Full Text of HB1751 102nd General Assembly
HB1751 102ND GENERAL ASSEMBLY |
| | 102ND GENERAL ASSEMBLY
State of Illinois
2021 and 2022 HB1751 Introduced 2/17/2021, by Rep. Deanne M. Mazzochi SYNOPSIS AS INTRODUCED: |
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Amends the Property Tax Code. In provisions concerning exemptions related to hospitals and health care services, provides that ambulance transport is considered a service that addresses the health care needs of low-income or underserved individuals. Effective immediately.
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| | FISCAL NOTE ACT MAY APPLY | | HOUSING AFFORDABILITY IMPACT NOTE ACT MAY APPLY |
| | A BILL FOR |
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| 1 | | AN ACT concerning revenue.
| 2 | | Be it enacted by the People of the State of Illinois,
| 3 | | represented in the General Assembly:
| 4 | | Section 5. The Property Tax Code is amended by changing | 5 | | Section 15-86 as follows: | 6 | | (35 ILCS 200/15-86) | 7 | | Sec. 15-86. Exemptions related to access to hospital and | 8 | | health care services by low-income and underserved | 9 | | individuals. | 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 | 3 | | following 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 | 26 | | exemption under this Section with respect to the subject |
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| 1 | | property, and shall be issued a charitable exemption for that | 2 | | property, if the value of services or activities listed in | 3 | | subsection (e) for the hospital year equals or exceeds the | 4 | | relevant hospital entity's estimated property tax liability, | 5 | | as determined under subsection (g), for the year for which | 6 | | exemption is sought. For purposes of making the calculations | 7 | | required by this subsection (c), if the relevant hospital | 8 | | entity is a hospital owner that owns more than one hospital, | 9 | | the value of the services or activities listed in subsection | 10 | | (e) shall be calculated on the basis of only those services and | 11 | | activities relating to the hospital that includes the subject | 12 | | property, and the relevant hospital entity's estimated | 13 | | property tax liability shall be calculated only with respect | 14 | | to the properties comprising that hospital. In the case of a | 15 | | multi-state hospital system or hospital affiliate, the value | 16 | | of the services or activities listed in subsection (e) shall | 17 | | be calculated on the basis of only those services and | 18 | | activities that occur in Illinois and the relevant hospital | 19 | | entity's estimated property tax liability shall be calculated | 20 | | only with respect to its property located in Illinois. | 21 | | Notwithstanding any other provisions of this Act, any | 22 | | parcel or portion thereof, that is owned by a for-profit | 23 | | entity whether part of the hospital system or not, or that is | 24 | | leased, licensed or operated by a for-profit entity regardless | 25 | | of whether healthcare services are provided on that parcel | 26 | | shall not qualify for exemption. If a parcel has both exempt |
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| 1 | | and non-exempt uses, an exemption may be granted for the | 2 | | qualifying portion of that parcel. In the case of parking lots | 3 | | and common areas serving both exempt and non-exempt uses those | 4 | | parcels or portions thereof may qualify for an exemption in | 5 | | proportion to the amount of qualifying use. | 6 | | (d) The hospital applicant shall include information in | 7 | | its exemption application establishing that it satisfies the | 8 | | requirements of subsection (c). For purposes of making the | 9 | | calculations required by subsection (c), the hospital | 10 | | applicant may for each year elect to use either (1) the value | 11 | | of the services or activities listed in subsection (e) for the | 12 | | hospital year or (2) the average value of those services or | 13 | | activities for the 3 fiscal years ending with the hospital | 14 | | year. If the relevant hospital entity has been in operation | 15 | | for less than 3 completed fiscal years, then the latter | 16 | | calculation, if elected, shall be performed on a pro rata | 17 | | basis. | 18 | | (e) Services that address the health care needs of | 19 | | low-income or underserved individuals or relieve the burden of | 20 | | government with regard to health care services. The following | 21 | | services and activities shall be considered for purposes of | 22 | | making 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 to low-income or underserved persons. | 20 | | (3) Subsidy of State or local governments. Direct or | 21 | | indirect financial or in-kind subsidies of State or local | 22 | | governments by the relevant hospital entity that pay for | 23 | | or subsidize activities or programs related to health care | 24 | | for low-income or underserved individuals. | 25 | | (4) Support for State health care programs for | 26 | | low-income individuals. At the election of the hospital |
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| 1 | | applicant for each applicable year, either (A) 10% of | 2 | | payments to the relevant hospital entity and any hospital | 3 | | affiliate designated by the relevant hospital entity | 4 | | (provided that such hospital affiliate's operations | 5 | | provide financial or operational support for or receive | 6 | | financial or operational support from the relevant | 7 | | hospital entity) under Medicaid or other means-tested | 8 | | programs, including, but not limited to, General | 9 | | Assistance, the Covering ALL KIDS Health Insurance Act, | 10 | | and the State Children's Health Insurance Program or (B) | 11 | | the amount of subsidy provided by the relevant hospital | 12 | | entity and any hospital affiliate designated by the | 13 | | relevant hospital entity (provided that such hospital | 14 | | affiliate's operations provide financial or operational | 15 | | support for or receive financial or operational support | 16 | | from the relevant hospital entity) to State or local | 17 | | government in treating Medicaid recipients and recipients | 18 | | of means-tested programs, including but not limited to | 19 | | General Assistance, the Covering ALL KIDS Health Insurance | 20 | | Act, and the State Children's Health Insurance Program. | 21 | | The amount of subsidy for purposes of this item (4) is | 22 | | calculated in the same manner as unreimbursed costs are | 23 | | calculated for Medicaid and other means-tested government | 24 | | programs in the Schedule H of IRS Form 990 in effect on the | 25 | | effective date of this amendatory Act of the 97th General | 26 | | Assembly; provided, however, that in any event |
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| 1 | | unreimbursed costs shall be net of fee-for-services | 2 | | payments, payments pursuant to an assessment, quarterly | 3 | | payments, and all other payments included on the schedule | 4 | | H of the IRS form 990. | 5 | | (5) Dual-eligible subsidy. The amount of subsidy | 6 | | provided to government by treating dual-eligible | 7 | | Medicare/Medicaid patients. The amount of subsidy for | 8 | | purposes of this item (5) is calculated by multiplying the | 9 | | relevant hospital entity's unreimbursed costs for | 10 | | Medicare, calculated in the same manner as determined in | 11 | | the Schedule H of IRS Form 990 in effect on the effective | 12 | | date of this amendatory Act of the 97th General Assembly, | 13 | | by the relevant hospital entity's ratio of dual-eligible | 14 | | patients to total Medicare patients. | 15 | | (6) Relief of the burden of government related to | 16 | | health care of low-income individuals. Except to the | 17 | | extent otherwise taken into account in this subsection, | 18 | | the portion of unreimbursed costs of the relevant hospital | 19 | | entity attributable to providing, paying for, or | 20 | | subsidizing goods, activities, or services that relieve | 21 | | the burden of government related to health care for | 22 | | low-income individuals. Such activities or services shall | 23 | | include, but are not limited to, providing emergency, | 24 | | trauma, burn, neonatal, psychiatric, rehabilitation, | 25 | | ambulance transport, or other special services; providing | 26 | | medical education; and conducting medical research or |
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| 1 | | training of health care professionals. The portion of | 2 | | those unreimbursed costs attributable to benefiting | 3 | | low-income individuals shall be determined using the ratio | 4 | | calculated by adding the relevant hospital entity's costs | 5 | | attributable to charity care, Medicaid, other means-tested | 6 | | government programs, Medicare patients with disabilities | 7 | | under age 65, and dual-eligible Medicare/Medicaid patients | 8 | | and dividing that total by the relevant hospital entity's | 9 | | total costs. Such costs for the numerator and denominator | 10 | | shall be determined by multiplying gross charges by the | 11 | | cost to charge ratio taken from the hospitals' most | 12 | | recently filed Medicare cost report (CMS 2252-10 Worksheet | 13 | | C, Part I). In the case of emergency services, the ratio | 14 | | shall be calculated using costs (gross charges multiplied | 15 | | by the cost to charge ratio taken from the hospitals' most | 16 | | recently filed Medicare cost report (CMS 2252-10 Worksheet | 17 | | C, Part I)) of patients treated in the relevant hospital | 18 | | entity's emergency department. | 19 | | (7) Any other activity by the relevant hospital entity | 20 | | that the Department determines relieves the burden of | 21 | | government or addresses the health of low-income or | 22 | | underserved individuals. | 23 | | (f) For purposes of making the calculations required by | 24 | | subsections (c) and (e): | 25 | | (1) particular services or activities eligible for | 26 | | consideration under any of the paragraphs (1) through (7) |
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| 1 | | of subsection (e) may not be counted under more than one of | 2 | | those paragraphs; and | 3 | | (2) the amount of unreimbursed costs and the amount of | 4 | | subsidy shall not be reduced by restricted or unrestricted | 5 | | payments received by the relevant hospital entity as | 6 | | contributions deductible under Section 170(a) of the | 7 | | Internal Revenue Code. | 8 | | (g) Estimation of Exempt Property Tax Liability. The | 9 | | estimated property tax liability used for the determination in | 10 | | subsection (c) shall be calculated as follows: | 11 | | (1) "Estimated property tax liability" means the | 12 | | estimated dollar amount of property tax that would be | 13 | | owed, with respect to the exempt portion of each of the | 14 | | relevant hospital entity's properties that are already | 15 | | fully or partially exempt, or for which an exemption in | 16 | | whole or in part is currently being sought, and then | 17 | | aggregated as applicable, as if the exempt portion of | 18 | | those properties were subject to tax, calculated with | 19 | | respect to each such property by multiplying: | 20 | | (A) the lesser of (i) the actual assessed value, | 21 | | if any, of the portion of the property for which an | 22 | | exemption is sought or (ii) an estimated assessed | 23 | | value of the exempt portion of such property as | 24 | | determined in item (2) of this subsection (g), by: | 25 | | (B) the applicable State equalization rate | 26 | | (yielding the equalized assessed value), by |
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| 1 | | (C) the applicable tax rate. | 2 | | (2) The estimated assessed value of the exempt portion | 3 | | of the property equals the sum of (i) the estimated fair | 4 | | market value of buildings on the property, as determined | 5 | | in accordance with subparagraphs (A) and (B) of this item | 6 | | (2), multiplied by the applicable assessment factor, and | 7 | | (ii) the estimated assessed value of the land portion of | 8 | | the property, as determined in accordance with | 9 | | subparagraph (C). | 10 | | (A) The "estimated fair market value of buildings | 11 | | on the property" means the replacement value of any | 12 | | exempt portion of buildings on the property, minus | 13 | | depreciation, determined utilizing the cost | 14 | | replacement method whereby the exempt square footage | 15 | | of all such buildings is multiplied by the replacement | 16 | | cost per square foot for Class A Average building | 17 | | found in the most recent edition of the Marshall & | 18 | | Swift Valuation Services Manual, adjusted by any | 19 | | appropriate current cost and local multipliers. | 20 | | (B) Depreciation, for purposes of calculating the | 21 | | estimated fair market value of buildings on the | 22 | | property, is applied by utilizing a weighted mean life | 23 | | for the buildings based on original construction and | 24 | | assuming a 40-year life for hospital buildings and the | 25 | | applicable life for other types of buildings as | 26 | | specified in the American Hospital Association |
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| 1 | | publication "Estimated Useful Lives of Depreciable | 2 | | Hospital Assets". In the case of hospital buildings, | 3 | | the remaining life is divided by 40 and this ratio is | 4 | | multiplied by the replacement cost of the buildings to | 5 | | obtain an estimated fair market value of buildings. If | 6 | | a hospital building is older than 35 years, a | 7 | | remaining life of 5 years for residual value is | 8 | | assumed; and if a building is less than 8 years old, a | 9 | | remaining life of 32 years is assumed. | 10 | | (C) The estimated assessed value of the land | 11 | | portion of the property shall be determined by | 12 | | multiplying (i) the per square foot average of the | 13 | | assessed values of three parcels of land (not | 14 | | including farm land, and excluding the assessed value | 15 | | of the improvements thereon) reasonably comparable to | 16 | | the property, by (ii) the number of square feet | 17 | | comprising the exempt portion of the property's land | 18 | | square footage. | 19 | | (3) The assessment factor, State equalization rate, | 20 | | and tax rate (including any special factors such as | 21 | | Enterprise Zones) used in calculating the estimated | 22 | | property tax liability shall be for the most recent year | 23 | | that is publicly available from the applicable chief | 24 | | county assessment officer or officers at least 90 days | 25 | | before the end of the hospital year. | 26 | | (4) The method utilized to calculate estimated |
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| 1 | | property tax liability for purposes of this Section 15-86 | 2 | | shall not be utilized for the actual valuation, | 3 | | assessment, or taxation of property pursuant to the | 4 | | Property Tax Code. | 5 | | (h) Application. Each hospital applicant applying for a | 6 | | property tax exemption pursuant to Section 15-5 and this | 7 | | Section shall use an application form provided by the | 8 | | Department. The application form shall specify the records | 9 | | required in support of the application and those records shall | 10 | | be submitted to the Department with the application form. Each | 11 | | application or affidavit shall contain a verification by the | 12 | | Chief Executive Officer of the hospital applicant under oath | 13 | | or affirmation stating that each statement in the application | 14 | | or affidavit and each document submitted with the application | 15 | | or affidavit are true and correct. The records submitted with | 16 | | the application pursuant to this Section shall include an | 17 | | exhibit prepared by the relevant hospital entity showing (A) | 18 | | the value of the relevant hospital entity's services and | 19 | | activities, if any, under paragraphs (1) through (7) of | 20 | | subsection (e) of this Section stated separately for each | 21 | | paragraph, and (B) the value relating to the relevant hospital | 22 | | entity's estimated property tax liability under subsections | 23 | | (g)(1)(A), (B), and (C), subsections (g)(2)(A), (B), and (C), | 24 | | and subsection (g)(3) of this Section stated separately for | 25 | | each item. Such exhibit will be made available to the public by | 26 | | the chief county assessment officer. Nothing in this Section |
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| 1 | | shall be construed as limiting the Attorney General's | 2 | | authority under the Illinois False Claims Act. | 3 | | (i) Nothing in this Section shall be construed to limit | 4 | | the ability of otherwise eligible hospitals, hospital owners, | 5 | | hospital affiliates, or hospital systems to obtain or maintain | 6 | | property tax exemptions pursuant to a provision of the | 7 | | Property Tax Code other than this Section.
| 8 | | (Source: P.A. 99-143, eff. 7-27-15.)
| 9 | | Section 99. Effective date. This Act takes effect upon | 10 | | becoming law.
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