Wednesday, April 18, 2012
As reported by the Daily Tax Report, Fitch Ratings, a global rating agency, released a report entitled Illinois Property Tax Exemption Battle, in which the rating agency concluded that the Illinois Department of Revenue's current enforcement stance on the property tax exemptions of Illinois nonprofit hospitals is a "negative credit development" for certain of these hospitals. As previously blogged, Illinois Governor Quinn lifted a moratorium on nonprofit hospital exemption cases last month. Essentially, according to the report, a nonprofit hospital's loss of tax exemption, along with current operational challenges, could "negatively affect" the hospitals' creditworthiness. The report opines that certain "lower rated entities will have a limited ability to absorb an additional expense in the form of a property tax."
The report acknowledges that this tax-exemption challenge is not limited to Illinois, mentioning an Ohio nonprofit dialysis clinic [Dialysis Clinic, Inc. v. Levin, see previous blog] that, similar to Provena Covenant Medical Center in Illinois, lost its property tax exemption due to insufficient provision of charity care. The Ohio Supreme Court upheld revocation of the clinic's property tax exemption. The Court noted that the Ohio test for exemption was narrower than the “community benefit” test of federal law, but did not find that a minimum amount of charity care is required. Rather, in Ohio, an exemption is granted if services are provided “on a nonprofit basis to those in need, without regard to race, creed, or ability to pay.”
Whether the Fitch report will impact the ongoing Illinois debate on hospitals' property tax exemption is unclear. The spokesman for the Illinois Hospital Association is nevertheless "hopeful that a legislative solution can be enacted" in the upcoming General Assembly session.