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State appeals ruling on Urbana hospital's tax exemption

Posted September 07, 2007 11:00 pm

Dean Olsen

An appeal filed Friday by the Illinois Department of Revenue means an Urbana hospital's tax-exempt status will remain in limbo for months while the agency's decision a year ago to revoke that status is debated in court.

Attorney General Lisa Madigan's office started the appeal by filing a notice with Sangamon County Circuit Court, where Judge Patrick Londrigan on July 20 sided with Provena Covenant Medical Center.

He later wrote in his formal order that evidence in Provena's lawsuit against the department "establishes by clear and convincing proof" that Provena has "satisfied the relevant factors used to determine qualification for charitable- and religious-exempt use of the real estate in this proceeding."

The department's appeal, to be considered by judges in the Springfield-based 4th District Appellate Court, delays a potential refund of the $4.49 million in additional property taxes Provena has had to pay since 2003, when most of the hospital's property was placed on local tax rolls for the first time.

Champaign County tax officials several years ago raised questions about Provena's business operations.

State Revenue director Brian Hamer in September 2006, ignoring the recommendation of an administrative law judge from his agency who heard testimony in the case, wrote in his decision that Provena didn't provide enough charity care or act enough like a charity to deserve a property-tax exemption.

Provena is disappointed by the state's appeal, said Lisa Lagger, spokeswoman for Provena Health, the Catholic hospital's Mokena-based parent organization.

"In fair hearings, Provena Covenant has now twice prevailed," she said, adding that Provena "will continue to vigorously defend this selective and improper denial of fair treatment."

The Provena case has attracted national attention as members of Congress and others question whether not-for-profit hospitals deserve tax breaks when many employ highly paid executives, use aggressive business tactics and sometimes fall short in assisting the uninsured.

Illinois Hospital Association president Ken Robbins said, "We strongly believe the courts will ultimately vindicate Provena Covenant Medical Center. We are disappointed that this case will be unnecessarily prolonged."

All but about $50,000 of the $4.49 million paid by Provena has been disbursed to the city of Urbana because most of the hospital land in question lies in a tax increment financing district, Champaign County Treasurer Dan Welch said.

Urbana is holding its share of the money in an account and not spending it in case a court orders the money to be refunded, he said.

The Department of Revenue also revoked the tax-exempt status of Carle Foundation Hospital in Urbana and Richland Memorial Hospital in Olney.

Carle is in the early stages of appealing the decision within the agency.

But Richland learned in late July, after Londrigan's ruling, that Revenue decided to reverse its December decision, according to Richland Memorial chief financial officer David Allen.

Richland faced a loss of its exemption - and the potential for paying $100,000 to $250,000 in annual property taxes - after it converted from a county-owned hospital to a private, not-for-profit hospital, Allen said.

The Department of Revenue based its original revocation decision on concerns that the 50-bed hospital wasn't adequately publicizing its charity-care program and wasn't receiving enough donations from the community, Allen said.

In oral and written communications, Richland convinced the department that neither concern was warranted, Allen said.

Revenue spokeswoman Katherine Ridgway declined comment on the reversal.

Dean Olsen can be reached at (217) 788-1543 or dean.olsen@sj-r.com.

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