Provena Covenant Medical Center v. The Department Of Revenue

925 N.E.2d 1131 (2010)

Purchase the Printed Copy at bsmsphd.com

Nature of the Case

To access this section all you need to do is click here and register.

Facts

P was formed through the consolidation of four Catholic-related healthcare organizations and is organized as a not-for-profit corporation under the laws of Illinois. The articles of consolidation for P state that the purpose of the corporation is to 'coordinate the activities of Provena Hospitals' subsidiaries or other organizations that are affiliated with Provena Hospitals as they pursue their religious, charitable, educational and scientific purposes' and 'to offer at all times high quality and cost-effective healthcare and human services to the consuming public.' P is exempt from federal income tax under section 501(c)(3). D also determined that the corporation is exempt from this state's retailers' occupation tax, service occupation tax, use tax, and service use tax. D also concluded that P 'meets the qualifications of Section 3(a) of 'An Act to Regulate Solicitation and Collection of Funds for Charitable Purposes' [225 ILCS 460/3(a) (West 2002)] and Section 4 of 'The Charitable Trust Act' [760 ILCS 55/1 (West 2002)]' and constitutes a religious organization exempt from filing annual financial reports under those statutes. P owns and operates six hospitals. During 2002, P's 'net patient service revenue' was $713,911,000. P's 'expenses and losses' exceeded its 'revenue and gains' during this period by $4,869,000. The following year, this changed. The corporation's revenue and gains exceeded its expenses and losses by $10,548,000. A charity care policy was in place but not advertised. The charity policy was not self-executing. An application was required. Whether an application would be granted was determined on a case-by-case basis using eligibility criteria based on federal poverty guidelines. A sliding scale was employed. Persons whose income was below the guidelines were eligible for 'a 100% reduction from the patient portion of the billed charges.' Persons whose income was not more than 125% of the guidelines could qualify for a 75% reduction. With an income level not more than 150% of the guidelines the discount fell to 50%. At an income level not more than 200% of the guidelines, the potential reduction was 25%. Eligibility was also affected by the value of an applicant's assets. Some unpaid bills were sent to collections. During 2002, the amount of aid provided under the facility's charity care program was modest. P waived $ 1,758,940 in charges, representing an actual cost to it of only $831,724. This was equivalent to only 0.723% of PCMC's revenues for that year and was $268,276 less than the $ 1.1 million in tax benefits that P stood to receive if its claim for a property tax exemption were granted. Only 302 of 10,000 inpatient and 100,000 outpatient admissions were granted reductions in their bills under the charitable care program. That figure is equivalent to just 0.27% of P's total annual patient census. P asked the Champaign County board of review to exempt all of it 43 of the parcels of land from property taxes for 2002. Exemption was requested under section 15-65(a) of the Property Tax Code (35 ILCS 200/15-65(a) (West 2002)) on the grounds that the parcels were owned by an institution of public charity and that the property was 'actually and exclusively used for charitable or beneficent purposes, and not leased or otherwise used with a view to profit.' The board of review denied the application. The Illinois Department of Revenue agreed. P paid the $1.1 million in taxes under protest and then filed a timely petition for a hearing. The ALJ recommended that 94.4% of the subject parcels be granted a charitable exemption. The Director of Revenue rejected the ALJ's recommendation. It held that P had failed to meet its burden of establishing that the property at issue qualified for a charitable exemption. The circuit court held that P was entitled to both a charitable tax exemption and a religious tax exemption for the subject parcels. The appellate court subsequently reversed. P appealed.