Health Law Monitor

Health Care Reform Whitepaper: New IRS Mandates for Charitable Hospitals

 

    Under prior law, charitable hospitals established tax-exemption under Internal Revenue Code (“IRC”) § 501(c)(3) by providing a community benefit. Most hospitals established a community benefit by providing health care regardless of a patient’s ability to pay (including payment through Medicare or Medicaid), by providing charitable (unreimbursed) care to the community, by maintaining an emergency room, by not restricting use of its facilities to a particular group of physicians, and/or by utilizing excess funds to improve the quality of patient care, expand facilities, and advance medical education and research.

Illinois Supreme Court Holds that Property Owned by Catholic § 501(c)(3) Health System not Exempt from Illinois Property Tax

On March 18, 2010, the Supreme Court of the State of Illinois decided a property tax case that could have nationwide implications for charitable healthcare organizations. A copy of the decision is available at http://www.state.il.us/court/Opinions/SupremeCourt/2010/March/107328.pdf. The Court ruled that forty-three parcels of real estate owned by Provena Hospitals were not exempt from Illinois ad valorem property tax under either the charitable or religious use exemptions of the Illinois code. This plurality decision of the Illinois Supreme Court is disturbing because the Court seems to have gone out of its way to define charitable use, in the context of the taxation of property owned by a non-profit IRC § 501(c)(3) hospital, so narrowly that many hospitals operating in today’s healthcare environment may not be able to maintain their exemption if the reasoning in this case is adopted by other jurisdictions, including West Virginia.