‘Poorhouses’ No Longer, More Ill. Hospitals Face Tax Review

Illinois officials are expanding their review of nonprofit hospitals’ tax exemptions, with rulings expected in the coming months on 15 institutions, Bloomberg Businessweek reports.

The state Department of Revenue last month denied tax exemptions for three hospitals, ruling that they did not provide sufficient charity care. The decision sent a wave of uncertainty through the industry, with one hospital in Bloomington, Ill., shelving a planned $23-million sale of construction bonds pending a determination on its tax status.

Some institutions say they will have to slash services or shut down if required to pay millions of dollars in property taxes. The Illinois Hospital Association has asked the state to put off further tax rulings pending a legislative solution to the dispute over charity care.

The state moves expose “the tip of a very big iceberg” in the debate over “what tax breaks [for nonprofit groups] contribute to the community,” said John Colombo, a University of Illinois law professor. “Hospitals aren’t poorhouses anymore. Just because they were exempt in 1900 doesn’t mean they should be exempt in 2011. The world is different.”