Bill Text: IL SB2955 | 2023-2024 | 103rd General Assembly | Introduced

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Bill Title: 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. Provides that general services, such as health fairs or the preparation and distribution of marketing materials, shall not qualify as a reimbursable cost when determining whether property qualifies for the hospital exemption. Provides that, when calculating the hospital exemption, discounts provided to managed care organizations or commercial insurers are not included unless those services are provided directly pursuant to a contract with the Department of Healthcare and Family Services. Provides that no more than 30% of the total services being claimed as a benefit may be related to residency programs or research. Provides that no more than 50% of the total services being claimed as a benefit may be related to government-sponsored health care. 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.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Introduced) 2024-04-15 - Chief Sponsor Changed to Sen. Don Harmon [SB2955 Detail]

Download: Illinois-2023-SB2955-Introduced.html

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103RD GENERAL ASSEMBLY State of Illinois 2023 and 2024 SB2955 Introduced 1/31/2024, by Sen. Ann Gillespie SYNOPSIS AS INTRODUCED:
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. Provides that general services, such as health fairs or the preparation and distribution of marketing materials, shall not qualify as a reimbursable cost when determining whether property qualifies for the hospital exemption. Provides that, when calculating the hospital exemption, discounts provided to managed care organizations or commercial insurers are not included unless those services are provided directly pursuant to a contract with the Department of Healthcare and Family Services. Provides that no more than 30% of the total services being claimed as a benefit may be related to residency programs or research. Provides that no more than 50% of the total services being claimed as a benefit may be related to government-sponsored health care. 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.
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A BILL FOR
SB2955 LRB103 38486 HLH 68622 b
AN ACT concerning revenue.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 5. The Property Tax Code is amended by changing
Section 15-86 as follows:
(35 ILCS 200/15-86)
Sec. 15-86. Exemptions related to access to hospital and
health care services by low-income and underserved
individuals.
(a) The General Assembly finds:
(1) (Blank). Despite the Supreme Court's decision in
Provena Covenant Medical Center v. Dept. of Revenue, 236
Ill.2d 368, there is considerable uncertainty surrounding
the test for charitable property tax exemption, especially
regarding the application of a quantitative or monetary
threshold. In Provena, the Department stated that the
primary basis for its decision was the hospital's
inadequate amount of charitable activity, but the
Department has not articulated what constitutes an
adequate amount of charitable activity. After Provena, the
Department denied property tax exemption applications of 3
more hospitals, and, on the effective date of this
amendatory Act of the 97th General Assembly, at least 20

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other hospitals are awaiting rulings on applications for
property tax exemption.
(2) (Blank). In Provena, two Illinois Supreme Court
justices opined that "setting a monetary or quantum
standard is a complex decision which should be left to our
legislature, should it so choose". The Appellate Court in
Provena stated: "The language we use in the State of
Illinois to determine whether real property is used for a
charitable purpose has its genesis in our 1870
Constitution. It is obvious that such language may be
difficult to apply to the modern face of our nation's
health care delivery systems". The court noted the many
significant changes in the health care system since that
time, but concluded that taking these changes into account
is a matter of public policy, and "it is the legislature's
job, not ours, to make public policy".
(3) It is essential to ensure that tax exemption law
relating to hospitals accounts for the complexities of the
modern health care delivery system. Health care is moving
beyond the walls of the hospital. In addition to treating
individual patients, hospitals are assuming responsibility
for improving the health status of communities and
populations. Low-income and underserved communities
benefit disproportionately by these activities.
(4) (Blank). The Supreme Court has explained that:
"the fundamental ground upon which all exemptions in favor

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of charitable institutions are based is the benefit
conferred upon the public by them, and a consequent
relief, to some extent, of the burden upon the state to
care for and advance the interests of its citizens".
Hospitals relieve the burden of government in many ways,
but most significantly through their participation in and
substantial financial subsidization of the Illinois
Medicaid program, which could not operate without the
participation and partnership of Illinois hospitals.
(5) Working with the Illinois hospital community and
other interested parties, the General Assembly has
developed a comprehensive combination of related
legislation that addresses hospital property tax
exemption, significantly increases access to free health
care for indigent persons, and strengthens the Medical
Assistance program. It is the intent of the General
Assembly to establish a new category of ownership for
charitable property tax exemption to be applied to
not-for-profit hospitals and hospital affiliates in lieu
of the existing ownership category of "institutions of
public charity". It is also the intent of the General
Assembly to establish quantifiable standards for the
issuance of charitable exemptions for such property. It is
not the intent of the General Assembly to declare any
property exempt ipso facto, but rather to establish
criteria to be applied to the facts on a case-by-case

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basis.
(b) For the purpose of this Section and Section 15-10, the
following terms shall have the meanings set forth below:
(1) "Hospital" means any institution, place, building,
buildings on a campus, or other health care facility
located in Illinois that is licensed under the Hospital
Licensing Act and has a hospital owner.
(2) "Hospital owner" means a not-for-profit
corporation that is the titleholder of a hospital, or the
owner of the beneficial interest in an Illinois land trust
that is the titleholder of a hospital.
(3) "Hospital affiliate" means any corporation,
partnership, limited partnership, joint venture, limited
liability company, association or other organization,
other than a hospital owner, that directly or indirectly
controls, is controlled by, or is under common control
with one or more hospital owners and that supports, is
supported by, or acts in furtherance of the exempt health
care purposes of at least one of those hospital owners'
hospitals.
(4) "Hospital system" means a hospital and one or more
other hospitals or hospital affiliates related by common
control or ownership.
(5) "Control" relating to hospital owners, hospital
affiliates, or hospital systems means possession, direct
or indirect, of the power to direct or cause the direction

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of the management and policies of the entity, whether
through ownership of assets, membership interest, other
voting or governance rights, by contract or otherwise.
(6) "Hospital applicant" means a hospital owner or
hospital affiliate that files an application for a
property tax exemption pursuant to Section 15-5 and this
Section.
(7) "Relevant hospital entity" means (A) the hospital
owner, in the case of a hospital applicant that is a
hospital owner, and (B) at the election of a hospital
applicant that is a hospital affiliate, either (i) the
hospital affiliate or (ii) the hospital system to which
the hospital applicant belongs, including any hospitals or
hospital affiliates that are related by common control or
ownership.
(8) "Subject property" means property for which a
hospital applicant files an application for an exemption
pursuant to Section 15-5 and this Section.
(9) "Hospital year" means the fiscal year of the
relevant hospital entity, or the fiscal year of one of the
hospital owners in the hospital system if the relevant
hospital entity is a hospital system with members with
different fiscal years, that ends in the year for which
the exemption is sought.
(c) A hospital applicant satisfies the conditions for an
exemption under this Section with respect to the subject

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

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

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Act.
(2) Health services to low-income and underserved
individuals. Other unreimbursed costs of the relevant
hospital entity for providing without charge, paying for,
or subsidizing goods, activities, or services for the
purpose of addressing the health of low-income or
underserved individuals. Those activities or services may
include, but are not limited to: financial or in-kind
support to affiliated or unaffiliated hospitals, hospital
affiliates, community clinics, or programs that treat
low-income or underserved individuals; paying for or
subsidizing health care professionals who care for
low-income or underserved individuals; providing or
subsidizing outreach or educational services to low-income
or underserved individuals for disease management and
prevention; free or subsidized goods, supplies, or
services needed by low-income or underserved individuals
because of their medical condition; and prenatal or
childbirth outreach services to low-income or underserved
persons. General services, such as health fairs or the
preparation and distribution of marketing materials, shall
not qualify as reimbursable costs under this subsection.
(3) Subsidy of State or local governments. Direct or
indirect financial or in-kind subsidies of State or local
governments by the relevant hospital entity that pay for
or subsidize activities or programs related to health care

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for low-income or underserved individuals.
(4) Support for State health care programs for
low-income individuals. At the election of the hospital
applicant for each applicable year, either (A) 10% of
payments to the relevant hospital entity and any hospital
affiliate designated by the relevant hospital entity
(provided that such hospital affiliate's operations
provide financial or operational support for or receive
financial or operational support from the relevant
hospital entity) under Medicaid or other means-tested
programs, including, but not limited to, General
Assistance, the Covering ALL KIDS Health Insurance Act,
and the State Children's Health Insurance Program or (B)
the amount of subsidy provided by the relevant hospital
entity and any hospital affiliate designated by the
relevant hospital entity (provided that such hospital
affiliate's operations provide financial or operational
support for or receive financial or operational support
from the relevant hospital entity) to State or local
government in treating Medicaid recipients and recipients
of means-tested programs, including but not limited to
General Assistance, the Covering ALL KIDS Health Insurance
Act, and the State Children's Health Insurance Program.
The amount of subsidy for purposes of this item (4) is
calculated in the same manner as unreimbursed costs are
calculated for Medicaid and other means-tested government

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programs in the Schedule H of IRS Form 990 in effect on the
effective date of this amendatory Act of the 97th General
Assembly; provided, however, that in any event
unreimbursed costs shall be net of fee-for-services
payments, payments from managed care organizations,
payments pursuant to an assessment, quarterly payments,
and all other payments included on the schedule H of the
IRS form 990.
(5) Dual-eligible subsidy. The amount of subsidy
provided to government by treating dual-eligible
Medicare/Medicaid patients. The amount of subsidy for
purposes of this item (5) is calculated by multiplying the
relevant hospital entity's unreimbursed costs for
Medicare, calculated in the same manner as determined in
the Schedule H of IRS Form 990 in effect on the effective
date of this amendatory Act of the 97th General Assembly,
by the relevant hospital entity's ratio of dual-eligible
patients to total Medicare patients.
(6) Relief of the burden of government related to
health care of low-income individuals. Except to the
extent otherwise taken into account in this subsection,
the portion of unreimbursed costs of the relevant hospital
entity attributable to providing, paying for, or
subsidizing goods, activities, or services that relieve
the burden of government related to health care for
low-income individuals. Such activities or services shall

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include, but are not limited to, providing emergency,
trauma, burn, neonatal, psychiatric, rehabilitation, or
other special services; providing medical education; and
conducting medical research or training of health care
professionals. The portion of those unreimbursed costs
attributable to benefiting low-income individuals shall be
determined using the ratio calculated by adding the
relevant hospital entity's costs attributable to charity
care, Medicaid, other means-tested government programs,
Medicare patients with disabilities under age 65, and
dual-eligible Medicare/Medicaid patients and dividing that
total by the relevant hospital entity's total costs. Such
costs for the numerator and denominator shall be
determined by multiplying gross charges by the cost to
charge ratio taken from the hospitals' most recently filed
Medicare cost report (CMS 2252-10 Worksheet C, Part I). In
the case of emergency services, the ratio shall be
calculated using costs (gross charges multiplied by the
cost to charge ratio taken from the hospitals' most
recently filed Medicare cost report (CMS 2252-10 Worksheet
C, Part I)) of patients treated in the relevant hospital
entity's emergency department.
(7) Any other activity by the relevant hospital entity
that the Department determines relieves the burden of
government or addresses the health of low-income or
underserved individuals.

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(f) For purposes of making the calculations required by
subsections (c) and (e):
(1) particular services or activities eligible for
consideration under any of the paragraphs (1) through (7)
of subsection (e) may not be counted under more than one of
those paragraphs; and
(2) the amount of unreimbursed costs and the amount of
subsidy shall not be reduced by restricted or unrestricted
payments received by the relevant hospital entity as
contributions deductible under Section 170(a) of the
Internal Revenue Code; .
(3) discounts provided to managed care organizations
or commercial insurers shall not be included unless those
services are provided directly pursuant to a contract
between the managed care organization and the Department
of Healthcare and Family Services or the commercial
insurer and the Department of Healthcare and Family
Services;
(4) no more than 30% of the total services being
claimed as a benefit may be related to residency programs
or research; and
(5) no more than 50% of the total services being
claimed as a benefit may be related to
government-sponsored health care.
(g) Estimation of Exempt Property Tax Liability. The
estimated property tax liability used for the determination in

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subsection (c) shall be calculated as follows:
(1) "Estimated property tax liability" means the
estimated dollar amount of property tax that would be
owed, with respect to the exempt portion of each of the
relevant hospital entity's properties that are already
fully or partially exempt, or for which an exemption in
whole or in part is currently being sought, and then
aggregated as applicable, as if the exempt portion of
those properties were subject to tax, calculated with
respect to each such property by multiplying:
(A) the lesser of (i) the actual assessed value,
if any, of the portion of the property for which an
exemption is sought or (ii) an estimated assessed
value of the exempt portion of such property as
determined in item (2) of this subsection (g), by:
(B) the applicable State equalization rate
(yielding the equalized assessed value), by
(C) the applicable tax rate.
(2) The estimated assessed value of the exempt portion
of the property equals the sum of (i) the estimated fair
market value of buildings on the property, as determined
in accordance with subparagraphs (A) and (B) of this item
(2), multiplied by the applicable assessment factor, and
(ii) the estimated assessed value of the land portion of
the property, as determined in accordance with
subparagraph (C).

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(A) The "estimated fair market value of buildings
on the property" means the replacement value of any
exempt portion of buildings on the property, minus
depreciation, determined utilizing the cost
replacement method whereby the exempt square footage
of all such buildings is multiplied by the replacement
cost per square foot for Class A Average building
found in the most recent edition of the Marshall &
Swift Valuation Services Manual, adjusted by any
appropriate current cost and local multipliers.
(B) Depreciation, for purposes of calculating the
estimated fair market value of buildings on the
property, is applied by utilizing a weighted mean life
for the buildings based on original construction and
assuming a 40-year life for hospital buildings and the
applicable life for other types of buildings as
specified in the American Hospital Association
publication "Estimated Useful Lives of Depreciable
Hospital Assets". In the case of hospital buildings,
the remaining life is divided by 40 and this ratio is
multiplied by the replacement cost of the buildings to
obtain an estimated fair market value of buildings. If
a hospital building is older than 35 years, a
remaining life of 5 years for residual value is
assumed; and if a building is less than 8 years old, a
remaining life of 32 years is assumed.

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(C) The estimated assessed value of the land
portion of the property shall be determined by
multiplying (i) the per square foot average of the
assessed values of three parcels of land (not
including farm land, and excluding the assessed value
of the improvements thereon) reasonably comparable to
the property, by (ii) the number of square feet
comprising the exempt portion of the property's land
square footage.
(3) The assessment factor, State equalization rate,
and tax rate (including any special factors such as
Enterprise Zones) used in calculating the estimated
property tax liability shall be for the most recent year
that is publicly available from the applicable chief
county assessment officer or officers at least 90 days
before the end of the hospital year.
(4) The method utilized to calculate estimated
property tax liability for purposes of this Section 15-86
shall not be utilized for the actual valuation,
assessment, or taxation of property pursuant to the
Property Tax Code.
(5) Assessments shall be made by the chief county
assessment officer.
(h) Application. Each hospital applicant applying for a
property tax exemption pursuant to Section 15-5 and this
Section shall use an application form provided by the

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Department. The application form shall specify the records
required in support of the application and those records shall
be submitted to the Department with the application form. Each
application or affidavit shall contain a verification by the
Chief Executive Officer of the hospital applicant under oath
or affirmation stating that each statement in the application
or affidavit and each document submitted with the application
or affidavit are true and correct. The records submitted with
the application pursuant to this Section shall include an
exhibit prepared by the relevant hospital entity showing (A)
the value of the relevant hospital entity's services and
activities, if any, under paragraphs (1) through (7) of
subsection (e) of this Section stated separately for each
paragraph, and (B) the value relating to the relevant hospital
entity's estimated property tax liability under subsections
(g)(1)(A), (B), and (C), subsections (g)(2)(A), (B), and (C),
and subsection (g)(3) of this Section stated separately for
each item. Such exhibit will be made available to the public by
the chief county assessment officer. Nothing in this Section
shall be construed as limiting the Attorney General's
authority under the Illinois False Claims Act.
(i) Nothing in this Section shall be construed to limit
the ability of otherwise eligible hospitals, hospital owners,
hospital affiliates, or hospital systems to obtain or maintain
property tax exemptions pursuant to a provision of the
Property Tax Code other than this Section.

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(j) Notwithstanding any other provision of law, at least
once per year, the chief county assessment officer shall
publish, on the assessor's website and in a newspaper of
general circulation in the county where the property is
located, the assessed value of all property that qualifies for
an exemption under this Section in the taxable year, as well as
the estimated property tax liability for that property.
(Source: P.A. 99-143, eff. 7-27-15.)
Section 10. The Community Benefits Act is amended by
changing Sections 10 and 20 as follows:
(210 ILCS 76/10)
Sec. 10. Definitions. As used in this Act:
"Bad debt" means the current period charge for actual or
expected doubtful accounting resulting from the extension of
credit.
"Charity care" means the delivery of health care services
for free or at a reduced cost to poor and low-income
individuals who could not otherwise afford the health care
they are receiving. care provided by a health care provider
for which the provider does not expect to receive payment from
the patient or a third party payer. "Charity care" includes
the actual cost of services provided based upon the total cost
to charge ratio derived from a nonprofit hospital's most
recently filed Medicare cost report Worksheet C and not based

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upon the charges for the services. "Charity care" does not
include bad debt.
"Community benefits" means the unreimbursed cost to a
hospital or health system of providing charity care, language
assistant services, government-sponsored health care,
donations, volunteer services, education,
government-sponsored program services, research, and
subsidized health services and collecting bad debts.
"Community benefits" does not include the cost of paying any
taxes or other governmental assessments, health fairs, or
marketing materials.
"Financial assistance" means a discount provided to a
patient under the terms and conditions the hospital offers to
qualified patients or as required by law.
"Government-sponsored health care" means the unreimbursed
cost to a hospital or health system of Medicare, providing
health care services to recipients of Medicaid, and other
federal, State, or local health care programs, eligibility for
which is based on financial need.
"Health system" means an entity that owns or operates at
least one hospital.
"Net patient revenue" means gross service revenue less
provisions for contractual adjustments with third-party
payors, courtesy and policy discounts, or other adjustments
and deductions, excluding charity care.
"Nonprofit hospital" means a hospital that is organized as

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a nonprofit corporation, including religious organizations, or
a charitable trust under Illinois law or the laws of any other
state or country.
"Subsidized health services" means those services provided
by a hospital in response to community needs for which the
reimbursement is less than the hospital's cost of providing
the services that must be subsidized by other hospital or
nonprofit supporting entity revenue sources. "Subsidized
health services" includes, but is not limited to, emergency
and trauma care, neonatal intensive care, community health
clinics, and collaborative efforts with local government or
private agencies to prevent illness and improve wellness, such
as immunization programs, housing assistance, or food
assistance.
(Source: P.A. 102-581, eff. 1-1-22.)
(210 ILCS 76/20)
Sec. 20. Annual report for community benefits plan.
(a) Each nonprofit hospital shall prepare an annual report
of the community benefits plan. The report must include, in
addition to the community benefits plan itself, all of the
following background information:
(1) The hospital's mission statement.
(2) A disclosure of the health care needs of the
community that were considered in developing the
hospital's community benefits plan.

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(3) A disclosure of the amount and types of community
benefits actually provided, including charity care, and
details about financial assistance applications received
and processed by the hospital as specified in paragraph
(5) of subsection (a) of Section 22. Charity care must be
reported separate from other community benefits. In
reporting charity care, the hospital must report the
actual cost of services provided, based on the total cost
to charge ratio derived from the hospital's Medicare cost
report (CMS 2552-96 Worksheet C, Part 1, PPS Inpatient
Ratios), not the charges for the services. For a health
system that includes more than one hospital, charity care
spending and financial assistance application data must be
reported separately for each individual hospital within
the health system.
(4) Audited annual financial reports for its most
recently completed fiscal year.
(b) Each nonprofit hospital shall annually file a report
of the community benefits plan with the Attorney General. The
report must be filed not later than the last day of the sixth
month after the close of the hospital's fiscal year, beginning
with the hospital fiscal year that ends in 2004. Reports that
are filed under this Section on or after the effective date of
this amendatory Act of the 103rd General Assembly shall be
posted on the Attorney General's website.
(c) Each nonprofit hospital shall prepare a statement that

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