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Illinois Property Tax Exemption Law Held Unconstitutional by State Appellate Court

On January 6, an Illinois Court of Appeals held unconstitutional part of a 2012 law that defined hospitals’ eligibility for Illinois charitable property tax exemption. (Carle Foundation v. Cunningham Township, et. al. Appellate Court of Illinois, Fourth District, Nos. 4-14-0795, 4-14-0845). The Illinois statute had been enacted in response to an earlier state Supreme Court ruling in the Provena Case, when the court denied a charitable property tax exemption to Provena Covenant Hospital (now part of Presence Health) because the hospital failed to provide sufficient charity care. The Provena court did not establish a specific standard for the amount of charity care required. (The Provena case is discussed in The Hilltop Institute’s January 2011 issue brief Hospital Community Benefits After the ACA: The Emerging Federal Framework). The 2012 statute attempted to establish a specific standard by making hospitals eligible for property tax exemption if the amount the hospital spent on specified health services to low-income or under-served individuals equaled or exceeded the property tax liability. 35 ILCS 200/15-86(c) (2012).

According to the Court of Appeals, relevant provisions of the Illinois Constitution permit the legislature to exempt from taxation only “property used exclusively” for charitable purposes. The court said the new statute permitted tax exemption without requiring any charitable use of the property at all, therefore contravening the state Constitutional requirement. Finding this aspect of the statute to be unconstitutional and therefore unenforceable, the Court of Appeals remanded the case back to the trial court for further proceedings.

Nevada, Pennsylvania, Texas, and Utah also require that nonprofit hospitals satisfy minimum community benefit contribution requirements in exchange for tax exemption. However, this Illinois ruling will have no direct effect on the requirements of these other states as it pertains solely to the Illinois Constitution. Even with respect to Illinois, it is important to note that the court did not determine that minimum community benefit requirements are unconstitutional—only that the specific language of the relevant provisions of the 2012 contravened the state constitution. 

Whether the legislature will attempt to craft new statutory language and whether the case will be retried in the trial court are both unclear at this time.

For more information, contact Gayle Nelson, Hospital Community Benefit Program Director.


The Hilltop Institute at the University of Maryland, Baltimore County (UMBC) is a nationally recognized policy and research center dedicated to improving the health and wellbeing of vulnerable populations. Hilltop conducts research, analysis, and evaluations on behalf of government agencies, foundations, and nonprofit organizations at the national, state, and local levels.

Hilltop’s Hospital Community Benefit Program is a central resource created specifically for state and local policymakers who seek to assure that tax-exempt hospital community benefit activities are more responsive to pressing community health needs. The program provides tools to state and local health departments, hospital regulators, legislators, revenue collection and budgeting agencies, and hospitals, as these stakeholders develop approaches that will best suit their communities and work toward a more accessible, coordinated, and effective community health system.
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