Illinois Set to Finalize New Charity Care, Tax Exemption Regulations for Hospitals

The Illinois Senate has approved two bills that define criteria for hospitals to qualify for property tax exemptions and what qualifies as charitable care.

Senate Bill 2194 passed on a 31 to 27 Senate vote after passing the House 60 to 52. The bill both establishes criteria for property and sales tax exemptions for non-profit hospitals and establishes an income tax credit for for-profit hospitals.

In order to qualify for the property tax exemption, non-profit hospitals must provide charity care that equals or exceeds the estimated value of a hospital's property tax exemption, which is calculated using a formula based on fair market value. For example, if a hospital's property tax assessment is valued at $15 million, that hospital must provide at least $15 million in charity care.

However, the bill also expands the definition of charity care. Charity care includes free and discounted hospital care for the uninsured and poor populations, subsidizing physicians that treat low-income patients, Medicaid shortfalls and several other charitable activities. Previously, charity care only included care for indigent populations.


Last August, the Illinois Department of Revenue denied the property tax-exempt status of Northwestern Memorial's Prentice Women's Hospital in Chicago, Edward Hospital in Naperville and Decatur (Ill.) Memorial Hospital based on their low levels of charity care, which prompted the discussion of hospital property tax reform.

For-profit hospitals would receive an income tax credit for the "lesser of property taxes paid or free and discounted care delivered pursuant to the hospital's financial assistance policy," according to the Illinois Hospital Association.

Another main pillar of SB2194 was the $1-per-pack tax increase on cigarettes, which is expected to generate $700 million for Illinois' Medicaid program. An enhanced hospital assessment program was also included and is expected to raise more than $240 million in federal matches for Medicaid.

SB3261 amends a previous charity care law that will require Illinois hospitals to provide medically necessary charity care to individuals with family income of up to 200 percent of the federal poverty level in urban areas and up to 125 percent of the FPL in rural areas.

Democratic Gov. Pat Quinn supports the bills and is expected to sign them.

More Articles on Illinois Hospitals:

Illinois House Passes Tax Credit Bill for Hospitals

Illinois to Resume Reviews of Non-Profit Hospitals' Tax-Exempt Statuses

Illinois Department of Revenue Denies Tax-Exempt Status to 3 Illinois Hospitals

© Copyright ASC COMMUNICATIONS 2020. Interested in LINKING to or REPRINTING this content? View our policies by clicking here.