Judge rules all tax rules on charitable exemptions apply in Carle's case

Judge rules all tax rules on charitable exemptions apply in Carle's case

URBANA — The Carle Foundation will have to meet all the long-standing requirements for a charitable tax exemption, a Champaign County judge has ruled.

In a written decision this week, Judge Randy Rosenbaum sided with local and state taxing authorities on a major point as they head to trial on a decade-old lawsuit with Carle in January.

In that lawsuit, Carle is seeking retroactive property-tax exemptions for 2004-11 and a refund on taxes it paid to local units of government during those years.

In advance of the trial, Rosenbaum agreed with taxing authorities in Champaign County, Urbana, Cunningham Township and the Illinois Department of Revenue about what the state Supreme Court meant when it recently upheld Illinois' controversial hospital tax-exemption law — basically, that hospitals seeking exemptions would also still need to meet constitutional standards for charitable use in addition to statutory requirements.

Carle's attorneys contended they would need to show only that Carle complies with the terms of the hospital tax-exemption law — essentially, that it gives away at least as much in charitable assistance as the amount of taxes it would have to pay — and that Carle freely makes care available to anyone walking through its doors.

Local and state taxing authorities have held Carle needs to show considerably more than that.

The test under constitutional standards includes such factors as showing that an organization seeking a charitable tax exemption extends charity to an indefinite number of people; that it doesn't have capital, stock or shareholders and doesn't earn a profit or pay dividends; that its income comes largely from charitable donations; that it gives charity to anyone who needs and applies for it; that it doesn't place any barriers in the way of seeking charity; and that the properties for which tax exemptions are sought are used primarily for charitable purposes.

Rosenbaum wrote in his decision that the Supreme Court in its recent ruling didn't change those standards and that all these factors are part of the constitutional charitable-use test.

Having said that, Rosenbaum also wrote that those factors "dealing with ownership are only relevant if they can be shown to have affected the way in which Plaintiff (Carle) uses its property."

Retired University of Illinois law Professor John Colombo said Rosenbaum's ruling is significant in the context of the upcoming trial, but the trial itself won't ultimately settle this issue. Regardless of whether Carle or taxing authorities win, he said, the outcome will be appealed, and the lawsuit will be headed back to the Supreme Court for a decision.

The recent Supreme Court ruling upholding the hospital tax-exemption law didn't clearly define for Illinois hospitals and taxing districts what, for example, it means for a property's primary use to be charitable, Colombo said.

"The Illinois Supreme Court is going to have to say at some point: Here's what it takes for an Illinois hospital to be tax-exempt," he said.

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