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Tribune Article: Department of Revenue Denies Tax Exempt Status to Three Local Hospitals

Health & Medicine Policy Research Group (HMPRG)
August 17, 2011

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Illinois Department of Revenue denies tax exemptions for 3 hospitals

Ruling on Northwestern Memorial Hospital's Prentice Women's Hospital, Edward Hospital in Naperville and Decatur Memorial Hospital based on charity care

By Kathy Bergen, Tribune reporter

August 17, 2011

The question of how much charity care a not-for-profit hospital must provide to qualify for a pass on property taxes surfaced again Tuesday when the state denied exemptions for three hospitals, including Northwestern Memorial Hospital's Prentice Women's Hospital.

The decision follows in the wake of an Illinois Supreme Court ruling last year that the state revenue department was correct in withdrawing Provena Covenant Medical Center's property tax exemption in 2004. The court found the Urbana hospital failed to justify its exemption by providing charity care to just 302 patients, or less than one-half of 1 percent of the patients it served in 2002.

Provena, however, said it provided more than $38 million in "free care and other community benefits."

The other two hospitals denied exemptions by the Illinois Department of Revenue on Tuesday were Edward Hospital in Naperville and Decatur Memorial Hospital. More decisions are expected and could affect about 15 other health care systems.

While property taxes do not provide revenue to the state, they are the lifeblood of many cash-strapped cities, school districts, park systems and libraries.

"The Illinois Supreme Court provided guidance in the Provena case. … We are applying that interpretation of the law," the revenue department said in a statement. "The fundamental question is whether hospitals operate as businesses or as charities."

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