Fourth District Appellate Court’s decision that the charitable-use exemption for hospitals enacted in 2012 is unconstitutional has been reversed by the Illinois Supreme Court - with the high court electing not to decide the issue, but to have the matter further clarified at the trial court level.
The Illinois Supreme Court addressed an important question in the case of Carle Foundation v. Cunningham Township. In that case, the court was asked to determine whether a hospital is exempt from paying property taxes based upon its use of the property for charitable purposes. Beginning in 2004, a township assessor terminated the charitable use exemption of four parcels of property used in connection with the operation of Carle Foundation Hospital. In 2007, Carle Foundation filed an action in circuit court asking the court to find that its property qualified for a charitable-use tax exemption. After extensive briefing on the issue, the trial court granted summary judgment relief in favor of the Foundation, finding that 35 ILCS 200/15-86 was to be applied, as plaintiff requested, for tax assessment years 2004 - 2011. The trial court then certified its ruling for an interlocutory appeal pursuant to Illinois Supreme Court Rule 304(a). On appeal, the Illinois Appellate Court, Fourth District, found that a recently enacted statutory exemption, 35 ILCS 200/15-86, facially violates Article IX, Section 6 of the Illinois Constitution, which in relevant part, states that “the General Assembly by law may exempt from taxation ***property used exclusively for ***charitable purposes.” 35 ILCS 200/15-86, which took effect on June 14, 2012, sets forth a new charitable-use exemption specifically for hospitals.
In first addressing whether the issue before the court was properly raised under Illinois Supreme Court Rule 304(a), the Supreme Court found that the issue certified for appeal is dispositive of only an issue relating to a claim - and not the full claim itself - meaning that the Fourth District Appellate Court did not have proper jurisdiction to review the trial court’s rulings. In support of this finding, the Supreme Court noted that interlocutory appeals of “issues” as opposed to “claims” promotes costly and inefficient piecemeal litigation.
The Supreme Court further noted, in discussing its “supervisory authority” to resolve the constitutionality of 35 ILCS 200/15-86, that it was compelled to decline the request to exercise such authority. In doing so, the court noted that ruling on the “issue” would be tantamount to encouraging piecemeal litigation of legal issues - which is not the purpose of Illinois Supreme Rule 304(a) interlocutory appeals - and that “cases should be decided on non-constitutional grounds, wherever possible, reaching constitutional issues only as a last resort.” Accordingly, the Supreme Court remanded the case to the trial court for further proceedings.
The practical effect of the Supreme Court’s ruling is that the Fourth District Appellate Court’s declaration that the 15-86’s charitable-use tax exemption is unconstitutional has now been reversed - meaning that the constitutionality of the charitable use exemption for hospitals is again an open question.