City, township pressing fight vs. Carle tax status

City, township pressing fight vs. Carle tax status

Filing by local officials, governments maintains statute unconstitutional

URBANA — Several local governments in Champaign County are seeking a court challenge of the state's new charitable-exemption law for hospitals.

Attorneys representing the city of Urbana, Cunningham Township and the Champaign County Board of Review, plus some individual officials, have asserted the state law is unconstitutional in motions filed in a long-running lawsuit over Carle Foundation Hospital's taxable status.

Fred Grosser, an attorney representing the city, township and township Assessor Dan Stebbins, contends the new exemption law created for hospitals was beyond the scope of lawmakers' authority.

"The Legislature has carved out a special type of exemption only for hospitals," he said.

The new law that went into effect last year was spawned by a series of challenges to hospitals' time-honored charitable exemptions — starting with taxing authorities challenging exemptions to what is now Presence Covenant Medical Center and Carle Foundation Hospital.

The new standard not only defined — but considerably broadened — what makes a hospital eligible to escape paying property taxes.

To qualify for an exemption under the new standard, a nonprofit hospital must show it is providing an amount of charity care that is equal to the tax exemptions it receives, with the exemptions calculated on its fair market value.

But many other expenses that previously didn't count as charity care — for example, the shortfall in government payments for patients in the state Medicaid system — now can be applied toward eligibility for an exemption.

Grosser said the state's existing charitable exemption law still exists, and most charities, "if they qualify at all," qualify under that standard.

"It's much easier to get an exemption under the hospital exemption than under the charitable exemption," he said.

Grosser also said it's the city's and township's position that the new state law doesn't apply in the Carle case because Carle didn't have any exemption cases pending before the state Department of Revenue when the new hospital exemption law took effect June 14, 2012. Carle's exemption petitions were pending before the court. In a recent ruling in the Carle case, Champaign County Judge Chase Leonhard found the new hospital tax exemption law is also applicable to claims pending before a circuit court.

The Illinois Hospital Association said the state hospitals provided $704 million in charity care for the most recent reporting period ending Sept. 30, 3012.

The organization defends the new law vigorously.

"It was probably one of the most thoroughly discussed and debated pieces of legislation I was ever involved with," Mark Deaton, the association's general counsel, said Wednesday.

Deaton said he knows of at least two other pending constitutional challenges to the law, both in Cook County — yet the new law replaced a charity care standard for hospitals that was "extremely confused and muddled."

"There was no clarity on what the test was, what hospitals had to do to earn exemptions," he said. "This statute has given us clarity on the exemption."

The county's motion was also filed on behalf of county Treasurer Dan Welch, Supervisor of Assessments Stan Jenkins and individual members of the Board of Review.

In a hearing Tuesday, the Urbana park and school districts were dismissed as parties to the Carle lawsuit. Both made settlement agreements with Carle earlier in the fall.

Carle spokeswoman Jennifer Hendricks said Urbana and Cunningham Township are ignoring an agreement regarding property tax exemptions reached with Carle in 2002, something she said Carle finds disappointing.

"Carle made payments totaling hundreds of thousands of dollars under that agreement to Urbana, Cunningham Township and the Urbana Free Library, in return for promises by Urbana and Cunningham Township not to oppose Carle's continued property tax exemptions, which Carle had possessed for decades as a nonprofit," she said in an email. "Urbana and Cunningham Township challenging the constitutionality of the law under which Carle has received exemptions flagrantly breaches that agreement."

Hendricks said Carle is also disappointed the city and township have refused to discuss a settlement.

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wayward wrote on November 21, 2013 at 11:11 am

Would there be any possibility of the governments negotiating with Carle about the possibility of a voluntary offset payment (like Urbana gets from UI for Orchard Downs) instead of engaging in a protracted battle?  Sure, said offset payment would likely be far less than Carle had previously been paying in taxes, but could still be a better deal for both sides than an ongoing fight.