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| | 101ST GENERAL ASSEMBLY
State of Illinois
2019 and 2020
HB4480 Introduced , by Rep. Deanne M. Mazzochi SYNOPSIS AS INTRODUCED:
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Amends the Property Tax Code. In provisions concerning exemptions related to hospitals and health care services, provides that ambulance transport is considered a service that addresses the health care needs of low-income or underserved individuals. Effective immediately.
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| | FISCAL NOTE ACT MAY APPLY | | HOUSING AFFORDABILITY IMPACT NOTE ACT MAY APPLY |
| | A BILL FOR |
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1 | | AN ACT concerning revenue.
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2 | | Be it enacted by the People of the State of Illinois,
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3 | | represented in the General Assembly:
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4 | | Section 5. The Property Tax Code is amended by changing |
5 | | Section 15-86 as follows:
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6 | | (35 ILCS 200/15-86) |
7 | | Sec. 15-86. Exemptions related to access to hospital and |
8 | | health care services by low-income and underserved |
9 | | individuals. |
10 | | (a) The General Assembly finds: |
11 | | (1) Despite the Supreme Court's decision in Provena |
12 | | Covenant Medical Center v. Dept. of Revenue , 236 Ill.2d |
13 | | 368, there is considerable uncertainty surrounding the |
14 | | test for charitable property tax exemption, especially |
15 | | regarding the application of a quantitative or monetary |
16 | | threshold. In Provena , the Department stated that the |
17 | | primary basis for its decision was the hospital's |
18 | | inadequate amount of charitable activity, but the |
19 | | Department has not articulated what constitutes an |
20 | | adequate amount of charitable activity. After Provena , the |
21 | | Department denied property tax exemption applications of 3 |
22 | | more hospitals, and, on the effective date of this |
23 | | amendatory Act of the 97th General Assembly, at least 20 |
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1 | | other hospitals are awaiting rulings on applications for |
2 | | property tax exemption. |
3 | | (2) In Provena , two Illinois Supreme Court justices |
4 | | opined that "setting a monetary or quantum standard is a |
5 | | complex decision which should be left to our legislature, |
6 | | should it so choose". The Appellate Court in Provena |
7 | | stated: "The language we use in the State of Illinois to |
8 | | determine whether real property is used for a charitable |
9 | | purpose has its genesis in our 1870 Constitution. It is |
10 | | obvious that such language may be difficult to apply to the |
11 | | modern face of our nation's health care delivery systems". |
12 | | The court noted the many significant changes in the health |
13 | | care system since that time, but concluded that taking |
14 | | these changes into account is a matter of public policy, |
15 | | and "it is the legislature's job, not ours, to make public |
16 | | policy". |
17 | | (3) It is essential to ensure that tax exemption law |
18 | | relating to hospitals accounts for the complexities of the |
19 | | modern health care delivery system. Health care is moving |
20 | | beyond the walls of the hospital. In addition to treating |
21 | | individual patients, hospitals are assuming responsibility |
22 | | for improving the health status of communities and |
23 | | populations. Low-income and underserved communities |
24 | | benefit disproportionately by these activities. |
25 | | (4) The Supreme Court has explained that: "the |
26 | | fundamental ground upon which all exemptions in favor of |
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1 | | charitable institutions are based is the benefit conferred |
2 | | upon the public by them, and a consequent relief, to some |
3 | | extent, of the burden upon the state to care for and |
4 | | advance the interests of its citizens". Hospitals relieve |
5 | | the burden of government in many ways, but most |
6 | | significantly through their participation in and |
7 | | substantial financial subsidization of the Illinois |
8 | | Medicaid program, which could not operate without the |
9 | | participation and partnership of Illinois hospitals. |
10 | | (5) Working with the Illinois hospital community and |
11 | | other interested parties, the General Assembly has |
12 | | developed a comprehensive combination of related |
13 | | legislation that addresses hospital property tax |
14 | | exemption, significantly increases access to free health |
15 | | care for indigent persons, and strengthens the Medical |
16 | | Assistance program. It is the intent of the General |
17 | | Assembly to establish a new category of ownership for |
18 | | charitable property tax exemption to be applied to |
19 | | not-for-profit hospitals and hospital affiliates in lieu |
20 | | of the existing ownership category of "institutions of |
21 | | public charity". It is also the intent of the General |
22 | | Assembly to establish quantifiable standards for the |
23 | | issuance of charitable exemptions for such property. It is |
24 | | not the intent of the General Assembly to declare any |
25 | | property exempt ipso facto, but rather to establish |
26 | | criteria to be applied to the facts on a case-by-case |
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1 | | basis. |
2 | | (b) For the purpose of this Section and Section 15-10, the |
3 | | following terms shall have the meanings set forth below: |
4 | | (1) "Hospital" means any institution, place, building, |
5 | | buildings on a campus, or other health care facility |
6 | | located in Illinois that is licensed under the Hospital |
7 | | Licensing Act and has a hospital owner. |
8 | | (2) "Hospital owner" means a not-for-profit |
9 | | corporation that is the titleholder of a hospital, or the |
10 | | owner of the beneficial interest in an Illinois land trust |
11 | | that is the titleholder of a hospital. |
12 | | (3) "Hospital affiliate" means any corporation, |
13 | | partnership, limited partnership, joint venture, limited |
14 | | liability company, association or other organization, |
15 | | other than a hospital owner, that directly or indirectly |
16 | | controls, is controlled by, or is under common control with |
17 | | one or more hospital owners and that supports, is supported |
18 | | by, or acts in furtherance of the exempt health care |
19 | | purposes of at least one of those hospital owners' |
20 | | hospitals. |
21 | | (4) "Hospital system" means a hospital and one or more |
22 | | other hospitals or hospital affiliates related by common |
23 | | control or ownership. |
24 | | (5) "Control" relating to hospital owners, hospital |
25 | | affiliates, or hospital systems means possession, direct |
26 | | or indirect, of the power to direct or cause the direction |
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1 | | of the management and policies of the entity, whether |
2 | | through ownership of assets, membership interest, other |
3 | | voting or governance rights, by contract or otherwise. |
4 | | (6) "Hospital applicant" means a hospital owner or |
5 | | hospital affiliate that files an application for a property |
6 | | tax exemption pursuant to Section 15-5 and this Section. |
7 | | (7) "Relevant hospital entity" means (A) the hospital |
8 | | owner, in the case of a hospital applicant that is a |
9 | | hospital owner, and (B) at the election of a hospital |
10 | | applicant that is a hospital affiliate, either (i) the |
11 | | hospital affiliate or (ii) the hospital system to which the |
12 | | hospital applicant belongs, including any hospitals or |
13 | | hospital affiliates that are related by common control or |
14 | | ownership. |
15 | | (8) "Subject property" means property for which a |
16 | | hospital applicant files an application for an exemption |
17 | | pursuant to Section 15-5 and this Section. |
18 | | (9) "Hospital year" means the fiscal year of the |
19 | | relevant hospital entity, or the fiscal year of one of the |
20 | | hospital owners in the hospital system if the relevant |
21 | | hospital entity is a hospital system with members with |
22 | | different fiscal years, that ends in the year for which the |
23 | | exemption is sought. |
24 | | (c) A hospital applicant satisfies the conditions for an |
25 | | exemption under this Section with respect to the subject |
26 | | property, and shall be issued a charitable exemption for that |
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1 | | property, if the value of services or activities listed in |
2 | | subsection (e) for the hospital year equals or exceeds the |
3 | | relevant hospital entity's estimated property tax liability, |
4 | | as determined under subsection (g), for the year for which |
5 | | exemption is sought. For purposes of making the calculations |
6 | | required by this subsection (c), if the relevant hospital |
7 | | entity is a hospital owner that owns more than one hospital, |
8 | | the value of the services or activities listed in subsection |
9 | | (e) shall be calculated on the basis of only those services and |
10 | | activities relating to the hospital that includes the subject |
11 | | property, and the relevant hospital entity's estimated |
12 | | property tax liability shall be calculated only with respect to |
13 | | the properties comprising that hospital. In the case of a |
14 | | multi-state hospital system or hospital affiliate, the value of |
15 | | the services or activities listed in subsection (e) shall be |
16 | | calculated on the basis of only those services and activities |
17 | | that occur in Illinois and the relevant hospital entity's |
18 | | estimated property tax liability shall be calculated only with |
19 | | respect to its property located in Illinois. |
20 | | Notwithstanding any other provisions of this Act, any |
21 | | parcel or portion thereof, that is owned by a for-profit entity |
22 | | whether part of the hospital system or not, or that is leased, |
23 | | licensed or operated by a for-profit entity regardless of |
24 | | whether healthcare services are provided on that parcel shall |
25 | | not qualify for exemption. If a parcel has both exempt and |
26 | | non-exempt uses, an exemption may be granted for the qualifying |
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1 | | portion of that parcel. In the case of parking lots and common |
2 | | areas serving both exempt and non-exempt uses those parcels or |
3 | | portions thereof may qualify for an exemption in proportion to |
4 | | the amount of qualifying use. |
5 | | (d) The hospital applicant shall include information in its |
6 | | exemption application establishing that it satisfies the |
7 | | requirements of subsection (c). For purposes of making the |
8 | | calculations required by subsection (c), the hospital |
9 | | applicant may for each year elect to use either (1) the value |
10 | | of the services or activities listed in subsection (e) for the |
11 | | hospital year or (2) the average value of those services or |
12 | | activities for the 3 fiscal years ending with the hospital |
13 | | year. If the relevant hospital entity has been in operation for |
14 | | less than 3 completed fiscal years, then the latter |
15 | | calculation, if elected, shall be performed on a pro rata |
16 | | basis. |
17 | | (e) Services that address the health care needs of |
18 | | low-income or underserved individuals or relieve the burden of |
19 | | government with regard to health care services. The following |
20 | | services and activities shall be considered for purposes of |
21 | | making the calculations required by subsection (c): |
22 | | (1) Charity care. Free or discounted services provided |
23 | | pursuant to the relevant hospital entity's financial |
24 | | assistance policy, measured at cost, including discounts |
25 | | provided under the Hospital Uninsured Patient Discount |
26 | | Act. |
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1 | | (2) Health services to low-income and underserved |
2 | | individuals. Other unreimbursed costs of the relevant |
3 | | hospital entity for providing without charge, paying for, |
4 | | or subsidizing goods, activities, or services for the |
5 | | purpose of addressing the health of low-income or |
6 | | underserved individuals. Those activities or services may |
7 | | include, but are not limited to: financial or in-kind |
8 | | support to affiliated or unaffiliated hospitals, hospital |
9 | | affiliates, community clinics, or programs that treat |
10 | | low-income or underserved individuals; paying for or |
11 | | subsidizing health care professionals who care for |
12 | | low-income or underserved individuals; providing or |
13 | | subsidizing outreach or educational services to low-income |
14 | | or underserved individuals for disease management and |
15 | | prevention; free or subsidized goods, supplies, or |
16 | | services needed by low-income or underserved individuals |
17 | | because of their medical condition; and prenatal or |
18 | | childbirth outreach to low-income or underserved persons. |
19 | | (3) Subsidy of State or local governments. Direct or |
20 | | indirect financial or in-kind subsidies of State or local |
21 | | governments by the relevant hospital entity that pay for or |
22 | | subsidize activities or programs related to health care for |
23 | | low-income or underserved individuals. |
24 | | (4) Support for State health care programs for |
25 | | low-income individuals. At the election of the hospital |
26 | | applicant for each applicable year, either (A) 10% of |
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1 | | payments to the relevant hospital entity and any hospital |
2 | | affiliate designated by the relevant hospital entity |
3 | | (provided that such hospital affiliate's operations |
4 | | provide financial or operational support for or receive |
5 | | financial or operational support from the relevant |
6 | | hospital entity) under Medicaid or other means-tested |
7 | | programs, including, but not limited to, General |
8 | | Assistance, the Covering ALL KIDS Health Insurance Act, and |
9 | | the State Children's Health Insurance Program or (B) the |
10 | | amount of subsidy provided by the relevant hospital entity |
11 | | and any hospital affiliate designated by the relevant |
12 | | hospital entity (provided that such hospital affiliate's |
13 | | operations provide financial or operational support for or |
14 | | receive financial or operational support from the relevant |
15 | | hospital entity) to State or local government in treating |
16 | | Medicaid recipients and recipients of means-tested |
17 | | programs, including but not limited to General Assistance, |
18 | | the Covering ALL KIDS Health Insurance Act, and the State |
19 | | Children's Health Insurance Program. The amount of subsidy |
20 | | for purposes of this item (4) is calculated in the same |
21 | | manner as unreimbursed costs are calculated for Medicaid |
22 | | and other means-tested government programs in the Schedule |
23 | | H of IRS Form 990 in effect on the effective date of this |
24 | | amendatory Act of the 97th General Assembly; provided, |
25 | | however, that in any event unreimbursed costs shall be net |
26 | | of fee-for-services payments, payments pursuant to an |
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1 | | assessment, quarterly payments, and all other payments |
2 | | included on the schedule H of the IRS form 990. |
3 | | (5) Dual-eligible subsidy. The amount of subsidy |
4 | | provided to government by treating dual-eligible |
5 | | Medicare/Medicaid patients. The amount of subsidy for |
6 | | purposes of this item (5) is calculated by multiplying the |
7 | | relevant hospital entity's unreimbursed costs for |
8 | | Medicare, calculated in the same manner as determined in |
9 | | the Schedule H of IRS Form 990 in effect on the effective |
10 | | date of this amendatory Act of the 97th General Assembly, |
11 | | by the relevant hospital entity's ratio of dual-eligible |
12 | | patients to total Medicare patients. |
13 | | (6) Relief of the burden of government related to |
14 | | health care of low-income individuals. Except to the extent |
15 | | otherwise taken into account in this subsection, the |
16 | | portion of unreimbursed costs of the relevant hospital |
17 | | entity attributable to providing, paying for, or |
18 | | subsidizing goods, activities, or services that relieve |
19 | | the burden of government related to health care for |
20 | | low-income individuals. Such activities or services shall |
21 | | include, but are not limited to, providing emergency, |
22 | | trauma, burn, neonatal, psychiatric, rehabilitation, |
23 | | ambulance transport, or other special services; providing |
24 | | medical education; and conducting medical research or |
25 | | training of health care professionals. The portion of those |
26 | | unreimbursed costs attributable to benefiting low-income |
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1 | | individuals shall be determined using the ratio calculated |
2 | | by adding the relevant hospital entity's costs |
3 | | attributable to charity care, Medicaid, other means-tested |
4 | | government programs, Medicare patients with disabilities |
5 | | under age 65, and dual-eligible Medicare/Medicaid patients |
6 | | and dividing that total by the relevant hospital entity's |
7 | | total costs. Such costs for the numerator and denominator |
8 | | shall be determined by multiplying gross charges by the |
9 | | cost to charge ratio taken from the hospitals' most |
10 | | recently filed Medicare cost report (CMS 2252-10 Worksheet |
11 | | C, Part I). In the case of emergency services, the ratio |
12 | | shall be calculated using costs (gross charges multiplied |
13 | | by the cost to charge ratio taken from the hospitals' most |
14 | | recently filed Medicare cost report (CMS 2252-10 Worksheet |
15 | | C, Part I)) of patients treated in the relevant hospital |
16 | | entity's emergency department. |
17 | | (7) Any other activity by the relevant hospital entity |
18 | | that the Department determines relieves the burden of |
19 | | government or addresses the health of low-income or |
20 | | underserved individuals. |
21 | | (f) For purposes of making the calculations required by |
22 | | subsections (c) and (e): |
23 | | (1) particular services or activities eligible for |
24 | | consideration under any of the paragraphs (1) through (7) |
25 | | of subsection (e) may not be counted under more than one of |
26 | | those paragraphs; and |
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1 | | (2) the amount of unreimbursed costs and the amount of |
2 | | subsidy shall not be reduced by restricted or unrestricted |
3 | | payments received by the relevant hospital entity as |
4 | | contributions deductible under Section 170(a) of the |
5 | | Internal Revenue Code. |
6 | | (g) Estimation of Exempt Property Tax Liability. The |
7 | | estimated property tax liability used for the determination in |
8 | | subsection (c) shall be calculated as follows: |
9 | | (1) "Estimated property tax liability" means the |
10 | | estimated dollar amount of property tax that would be owed, |
11 | | with respect to the exempt portion of each of the relevant |
12 | | hospital entity's properties that are already fully or |
13 | | partially exempt, or for which an exemption in whole or in |
14 | | part is currently being sought, and then aggregated as |
15 | | applicable, as if the exempt portion of those properties |
16 | | were subject to tax, calculated with respect to each such |
17 | | property by multiplying: |
18 | | (A) the lesser of (i) the actual assessed value, if |
19 | | any, of the portion of the property for which an |
20 | | exemption is sought or (ii) an estimated assessed value |
21 | | of the exempt portion of such property as determined in |
22 | | item (2) of this subsection (g), by: |
23 | | (B) the applicable State equalization rate |
24 | | (yielding the equalized assessed value), by |
25 | | (C) the applicable tax rate. |
26 | | (2) The estimated assessed value of the exempt portion |
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1 | | of the property equals the sum of (i) the estimated fair |
2 | | market value of buildings on the property, as determined in |
3 | | accordance with subparagraphs (A) and (B) of this item (2), |
4 | | multiplied by the applicable assessment factor, and (ii) |
5 | | the estimated assessed value of the land portion of the |
6 | | property, as determined in accordance with subparagraph |
7 | | (C). |
8 | | (A) The "estimated fair market value of buildings |
9 | | on the property" means the replacement value of any |
10 | | exempt portion of buildings on the property, minus |
11 | | depreciation, determined utilizing the cost |
12 | | replacement method whereby the exempt square footage |
13 | | of all such buildings is multiplied by the replacement |
14 | | cost per square foot for Class A Average building found |
15 | | in the most recent edition of the Marshall & Swift |
16 | | Valuation Services Manual, adjusted by any appropriate |
17 | | current cost and local multipliers. |
18 | | (B) Depreciation, for purposes of calculating the |
19 | | estimated fair market value of buildings on the |
20 | | property, is applied by utilizing a weighted mean life |
21 | | for the buildings based on original construction and |
22 | | assuming a 40-year life for hospital buildings and the |
23 | | applicable life for other types of buildings as |
24 | | specified in the American Hospital Association |
25 | | publication "Estimated Useful Lives of Depreciable |
26 | | Hospital Assets". In the case of hospital buildings, |
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1 | | the remaining life is divided by 40 and this ratio is |
2 | | multiplied by the replacement cost of the buildings to |
3 | | obtain an estimated fair market value of buildings. If |
4 | | a hospital building is older than 35 years, a remaining |
5 | | life of 5 years for residual value is assumed; and if a |
6 | | building is less than 8 years old, a remaining life of |
7 | | 32 years is assumed. |
8 | | (C) The estimated assessed value of the land |
9 | | portion of the property shall be determined by |
10 | | multiplying (i) the per square foot average of the |
11 | | assessed values of three parcels of land (not including |
12 | | farm land, and excluding the assessed value of the |
13 | | improvements thereon) reasonably comparable to the |
14 | | property, by (ii) the number of square feet comprising |
15 | | the exempt portion of the property's land square |
16 | | footage. |
17 | | (3) The assessment factor, State equalization rate, |
18 | | and tax rate (including any special factors such as |
19 | | Enterprise Zones) used in calculating the estimated |
20 | | property tax liability shall be for the most recent year |
21 | | that is publicly available from the applicable chief county |
22 | | assessment officer or officers at least 90 days before the |
23 | | end of the hospital year. |
24 | | (4) The method utilized to calculate estimated |
25 | | property tax liability for purposes of this Section 15-86 |
26 | | shall not be utilized for the actual valuation, assessment, |
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1 | | or taxation of property pursuant to the Property Tax Code. |
2 | | (h) Application. Each hospital applicant applying for a |
3 | | property tax exemption pursuant to Section 15-5 and this |
4 | | Section shall use an application form provided by the |
5 | | Department. The application form shall specify the records |
6 | | required in support of the application and those records shall |
7 | | be submitted to the Department with the application form. Each |
8 | | application or affidavit shall contain a verification by the |
9 | | Chief Executive Officer of the hospital applicant under oath or |
10 | | affirmation stating that each statement in the application or |
11 | | affidavit and each document submitted with the application or |
12 | | affidavit are true and correct. The records submitted with the |
13 | | application pursuant to this Section shall include an exhibit |
14 | | prepared by the relevant hospital entity showing (A) the value |
15 | | of the relevant hospital entity's services and activities, if |
16 | | any, under paragraphs (1) through (7) of subsection (e) of this |
17 | | Section stated separately for each paragraph, and (B) the value |
18 | | relating to the relevant hospital entity's estimated property |
19 | | tax liability under subsections (g)(1)(A), (B), and (C), |
20 | | subsections (g)(2)(A), (B), and (C), and subsection (g)(3) of |
21 | | this Section stated separately for each item. Such exhibit will |
22 | | be made available to the public by the chief county assessment |
23 | | officer. Nothing in this Section shall be construed as limiting |
24 | | the Attorney General's authority under the Illinois False |
25 | | Claims Act. |
26 | | (i) Nothing in this Section shall be construed to limit the |
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1 | | ability of otherwise eligible hospitals, hospital owners, |
2 | | hospital affiliates, or hospital systems to obtain or maintain |
3 | | property tax exemptions pursuant to a provision of the Property |
4 | | Tax Code other than this Section.
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5 | | (Source: P.A. 99-143, eff. 7-27-15.)
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6 | | Section 99. Effective date. This Act takes effect upon |
7 | | becoming law.
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