Court of Appeals of Illinois, First District, Fourth Division
from the Circuit Court Cook County. No. 12 CH 42723 Honorable
Robert Lopez Cepero, Judge Presiding.
JUSTICE McBRIDE delivered the judgment of the court, with
opinion. Justices Howse and Rochford concurred in the
judgment and opinion.
1 On appeal, plaintiff Constance Oswald, as a Cook County
real property taxpayer, argues that section 15-86 of the
Property Tax Code (Code) (35 ILCS 200/15-86 (West 2012)) is
unconstitutional on its face because section 15-86(c)
purports to grant a property tax exemption to a hospital
applicant without regard to whether the property is used
exclusively for charitable purposes, as required under
article IX, section 6, of the Illinois Constitution (Ill.
Const. 1970, art. IX, § 6).
2 In November 2012, plaintiff filed an action for declaratory
judgment in the trial court, challenging the
constitutionality of section 15-86. Section 15-86 details the
process to seek a property tax exemption for certain Illinois
hospitals and their affiliates. Plaintiff asserted that
section 15-86 violates article IX, section 6, of the Illinois
Constitution and, therefore, was unconstitutional on its
face. Following cross-motions for summary judgment, the trial
court granted summary judgment in favor of defendants, Brian
Hamer, as Director of Revenue, and the Illinois Department of
Revenue (collectively "the Department"), and
intervening defendant, the Illinois Hospital Association,
finding that section 15-86 was not facially unconstitutional.
3 There is no factual dispute in this case. The only issue
before this court, whether section 15-86 is facially
constitutional, is purely a question of law. We review a
statute's constitutionality de novo. People ex rel.
Birkett v. Konetski, 233 Ill.2d 185, 200 (2009).
4 "Under Illinois law, taxation is the rule. Tax
exemption is the exception." Provena Covenant
Medical Center v. Department of Revenue, 236 Ill.2d 368,
388 (2010) (plurality opinion). Article IX of the Illinois
Constitution "generally subjects all real property to
taxation." Eden Retirement Center, Inc. v.
Department of Revenue, 213 Ill.2d 273, 285 (2004).
"[T]he state's inherent power to tax is vested in
the General Assembly. The legislature's power to tax is
plenary; it is restricted only by the federal and state
constitutions." Id. "The Illinois
Constitution does not grant power to the legislature, but
rather restricts the legislature's power to act."
Id. at 284.
5 Article IX, section 6, of the constitution provides, in
"The General Assembly by law may exempt from taxation
only the property of the State, units of local government and
school districts and property used exclusively for
agricultural and horticultural societies, and for school,
religious, cemetery and charitable purposes." Ill.
Const. 1970, art. IX, § 6.
6 "Section 6 is not self-executing. It merely authorizes
the General Assembly to enact legislation exempting certain
property from taxation." Provena, 236 Ill.2d at
389. "By designating the classes of property which may
be exempted from taxation, section 6 of article IX has placed
a restriction on the legislature's authority to
exempt." Chicago Bar Ass'n v. Department of
Revenue, 163 Ill.2d 290, 297 (1994). "Accordingly,
a property tax exemption created by statute cannot be broader
than the provisions of the constitution, and no property
except that mentioned in the exemption provisions of the
constitution can be exempted by any laws passed by the
legislature." Id. "While the General
Assembly has no authority to grant exemptions beyond those
authorized by section 6, it 'may place restrictions,
limitations, and conditions on [property tax] exemptions as
may be proper by general law.' " Provena,
236 Ill.2d at 390 (quoting North Shore Post No. 21 of the
American Legion v. Korzen, 38 Ill.2d 231, 233, (1967)).
7 "One class of property that the legislature may exempt
from taxation is property used for charitable purposes.
Charitable use is a constitutional requirement. An
applicant for a charitable-use property tax exemption must
'comply unequivocally with the constitutional requirement
of exclusive charitable use.' " (Emphasis in
original.) Eden, 213 Ill.2d at 286-87 (quoting
Small v. Pangle, 60 Ill.2d 510, 516 (1975)).
Illinois courts have held that a "property satisfies the
exclusive-use requirement for tax exemption purposes if it is
primarily used for the exempted purpose."
(Emphasis in original.) Chicago Bar Ass'n, 163
Ill.2d at 300. Illinois courts have also concluded that
"a 'hospital not owned by the State or any other
municipal corporation, but which is open to all persons,
regardless of race, creed or financial ability, '
qualifies as a charitable institution under Illinois law
provided certain conditions are satisfied."
Provena, 236 Ill.2d at 391 (quoting People ex
rel. Cannon v. Southern Illinois Hospital Corp., 404
Ill. 66, 69-70 (1949)). "There is, however, no blanket
exemption under the law for hospitals or health-care
providers. Whether a particular institution qualifies as a
charitable institution and is exempt from property tax is a
question which must be determined on a case-by-case
8 The Illinois Supreme Court first found not-for-profit
hospitals to qualify for charitable property tax exemptions
in the 1907 decision of Sisters of the Third Order of St.
Francis v. Board of Review, 231 Ill. 317 (1907). In that
case, the supreme court held that the hospital was an
institution of public charity under a statutory predecessor
to section 15-65, which granted property tax exemption to
" '[a]ll property of institutions of public charity,
when actually and exclusively used for such charitable
purposes, not leased or otherwise used with a view to
profit.' " Id. at 319 (quoting Ill. Rev.
Stat. 1905, ch. 120, ¶ 2). The court discussed the
purpose and work of the hospital as an institution of public
"In this hospital charity is extended to all the members
of the community and is not confined to any particular class
of individuals. It is an institution of public charity, and
where an institution devoted to beneficence of that character
is, under the law, exempt from taxation, it does not lose its
immunity by reason of the fact that those patients received
by it who are able to pay are required to do so, or by reason
of the fact that it receives contributions from outside
sources, so long as all the money received by it is devoted
to the general purposes of the charity, and no portion of the
money received by it is permitted to inure to the benefit of
any private individual engaged in managing the charity."
Id. at 320-21.
9 The court rejected an argument about the disparity between
the number of charity patients in comparison with the number
of patients who paid for service.
"This objection seems to us without merit, so long as
charity was dispensed to all those who needed it and who
applied therefor, and so long as no private gain or profit
came to any person connected with the institution, and so
long as it does not appear that any obstacle, of any
character, was by the corporation placed in the way of those
who might need charity of the kind dispensed by this
institution, calculated to prevent such persons making
application to or obtaining admission to the hospital. The
institution could not extend its benefactions to those who
did not need them, or to those who did not seek
admission." Id. at 322.
10 Nearly a century later in Provena, the supreme
court considered whether a hospital was entitled to the
charitable property tax exemption under section 15-65 of the
Code (35 ILCS 200/15-65 (West 2002)). Section 15-65 granted
property tax exemption for institutions of public charity for
the subject property "when actually and exclusively used
for charitable or beneficent purposes." 35 ILCS
200/15-65(a) (West 2002). With two justices recusing, the
majority of the court concluded that the hospital failed to
establish by clear and convincing evidence that it satisfied
the requirements for the statutory charitable institution
exemption. Provena, 236 Ill.2d at 393. Specifically,
the hospital failed to establish that "it dispensed
charity to all who needed it and applied for it and did not
appear to place any obstacles in the way of those who needed
and would have availed themselves of the charitable benefits
it dispenses." Id.
11 The supreme court explained the rationale behind providing
exemptions for charitable institutions.
"Conditioning charitable status on whether an activity
helps relieve the burdens on government is appropriate. After
all, each tax dollar lost to a charitable exemption is one
less dollar affected governmental bodies will have to meet
their obligations directly. If a charitable institution
wishes to avail itself of funds which would otherwise flow
into a public treasury, it is only fitting that the
institution provide some compensatory benefit in exchange.
While Illinois law has never required that there be a direct,
dollar-for-dollar correlation between the value of the tax
exemption and the value of the goods or services provided by
the charity, it is a sine qua non of charitable
status that those seeking a charitable exemption be able to
demonstrate that their activities will help alleviate some
financial burden incurred by the affected taxing bodies in
performing their governmental functions." Id.
12 However, the justices disagreed on the question of
charitable use. Id. at 412 (Burke, J., concurring in
part and dissenting in part, joined by Freeman, J.). The
plurality of the court found the hospital's charitable
care was de minimis, as the evidence presented
failed to show that the hospital used the property at issue
"actually and exclusively for charitable purposes."
Id. at 397 (plurality opinion). The plurality
observed that while the hospital did not turn anyone away for
treatment, it did not advertise its charity services and
billed patients as a matter of course. Unpaid bills were
referred to collection agencies. Discounts or waivers in
costs were only made after it was established that the
patient lacked private insurance, did not have Medicare or
Medicaid, lacked the ability to pay, and had qualified for
the hospital's charity program. Id. at 398. The
court had observed that in 2002, the hospital had
"waived $1, 758, 940 in charges, representing an actual
cost to it of only $831, 724. This was equivalent to only
0.723% of PCMC's revenues for that year and was $268, 276
less than the $1.1 million in tax benefits which [the
hospital] stood to receive if its claim for a property tax
exemption were granted." Id. at 381.
"[B]oth the number of uninsured patients receiving free
or discounted care and the dollar value of the care they
received were [de minimis]. With very limited
exception, the property was devoted to the care and treatment
of patients in exchange for compensation through private
insurance, Medicare and Medicaid, or direct payment from the
patient or the patient's family." Id. at
13 Justice Burke dissented on the issue of charitable use,
joined by Justice Freeman. In her dissent, Justice Burke
wrote, "By imposing a quantum of care requirement and
monetary threshold, the plurality is injecting itself into
matters best left to the legislature." Id. at
412 (Burke, J., concurring in part and ...