102ND GENERAL ASSEMBLY
State of Illinois
2021 and 2022
HB1751

 

Introduced 2/17/2021, by Rep. Deanne M. Mazzochi

 

SYNOPSIS AS INTRODUCED:
 
35 ILCS 200/15-86

    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

 

HB1751LRB102 13582 HLH 18930 b

1    AN ACT concerning revenue.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Property Tax Code is amended by changing
5Section 15-86 as follows:
 
6    (35 ILCS 200/15-86)
7    Sec. 15-86. Exemptions related to access to hospital and
8health care services by low-income and underserved
9individuals.
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
11    the modern face of our nation's health care delivery
12    systems". The court noted the many significant changes in
13    the health care system since that time, but concluded that
14    taking these changes into account is a matter of public
15    policy, and "it is the legislature's job, not ours, to
16    make public 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
3following 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
17    with one or more hospital owners and that supports, is
18    supported by, or acts in furtherance of the exempt health
19    care 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
6    property tax exemption pursuant to Section 15-5 and this
7    Section.
8        (7) "Relevant hospital entity" means (A) the hospital
9    owner, in the case of a hospital applicant that is a
10    hospital owner, and (B) at the election of a hospital
11    applicant that is a hospital affiliate, either (i) the
12    hospital affiliate or (ii) the hospital system to which
13    the hospital applicant belongs, including any hospitals or
14    hospital affiliates that are related by common control or
15    ownership.
16        (8) "Subject property" means property for which a
17    hospital applicant files an application for an exemption
18    pursuant to Section 15-5 and this Section.
19        (9) "Hospital year" means the fiscal year of the
20    relevant hospital entity, or the fiscal year of one of the
21    hospital owners in the hospital system if the relevant
22    hospital entity is a hospital system with members with
23    different fiscal years, that ends in the year for which
24    the exemption is sought.
25    (c) A hospital applicant satisfies the conditions for an
26exemption under this Section with respect to the subject

 

 

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1property, and shall be issued a charitable exemption for that
2property, if the value of services or activities listed in
3subsection (e) for the hospital year equals or exceeds the
4relevant hospital entity's estimated property tax liability,
5as determined under subsection (g), for the year for which
6exemption is sought. For purposes of making the calculations
7required by this subsection (c), if the relevant hospital
8entity is a hospital owner that owns more than one hospital,
9the value of the services or activities listed in subsection
10(e) shall be calculated on the basis of only those services and
11activities relating to the hospital that includes the subject
12property, and the relevant hospital entity's estimated
13property tax liability shall be calculated only with respect
14to the properties comprising that hospital. In the case of a
15multi-state hospital system or hospital affiliate, the value
16of the services or activities listed in subsection (e) shall
17be calculated on the basis of only those services and
18activities that occur in Illinois and the relevant hospital
19entity's estimated property tax liability shall be calculated
20only with respect to its property located in Illinois.
21    Notwithstanding any other provisions of this Act, any
22parcel or portion thereof, that is owned by a for-profit
23entity whether part of the hospital system or not, or that is
24leased, licensed or operated by a for-profit entity regardless
25of whether healthcare services are provided on that parcel
26shall not qualify for exemption. If a parcel has both exempt

 

 

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1and non-exempt uses, an exemption may be granted for the
2qualifying portion of that parcel. In the case of parking lots
3and common areas serving both exempt and non-exempt uses those
4parcels or portions thereof may qualify for an exemption in
5proportion to the amount of qualifying use.
6    (d) The hospital applicant shall include information in
7its exemption application establishing that it satisfies the
8requirements of subsection (c). For purposes of making the
9calculations required by subsection (c), the hospital
10applicant may for each year elect to use either (1) the value
11of the services or activities listed in subsection (e) for the
12hospital year or (2) the average value of those services or
13activities for the 3 fiscal years ending with the hospital
14year. If the relevant hospital entity has been in operation
15for less than 3 completed fiscal years, then the latter
16calculation, if elected, shall be performed on a pro rata
17basis.
18    (e) Services that address the health care needs of
19low-income or underserved individuals or relieve the burden of
20government with regard to health care services. The following
21services and activities shall be considered for purposes of
22making the calculations required by subsection (c):
23        (1) Charity care. Free or discounted services provided
24    pursuant to the relevant hospital entity's financial
25    assistance policy, measured at cost, including discounts
26    provided under the Hospital Uninsured Patient Discount

 

 

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1    Act.
2        (2) Health services to low-income and underserved
3    individuals. Other unreimbursed costs of the relevant
4    hospital entity for providing without charge, paying for,
5    or subsidizing goods, activities, or services for the
6    purpose of addressing the health of low-income or
7    underserved individuals. Those activities or services may
8    include, but are not limited to: financial or in-kind
9    support to affiliated or unaffiliated hospitals, hospital
10    affiliates, community clinics, or programs that treat
11    low-income or underserved individuals; paying for or
12    subsidizing health care professionals who care for
13    low-income or underserved individuals; providing or
14    subsidizing outreach or educational services to low-income
15    or underserved individuals for disease management and
16    prevention; free or subsidized goods, supplies, or
17    services needed by low-income or underserved individuals
18    because of their medical condition; and prenatal or
19    childbirth outreach to low-income or underserved persons.
20        (3) Subsidy of State or local governments. Direct or
21    indirect financial or in-kind subsidies of State or local
22    governments by the relevant hospital entity that pay for
23    or subsidize activities or programs related to health care
24    for low-income or underserved individuals.
25        (4) Support for State health care programs for
26    low-income individuals. At the election of the hospital

 

 

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1    applicant for each applicable year, either (A) 10% of
2    payments to the relevant hospital entity and any hospital
3    affiliate designated by the relevant hospital entity
4    (provided that such hospital affiliate's operations
5    provide financial or operational support for or receive
6    financial or operational support from the relevant
7    hospital entity) under Medicaid or other means-tested
8    programs, including, but not limited to, General
9    Assistance, the Covering ALL KIDS Health Insurance Act,
10    and the State Children's Health Insurance Program or (B)
11    the amount of subsidy provided by the relevant hospital
12    entity and any hospital affiliate designated by the
13    relevant hospital entity (provided that such hospital
14    affiliate's operations provide financial or operational
15    support for or receive financial or operational support
16    from the relevant hospital entity) to State or local
17    government in treating Medicaid recipients and recipients
18    of means-tested programs, including but not limited to
19    General Assistance, the Covering ALL KIDS Health Insurance
20    Act, and the State Children's Health Insurance Program.
21    The amount of subsidy for purposes of this item (4) is
22    calculated in the same manner as unreimbursed costs are
23    calculated for Medicaid and other means-tested government
24    programs in the Schedule H of IRS Form 990 in effect on the
25    effective date of this amendatory Act of the 97th General
26    Assembly; provided, however, that in any event

 

 

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1    unreimbursed costs shall be net of fee-for-services
2    payments, payments pursuant to an assessment, quarterly
3    payments, and all other payments included on the schedule
4    H of the IRS form 990.
5        (5) Dual-eligible subsidy. The amount of subsidy
6    provided to government by treating dual-eligible
7    Medicare/Medicaid patients. The amount of subsidy for
8    purposes of this item (5) is calculated by multiplying the
9    relevant hospital entity's unreimbursed costs for
10    Medicare, calculated in the same manner as determined in
11    the Schedule H of IRS Form 990 in effect on the effective
12    date of this amendatory Act of the 97th General Assembly,
13    by the relevant hospital entity's ratio of dual-eligible
14    patients to total Medicare patients.
15        (6) Relief of the burden of government related to
16    health care of low-income individuals. Except to the
17    extent otherwise taken into account in this subsection,
18    the portion of unreimbursed costs of the relevant hospital
19    entity attributable to providing, paying for, or
20    subsidizing goods, activities, or services that relieve
21    the burden of government related to health care for
22    low-income individuals. Such activities or services shall
23    include, but are not limited to, providing emergency,
24    trauma, burn, neonatal, psychiatric, rehabilitation,
25    ambulance transport, or other special services; providing
26    medical education; and conducting medical research or

 

 

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1    training of health care professionals. The portion of
2    those unreimbursed costs attributable to benefiting
3    low-income individuals shall be determined using the ratio
4    calculated by adding the relevant hospital entity's costs
5    attributable to charity care, Medicaid, other means-tested
6    government programs, Medicare patients with disabilities
7    under age 65, and dual-eligible Medicare/Medicaid patients
8    and dividing that total by the relevant hospital entity's
9    total costs. Such costs for the numerator and denominator
10    shall be determined by multiplying gross charges by the
11    cost to charge ratio taken from the hospitals' most
12    recently filed Medicare cost report (CMS 2252-10 Worksheet
13    C, Part I). In the case of emergency services, the ratio
14    shall be calculated using costs (gross charges multiplied
15    by the cost to charge ratio taken from the hospitals' most
16    recently filed Medicare cost report (CMS 2252-10 Worksheet
17    C, Part I)) of patients treated in the relevant hospital
18    entity's emergency department.
19        (7) Any other activity by the relevant hospital entity
20    that the Department determines relieves the burden of
21    government or addresses the health of low-income or
22    underserved individuals.
23    (f) For purposes of making the calculations required by
24subsections (c) and (e):
25        (1) particular services or activities eligible for
26    consideration under any of the paragraphs (1) through (7)

 

 

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1    of subsection (e) may not be counted under more than one of
2    those paragraphs; and
3        (2) the amount of unreimbursed costs and the amount of
4    subsidy shall not be reduced by restricted or unrestricted
5    payments received by the relevant hospital entity as
6    contributions deductible under Section 170(a) of the
7    Internal Revenue Code.
8    (g) Estimation of Exempt Property Tax Liability. The
9estimated property tax liability used for the determination in
10subsection (c) shall be calculated as follows:
11        (1) "Estimated property tax liability" means the
12    estimated dollar amount of property tax that would be
13    owed, with respect to the exempt portion of each of the
14    relevant hospital entity's properties that are already
15    fully or partially exempt, or for which an exemption in
16    whole or in part is currently being sought, and then
17    aggregated as applicable, as if the exempt portion of
18    those properties were subject to tax, calculated with
19    respect to each such property by multiplying:
20            (A) the lesser of (i) the actual assessed value,
21        if any, of the portion of the property for which an
22        exemption is sought or (ii) an estimated assessed
23        value of the exempt portion of such property as
24        determined in item (2) of this subsection (g), by:
25            (B) the applicable State equalization rate
26        (yielding the equalized assessed value), by

 

 

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1            (C) the applicable tax rate.
2        (2) The estimated assessed value of the exempt portion
3    of the property equals the sum of (i) the estimated fair
4    market value of buildings on the property, as determined
5    in accordance with subparagraphs (A) and (B) of this item
6    (2), multiplied by the applicable assessment factor, and
7    (ii) the estimated assessed value of the land portion of
8    the property, as determined in accordance with
9    subparagraph (C).
10            (A) The "estimated fair market value of buildings
11        on the property" means the replacement value of any
12        exempt portion of buildings on the property, minus
13        depreciation, determined utilizing the cost
14        replacement method whereby the exempt square footage
15        of all such buildings is multiplied by the replacement
16        cost per square foot for Class A Average building
17        found in the most recent edition of the Marshall &
18        Swift Valuation Services Manual, adjusted by any
19        appropriate current cost and local multipliers.
20            (B) Depreciation, for purposes of calculating the
21        estimated fair market value of buildings on the
22        property, is applied by utilizing a weighted mean life
23        for the buildings based on original construction and
24        assuming a 40-year life for hospital buildings and the
25        applicable life for other types of buildings as
26        specified in the American Hospital Association

 

 

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1        publication "Estimated Useful Lives of Depreciable
2        Hospital Assets". In the case of hospital buildings,
3        the remaining life is divided by 40 and this ratio is
4        multiplied by the replacement cost of the buildings to
5        obtain an estimated fair market value of buildings. If
6        a hospital building is older than 35 years, a
7        remaining life of 5 years for residual value is
8        assumed; and if a building is less than 8 years old, a
9        remaining life of 32 years is assumed.
10            (C) The estimated assessed value of the land
11        portion of the property shall be determined by
12        multiplying (i) the per square foot average of the
13        assessed values of three parcels of land (not
14        including farm land, and excluding the assessed value
15        of the improvements thereon) reasonably comparable to
16        the property, by (ii) the number of square feet
17        comprising the exempt portion of the property's land
18        square footage.
19        (3) The assessment factor, State equalization rate,
20    and tax rate (including any special factors such as
21    Enterprise Zones) used in calculating the estimated
22    property tax liability shall be for the most recent year
23    that is publicly available from the applicable chief
24    county assessment officer or officers at least 90 days
25    before the end of the hospital year.
26        (4) The method utilized to calculate estimated

 

 

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1    property tax liability for purposes of this Section 15-86
2    shall not be utilized for the actual valuation,
3    assessment, or taxation of property pursuant to the
4    Property Tax Code.
5    (h) Application. Each hospital applicant applying for a
6property tax exemption pursuant to Section 15-5 and this
7Section shall use an application form provided by the
8Department. The application form shall specify the records
9required in support of the application and those records shall
10be submitted to the Department with the application form. Each
11application or affidavit shall contain a verification by the
12Chief Executive Officer of the hospital applicant under oath
13or affirmation stating that each statement in the application
14or affidavit and each document submitted with the application
15or affidavit are true and correct. The records submitted with
16the application pursuant to this Section shall include an
17exhibit prepared by the relevant hospital entity showing (A)
18the value of the relevant hospital entity's services and
19activities, if any, under paragraphs (1) through (7) of
20subsection (e) of this Section stated separately for each
21paragraph, and (B) the value relating to the relevant hospital
22entity's estimated property tax liability under subsections
23(g)(1)(A), (B), and (C), subsections (g)(2)(A), (B), and (C),
24and subsection (g)(3) of this Section stated separately for
25each item. Such exhibit will be made available to the public by
26the chief county assessment officer. Nothing in this Section

 

 

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1shall be construed as limiting the Attorney General's
2authority under the Illinois False Claims Act.
3    (i) Nothing in this Section shall be construed to limit
4the ability of otherwise eligible hospitals, hospital owners,
5hospital affiliates, or hospital systems to obtain or maintain
6property tax exemptions pursuant to a provision of the
7Property Tax Code other than this Section.
8(Source: P.A. 99-143, eff. 7-27-15.)
 
9    Section 99. Effective date. This Act takes effect upon
10becoming law.