Potential tax hit for hospitals concerns Kane board members

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Updated: March 24, 2012 11:27PM

GENEVA — Hospitals provide a wide level of tax-exempt care in the Fox Valley community and around Illinois.

And if the state steps in to revoke their non-profit tax-exempt status, it would have a negative effect on the level of care provided, and could damage the local economy, Kane County officials fear.

The County Board Legislative Committee Monday passed a resolution asking the state to consider all of a hospital’s charity work when considering its tax-exempt status, for these and other reasons.

“They have a huge economic impact in all of our communities,” said committee Chairman Jesse Vazquez, D-Montgomery. “It would put the hurt on them.”

The Kane County resolution asks the state to take a full look at the charitable work that hospitals provide when evaluating their tax-exempt status. In Kane County, hospitals made more than $221 million in charitable contributions in 2009.

If the state were to revoke their non-profit tax-exempt status, the hospitals would be forced to pay taxes on these contributions.

The tax issue for hospitals was raised in 2004, when the Illinois Department of Revenue denied the Provena hospital group’s property tax exemption in Champaign County. In 2010, Provena lost its appeal in the Illinois Supreme Court. The Department of Revenue then denied the property tax exemption to three more hospitals, including Edward Hospital in Naperville, in August of 2011.

Gov. Pat Quinn put a hold on any further tax-exempt rulings last September, and asked legislators to work together with hospital staff and the Department of Revenue to find a legislative solution by March 2012.

Dennis O’Sullivan, the director of government and public relations for the Metropolitan Chicago Health Council, made a presentation to the Kane committee on Monday, showing the potential impact on Kane County hospitals. How the hospitals react to the expense would be up to each one individually, he said.

Vazquez said he has met with representatives from various Kane County hospitals to discover the impact that it would have. Rush-Copley Medical Center in Aurora would have an additional $5 million in tax liability, he said.

Hospitals are a large employer in the area, directly and secondarily supporting about 21,000 jobs. There are also many small businesses in the area set up to provide support to area hospitals. They are a vital part of the local economy, Vazquez said.

The county is asking the state to evaluate all of a hospital’s charitable work. A wide array of work fits under the $221 million charitable umbrella that county hospitals provided in 2009, according to the presentation, and not all of it is factored into a hospital’s tax-exempt status, O’Sullivan said.

Kane County hospitals provided $73 million in charitable care and bad debt in 2009, according to the presentation. They also spent more than $123 million subsidizing government care provided to Medicare and Medicaid patients. They spent over $12 million to subsidize health services in response to community need.

While legislators may view this issue as a way for the state to generate more money, hospitals are too important in the local economy, Vazquez said.

“We need to make sure that the ancillary services provided are considered as well,” Vazquez said.