News: Assessor, AG’s Office and Healthcare Lawyers Debate Potential Changes to Tax-Exemption in Illinois

Chicago – March 1, 2007 – The intersection of potential universal healthcare initiatives, the looming sunset of CON on April 1, and the narrowing definition of charitable care could profoundly change the landscape of healthcare in Illinois. The law firm of Ungaretti & Harris LLP offered its expertise in healthcare during a charitable care seminar for hospitals and other healthcare providers. Led by Thomas M. Fahey, managing partner and chairman of Ungaretti & Harris’ healthcare department, this timely seminar drew more than 100 senior healthcare officials.

“When it comes to the property and sales tax exemption process,” said Fahey, “we advise our clients to fight for the best but prepare for the worst.”

The seminar featured presentations by Cook County Assessor James M. Houlihan and Senior Counsel to the Illinois Attorney General Anne M. Murphy, who provided their respective views on potential property tax assessments and Attorney General Lisa Madigan’s ongoing investigations into the charitable practices of Illinois hospitals.

Assessor Houlihan and his colleagues described the two basic tests they use for tax exemption: that the institution itself is charitable and that the use of the property is charitable. Given the volatility and polarization of the current situation, Assessor Houlihan indicated it was in the best interest of healthcare facilities to work within legal and legislative parameters. He also stressed the importance of communication between all parties involved.

Ms. Murphy, who also alluded to the volatile legal environment, discussed the need for a measurable standard on the amount of charity care a healthcare facility provides. She referenced the fact that her office is actively investigating 25 percent of Illinois tax-exempt hospitals to determine the validity of their tax exemption.

In response to Ms. Murphy, Healthcare Partner Floyd D. Perkins spoke of the difficulty of providing communities with the best medical care, health services, facilities and personnel, should a hospital lose its tax exemption. Perkins noted the necessity of taking into account the overall mission of not for profit hospitals, and that “focusing on charity care as the sole criterion for tax-exemption misses the mark in terms of Illinois law.”

With the initiatives of the Assessor’s and Attorney General’s offices in mind, Ungaretti & Harris attorneys strongly recommended healthcare facilities review their charity care policies to ensure they are in the best position in the event of an investigation. “It is not enough just to have a charity care policy,” said Healthcare Partner John J. Durso. “You must advertise your willingness to care for all those in need, and make sure everyone, particularly those without the ability to pay, knows about the policy.”

Recent developments have put virtually all Illinois not for profit healthcare facilities in danger of losing their tax exemption. With the Illinois Department of Revenue’s decision to uphold the revocation of the tax-exempt status of Provena Covenant Medical Center, a Catholic not for profit hospital in Champaign County, hospitals statewide are encountering heightened scrutiny of their charity care practices by local taxing authorities.

The proposed Tax-Exempt Hospital Responsibility Act of 2006 also remains a topic of critical interest, and the Attorney General continues to investigate hospitals concerning the charity care and community benefits they provide. Illinois hospitals have argued that increased charity care requirements could cripple healthcare facilities by increasing hospital costs and ultimately reducing access to quality healthcare.