Jr. of Chicago, who wrote the opinion for the court of four Democrats and three Republicans, said the “legislative intent” of the Illinois General Assembly to comply with the constitution was “nevertheless readily ascertainable.”
“We presume,” he said, “that the legislature enacts statutes in light of the constitution and intends to enact constitutional legislation.”
Neville added that there is a specific reference in the 2012 law to another state law outlining requirements for granting property tax exemptions, and the earlier law “contains the explicit reference to the constitutional limitation of exclusive charitable use.
“Construing these provisions together as a whole, we conclude that the legislature intended to comply with this constitutional limitation,” Neville said.
The 14-page ruling was praised by the Naperville-based Illinois Health and Hospital Association, which previously expressed worry that overturning the law would create financial problems for many hospitals if they eventually lost property tax exemptions that can be worth millions of dollars each year.
“Hospitals across Illinois are at the forefront of an unprecedented transformation in health care,” IHA president and chief executive officer A.J. Wilhelmi said in a written statement. “For nonprofit hospitals, property tax exemption fosters that transformation by permitting them to focus their time, energy and financial resources on new strategies to better serve all of the residents of our state.”
Wilhelmi added: “Taxing nonprofit hospitals would hurt the communities they serve by diverting dollars that are better used to care for patients and to upgrade equipment, modernize facilities and hire needed staff.”
There was no immediate reaction from Chicago lawyer Kenneth Flaxman, who represented Oswald.
Oswald’s challenge of the 2012 law was denied by a Cook County Circuit Court judge and by the 1st District of the Illinois Appellate Court, which ruled the law constitutional in December 2016.
Oswald previous said in court documents that her property taxes increased because of tax exemptions for hospitals allowed under the law.
The law says not-for-profit hospitals, which include Springfield’s Memorial Medical Center and HSHS St. John’s Hospital, “shall be issued a charitable exemption” if the value of qualifying services and activities listed in the law exceeds what hospitals would expect to pay if their property were on the tax rolls.
Qualifying services include charity care, subsidies for health-care services for the poor, the difference between the cost of care and what Medicaid pays, and community education programs.
Even though the state constitution requires that property tax exemptions be granted only when there’s “exclusive” charitable use, Supreme Court decisions as old as 1968 and earlier have said “exclusive” doesn’t mean all health-care services in a nonprofit hospital must be provided for free or reduced prices.
A not-for-profit hospital satisfies the charitable-use requirement if it provides care for all patients without regard for their ability to pay, according to previous rulings from the high court.
-- Contact Dean Olsen: firstname.lastname@example.org, 788-1543, twitter.com/DeanOlsenSJR.
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