Illinois General Assembly - Full Text of SB1819
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Full Text of SB1819  103rd General Assembly




State of Illinois
2023 and 2024


Introduced 2/9/2023, by Sen. Ann Gillespie


35 ILCS 200/15-86
210 ILCS 76/10
210 ILCS 76/20

    Amends the Property Tax Code. Provides that the assessor shall publish the assessed value of all property that qualifies for a hospital exemption under the Code in the taxable year as well as the estimated property tax liability for that property. Amends the Community Benefits Act. Makes changes to the definition of "charity care." Provides that the Attorney General shall post certain reports on the Attorney General's website.

LRB103 29266 HLH 57052 b





SB1819LRB103 29266 HLH 57052 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
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
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 services to low-income or underserved
20    persons.
21        (3) Subsidy of State or local governments. Direct or
22    indirect financial or in-kind subsidies of State or local
23    governments by the relevant hospital entity that pay for
24    or subsidize activities or programs related to health care
25    for low-income or underserved individuals.
26        (4) Support for State health care programs for



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



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



SB1819- 11 -LRB103 29266 HLH 57052 b

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



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



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



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



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1        (4) The method utilized to calculate estimated
2    property tax liability for purposes of this Section 15-86
3    shall not be utilized for the actual valuation,
4    assessment, or taxation of property pursuant to the
5    Property Tax Code.
6    (h) Application. Each hospital applicant applying for a
7property tax exemption pursuant to Section 15-5 and this
8Section shall use an application form provided by the
9Department. The application form shall specify the records
10required in support of the application and those records shall
11be submitted to the Department with the application form. Each
12application or affidavit shall contain a verification by the
13Chief Executive Officer of the hospital applicant under oath
14or affirmation stating that each statement in the application
15or affidavit and each document submitted with the application
16or affidavit are true and correct. The records submitted with
17the application pursuant to this Section shall include an
18exhibit prepared by the relevant hospital entity showing (A)
19the value of the relevant hospital entity's services and
20activities, if any, under paragraphs (1) through (7) of
21subsection (e) of this Section stated separately for each
22paragraph, and (B) the value relating to the relevant hospital
23entity's estimated property tax liability under subsections
24(g)(1)(A), (B), and (C), subsections (g)(2)(A), (B), and (C),
25and subsection (g)(3) of this Section stated separately for
26each item. Such exhibit will be made available to the public by



SB1819- 16 -LRB103 29266 HLH 57052 b

1the chief county assessment officer. Nothing in this Section
2shall be construed as limiting the Attorney General's
3authority under the Illinois False Claims Act.
4    (i) Nothing in this Section shall be construed to limit
5the ability of otherwise eligible hospitals, hospital owners,
6hospital affiliates, or hospital systems to obtain or maintain
7property tax exemptions pursuant to a provision of the
8Property Tax Code other than this Section.
9    (j) Notwithstanding any other provision of law, at least
10once per year, the assessor shall publish, on the assessor's
11website and in a newspaper of general circulation in the
12county where the property is located, the assessed value of
13all property that qualifies for an exemption under this
14Section in the taxable year, as well as the estimated property
15tax liability for that property.
16(Source: P.A. 99-143, eff. 7-27-15.)
17    Section 10. The Community Benefits Act is amended by
18changing Sections 10 and 20 as follows:
19    (210 ILCS 76/10)
20    Sec. 10. Definitions. As used in this Act:
21    "Bad debt" means the current period charge for actual or
22expected doubtful accounting resulting from the extension of
24    "Charity care" means the delivery of health care services



SB1819- 17 -LRB103 29266 HLH 57052 b

1for free or at a reduced cost to poor and low-income
2individuals who could not otherwise afford the health care
3they are receiving. care provided by a health care provider
4for which the provider does not expect to receive payment from
5the patient or a third party payer. "Charity care" includes
6the actual cost of services provided based upon the total cost
7to charge ratio derived from a nonprofit hospital's most
8recently filed Medicare cost report Worksheet C and not based
9upon the charges for the services. "Charity care" does not
10include bad debt.
11    "Community benefits" means the unreimbursed cost to a
12hospital or health system of providing charity care, language
13assistant services, government-sponsored health care,
14donations, volunteer services, education,
15government-sponsored program services, research, and
16subsidized health services and collecting bad debts.
17"Community benefits" does not include the cost of paying any
18taxes or other governmental assessments.
19    "Financial assistance" means a discount provided to a
20patient under the terms and conditions the hospital offers to
21qualified patients or as required by law.
22    "Government-sponsored health care" means the unreimbursed
23cost to a hospital or health system of Medicare, providing
24health care services to recipients of Medicaid, and other
25federal, State, or local health care programs, eligibility for
26which is based on financial need.



SB1819- 18 -LRB103 29266 HLH 57052 b

1    "Health system" means an entity that owns or operates at
2least one hospital.
3    "Net patient revenue" means gross service revenue less
4provisions for contractual adjustments with third-party
5payors, courtesy and policy discounts, or other adjustments
6and deductions, excluding charity care.
7    "Nonprofit hospital" means a hospital that is organized as
8a nonprofit corporation, including religious organizations, or
9a charitable trust under Illinois law or the laws of any other
10state or country.
11    "Subsidized health services" means those services provided
12by a hospital in response to community needs for which the
13reimbursement is less than the hospital's cost of providing
14the services that must be subsidized by other hospital or
15nonprofit supporting entity revenue sources. "Subsidized
16health services" includes, but is not limited to, emergency
17and trauma care, neonatal intensive care, community health
18clinics, and collaborative efforts with local government or
19private agencies to prevent illness and improve wellness, such
20as immunization programs.
21(Source: P.A. 102-581, eff. 1-1-22.)
22    (210 ILCS 76/20)
23    Sec. 20. Annual report for community benefits plan.
24    (a) Each nonprofit hospital shall prepare an annual report
25of the community benefits plan. The report must include, in



SB1819- 19 -LRB103 29266 HLH 57052 b

1addition to the community benefits plan itself, all of the
2following background information:
3        (1) The hospital's mission statement.
4        (2) A disclosure of the health care needs of the
5    community that were considered in developing the
6    hospital's community benefits plan.
7        (3) A disclosure of the amount and types of community
8    benefits actually provided, including charity care, and
9    details about financial assistance applications received
10    and processed by the hospital as specified in paragraph
11    (5) of subsection (a) of Section 22. Charity care must be
12    reported separate from other community benefits. In
13    reporting charity care, the hospital must report the
14    actual cost of services provided, based on the total cost
15    to charge ratio derived from the hospital's Medicare cost
16    report (CMS 2552-96 Worksheet C, Part 1, PPS Inpatient
17    Ratios), not the charges for the services. For a health
18    system that includes more than one hospital, charity care
19    spending and financial assistance application data must be
20    reported separately for each individual hospital within
21    the health system.
22        (4) Audited annual financial reports for its most
23    recently completed fiscal year.
24    (b) Each nonprofit hospital shall annually file a report
25of the community benefits plan with the Attorney General. The
26report must be filed not later than the last day of the sixth



SB1819- 20 -LRB103 29266 HLH 57052 b

1month after the close of the hospital's fiscal year, beginning
2with the hospital fiscal year that ends in 2004. Reports that
3are filed under this Section on or after the effective date of
4this amendatory Act of the 103rd General Assembly shall be
5posted on the Attorney General's website.
6    (c) Each nonprofit hospital shall prepare a statement that
7notifies the public that the annual report of the community
8benefits plan is:
9        (1) public information;
10        (2) filed with the Attorney General; and
11        (3) available to the public on request from the
12    Attorney General.
13    This statement shall be made available to the public.
14    (d) The obligations of a hospital under this Act, except
15for the filing of its audited financial report, shall take
16effect beginning with the hospital's fiscal year that begins
17after the effective date of this Act. Within 60 days of the
18effective date of this Act, a hospital shall file the audited
19annual financial report that has been completed for its most
20recently completed fiscal year. Thereafter, a hospital shall
21include its audited annual financial report for its most
22recently completed fiscal year in its annual report of its
23community benefits plan.
24(Source: P.A. 102-581, eff. 1-1-22.)