It is January 31; do you know where your annual affidavit is?
We want to bring to your attention two procedural pitfalls that Illinois hospitals must be aware of pertaining to their existing property tax-exemptions.
Filing of Annual Affidavit:
Most tax exempt property owners file their mandatory annual affidavits (stating whether there has been change in the “ownership” or “use” of the exempt property) in response to their receipt of an annual affidavit form from the assessment officer. Though it has been customary practice for most chief county assessment officials to mail such affidavits to a property owner, the assessment officer is under no obligation to send out an annual affidavit form. In fact, we just became aware of at least one instance where the form was never mailed by the assessor. Even if the county fails to mail the affidavit, an owner still has the obligation to file the affidavit on or before January 31st. Failure to file the affidavit gives the assessor the discretion to terminate your exemption. Confirm that your affidavits have been timely filed.
Hospital Responses to County Assessment Official Actions:
A second procedural pitfall, and a trap for the unwary, involves how a hospital responds if a county assessment official either requests a hospital to re-apply for property tax exemption, or unilaterally revokes a hospital’s exemption. As you know, in August 2011, the Illinois Department of Revenue denied applications for property-tax exemption for three Illinois hospitals. IDOR purportedly based those denials on its reading of the Illinois Supreme Court’s guidance in the Provena case. It is clear that IDOR and the Illinois Attorney General’s Office believe the fundamental question in determining whether a hospital is charitable is the amount of free care the hospital provides. It is our view that this interpretation of Provena is not binding precedent. Nevertheless, it is clear IDOR sees Provena as a mechanism to deny hospitals’ pending and future applications for property-tax exemption.
We are aware that some county assessment officials have found support, apparently based on IDOR’s and the Attorney General’s interpretation of the holding in Provena, to unilaterally seek to revoke a Hospital’s property-tax exemption and place it back on the assessment rolls in one instance, and to request that the hospital re-apply for exemption in another. Absent very limited circumstances, the Illinois Property Tax Code does not authorize county assessment officers to take either of such actions. If a county assessor attempts to put a property back on the assessment rolls, we have recommended that the property owner challenge the assessor’s action by filing a suit in equity in circuit court. As for responding to a request to reapply, be assured there is no requirement under statutory or case law for a hospital to file a “reapplication” for property tax exemption. A hospital that reapplies for exemption in this environment will have exposed itself to the vagaries of the exemption process.
For more information on this update, please contact any member of the Ungaretti & Harris LLP Healthcare Department.