Illinois high court rules for hospital tax exemptions, but some say fight isn’t over

Plaintiffs in a Central Illinois lawsuit to get nonprofit hospitals to pay property taxes say they’ll move forward with their case in light of a similar Supreme Court ruling.

The Illinois Supreme Court upheld that a nonprofit hospital is still exempt from property taxes if the value of the free services it provides is greater than its annual bill from all the units of government that levy taxes on the property. In the majority opinion in the case, Oswald v. Hamer, the justices said the plaintiff, Constance Oswald failed to prove that the tax exemption for nonprofit hospitals was unconstitutional.

Lawyer Mark Deaton with the Illinois Health and Hospital Association said communities will continue to receive the “benefit of the bargain,” offering tax exemption in exchange for their services.

“The value of the services that the hospitals are providing far exceed the value of the property tax that would be paid,” he said. “A property tax payment would diminish the resources that the hospital has to serve the community.”

But Urbana Mayor Diane Marlin said the ruling misses a key point that a lawsuit against a hospital network there made.

“They have to meet the definition of exclusive charitable use,” she said, in addition to proving the value of what they’d pay in property taxes was less than the services the did for free. “The meeting of the charitable standard, I think is the harder one to meet.”

Another hearing in that lawsuit is scheduled for January.

Marlin said she values the service done by nonprofit hospitals, but said the exemption forces other taxpayers to pay more to cover the hospital’s share. Not to mention, she said, that many of nonprofit institutions were solidly in the black.

Deaton estimated that 40 percent of nonprofit hospitals were operating with deficits.

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