The Illinois Supreme Court ruled Thursday to uphold a state law that exempts not-for-profit hospitals from paying property taxes.
In a unanimous decision, the state high court tossed out a January 2016 appellate court ruling that determined a state law exempting not-for-profit hospitals from property taxes was unconstitutional. Instead, the seven justices said the appellate court didn't have the jurisdiction to make the ruling in the first place, returning the case back to the lower court.
Although the ruling allows not-for-profit hospitals in Illinois to breathe a sigh of relief, the law isn't safe yet. The Supreme Court didn't weigh in on the constitutionality of the property tax exemption law.
In the case at hand, Carle Foundation Hospital in Urbana sued the city and local taxing bodies, arguing it's owed millions of dollars from paying unnecessary property taxes from 2004 to 2011. The hospital claimed the city should return that money since a law passed in 2012 exempted not-for-profit hospitals from paying property taxes so long as the value of their charitable services was equal to or greater than their tax liabilities. Carle alleged the law applied retroactively.
Attorneys representing the city said the 2012 law is unconstitutional because it goes beyond the state constitution by assigning a value to the tax exemption.
The city also argued that the cash-strapped state could benefit from property taxes by not-for-profit hospitals that already make large profits.
The Illinois 4th District Appellate Court sided with the city of Urbana, saying the state constitution only exempts property from taxes if it's used “exclusively” for charitable purposes. Carle attorneys claim the hospital has interpreted charity purposes to mean providing care to patients regardless of their ability to pay.
The roughly 150 not-for-profit hospitals in the state were hoping the Supreme Court would offer clarity on what the term "charity" in the constitution means, but will have to wait as the case goes back through the courts.
“While Carle, along with all Illinois hospitals, would like this important issue resolved, it respects the court's decision to rule on a procedural matter and to not issue an opinion on the constitutionality of the 2012 law at this time,” the foundation said in a statement Wednesday.
Carle said it will retry the suit in Champaign County Circuit Court.
The Illinois Health and Hospital Association also said in a statement that it had hoped the Supreme Court would address the constitutionality of the state law, but understood and respected the court's ruling.
In another Illinois case, Oswald v. Hamer, an appellate court ruled the law exempting hospitals from paying property taxes was constitutional. The Supreme Court has not yet decided whether to also take up that case.