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Ill. hospitals seek property tax refunds

After a lengthy lobbying effort by not-for-profit hospitals to preserve their tax-exempt status, three Illinois hospitals are waiting on refunds totaling nearly $10 million for taxes paid while the battle was raging.

That's how much Edward Hospital & Health Services and Adventist Bolingbrook Hospital in the western suburbs and Decatur Memorial Hospital in downstate Illinois are seeking in property taxes paid for several years while their applications for tax-exempt status were pending, according to public records and interviews with hospital executives. It could not be determined how many additional hospitals are also seeking refunds.

The requests for refunds come as the Illinois Department of Revenue is moving forward on hospital applications for tax-exempt status after a lengthy delay. The fight over exemptions, which intensified in 2010, was finally settled in June, when Gov. Pat Quinn signed legislation that expanded the definition of charity care, a key issue in the debate.

Adventist Bolingbrook, with 2011 revenue of nearly $117 million, is seeking the biggest recovery of the three hospitals —$7.1 million paid between 2008-2011. The hospital received its tax-exempt status late last year.“We believed that in our situation, the morally right decision was to pay our taxes, under protest, to Will County in full, letting the county know we were certain the hospital would be recognized as deserving tax-exempt status,” CEO Rick Mace said in a memo on Wednesday to the board of directors of the hospital, part of Adventist Health Midwest.

Naperville-based Edward is seeking to recover about $1.1 million on taxes paid for its Plainfield campus.

Plainfield Community Consolidated School District 202, one of the largest school districts in the state, received about $757,000 in taxes from Edward between 2008-10, according to a letter to the school district from Will County Treasurer Steve Weber. The district has cut nearly 350 positions since 2009 to save money, a spokesman said.

District 202 can little afford a refund, he said.

“We're already facing a $2 million deficit and continued ongoing uncertainty and frustration over state funding,” the spokesman said.

Edward received tax-exempt status in December for the 2011 tax year, and earlier this month for 2008-10, a hospital spokesman said. He said Edward hopes to get the 2007 tax year exemption “very shortly.”

A spokesman for Decatur Memorial said the hospital received tax-exempt status in November and is seeking a refund with Macon County officials. Decatur is slated to receive about $1.6 million in taxes paid from 2006-11, Macon County Treasurer Edward Yoder said.

DMH Health Systems, which includes Decatur Memorial, had $280.3 million in revenue for the fiscal year that ended Sept. 30, 2011.

The Revenue Department restarted the process in December, when it sent letters to nonprofit hospitals seeking additional information to determine if they would qualify under the new, broader rules.

“We're in the process of making decisions and granting exemptions to those hospitals,” the spokeswoman said.

She did not know how many applications are waiting for review.

By law, the hospitals are entitled to recoup taxes they paid while their applications were pending, but that doesn't mean taxing bodies that received some of the money want to give it back.

The battle over whether nonprofit hospitals should keep their charitable, tax-exempt status has raged for years but boiled over in 2010, when the Illinois Supreme Court in a split decision voted to strip the exemption from Provena Covenant Medical Center in Urbana in part because it spent less than 1 percent of its revenue on free care.

In August 2011, with more than 30 health care providers statewide waiting for decisions, the Revenue Department stripped the exemptions of Prentice Women's Hospital, Edward and Decatur Memorial. The department noted that Northwestern Memorial Hospital, which includes Prentice, as well as Edward and Decatur provided charity care worth less than 2 percent of net patient revenue in certain years.

In three court orders in December, Will County Judge Barbara Petrungaro ruled that Adventist and Edward were entitled to refunds for certain tax years, the orders say. The county treasurer's office is in the process of collecting the money back from taxing bodies, including school districts and municipalities.

Prentice has received tax-exempt status, but the hospital is not seeking a refund because it didn't pay taxes while the exemption was pending, a spokeswoman said.
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