The Illinois Department of Revenue will hold off on any further actions that strip nonprofit hospitals of their property tax exemption for failing to provide sufficient charity care, while state officials and hospitals engage in talks that could lead to legislation setting minimum charity thresholds.
Gov. Pat Quinn last week asked the department to halt further enforcement actions as the Illinois Hospital Association showed a new inclination to engage in talks with state officials, including Attorney General Lisa Madigan, over charity care levels. Madigan had previously proposed legislation that would have set minimum levels for hospitals to retain their tax-exempt perks at the state level.
The perks include a property tax exemption and access to the tax-exempt market through the Illinois Finance Authority. The hospitals had previously resisted any legislative mandate. Recommended legislation is expected by March.
The Revenue Department last month moved to deny exemptions for three nonprofit hospitals in the Chicago area, including the prominent Northwestern Memorial's Prentice Women's Hospital.
The action marked the first set of rulings on hospitals' tax-exempt status for property tax purposes since the Illinois Supreme Court last year ruled that a hospital operated by Provena Health does not provide enough charity care to warrant the exemption.
While property tax bills don't represent a significant piece of a nonprofit hospital's balance sheet, officials contend they can't afford the expense given the sector's fiscal challenges, including implementing national health care reform.
Like Provena, the three providers contributed 1% or 2% of their net revenue to charity care during the tax years examined. Many Illinois hospitals contribute less than 3%, and could be open to the same loss of tax-exempt status, a market expert said. The department is reviewing more than a dozen other hospital applications for property tax exemptions.