The Illinois House on Friday passed legislation that would establish clearer eligibility requirements for hospital tax-exempt status based on charity care levels.
Background: Taxing not-for-profit hospitals in Illinois
The Illinois Department of Revenue last year denied property tax exemptions to three not-for-profit hospitals based on their charity care levels, launching a statewide debate on tax-exempt status.
In response to the decision, hospitals began lobbying legislators to expand tax exemption qualifications to include patients' unpaid debts, the costs of elderly patient services not covered by Medicare, Medicaid patient services, and the costs that teaching hospitals incur to train physicians and conduct research.
Gov. Pat Quinn (D) asked the Illinois Hospital Association (IHA) to work with the state revenue department to re-evaluate hospital tax-exemption requirements and reach a consensus by March 1. However, the two groups were unable to reach an agreement. As a result, the revenue department resumed reviews on pending tax-status applications from 18 not-for-profit hospitals.
House passes charity care legislation
According to IHA, legislation passed by the House on Friday would:
- Establish clear criteria for hospital property and sales tax exemptions;
- Establish an income tax credit for investor-owned hospitals;
- Require hospitals to provide medically necessary care at no-cost to uninsured patients whose income levels is below 200% the federal poverty level in urban areas and 125% of the poverty level in rural areas;
- Allow the Office of the Attorney General to promulgate rules regarding financial assistance for patients seeking charity care; and
- Give IHA and hospitals a chance to submit recommendations as the Attorney General drafts new rules regarding charity care.
If the legislation passes, the three hospitals denied exemptions last year may qualify for an exemption this time, AP/NECN reports.
The state Senate is expected to consider the legislation this week.
Hospitals support legislation
IHA urged the Illinois state Senate to pass the House's legislation.
"Without this (bill), we will not have the ability to create a fair and reasonable test for hospitals to meet that will allow them to retain their tax-exempt status," says IHA's A.J. Wilhelmi (Selvam, Modern Healthcare, 5/25 [subscription required]; Finke/Thomas, Springfield State Journal-Register, 5/25; AP/NECN, 5/25; IHA release, 5/25).