## Facts

- Provena Covenant Medical Center (PCMC) was a Catholic-affiliated, not-for-profit hospital recognized as federally tax-exempt under I.R.C. § 501(c)(3).
- Provena sought a 2002 Illinois property-tax exemption for 43 parcels used in PCMC’s hospital operations, asserting charitable and religious exemptions.
- The Department of Revenue denied the exemption, finding the property was not in exempt ownership and not in exempt use.
- The circuit court reversed and granted charitable and religious exemptions; the appellate court reversed and reinstated the Department’s denial.
- PCMC generated most revenue from patient charges and third-party payments (Medicare, Medicaid, private insurance), with minimal charitable donations to the hospital in the relevant year.
- Provena’s formal charity-care program accounted for a small fraction of revenues (less than 1%), and the value of that charity care was less than the property-tax benefit sought.
- Provena argued that bad debt, Medicaid shortfalls, emergency services, and other community benefits should be treated as charity for exemption purposes.
- The Illinois Supreme Court affirmed the appellate court’s judgment; the court’s reasoning was divided, but a majority agreed the exemptions should be denied.

## Issues

1. Whether Provena proved by clear and convincing evidence that the hospital property was “actually and exclusively used for charitable or beneficent purposes” to qualify for a charitable property-tax exemption under § 15-65 of the Illinois Property Tax Code and the Illinois Constitution.
2. Whether the property qualified for a religious-use exemption under § 15-40(a)(1) based on exclusive use for religious purposes.

## Decision

- The court affirmed the appellate court’s judgment, leaving in place the Department of Revenue’s denial of the exemptions.
- The court held Provena failed to show the hospital property was used primarily for charitable purposes as required for the charitable exemption.
- A plurality concluded the hospital property was not used exclusively for religious purposes and therefore did not qualify for the religious-use exemption.
- The court treated federal § 501(c)(3) status as noncontrolling for Illinois property-tax exemption and required satisfaction of Illinois constitutional and statutory standards.

## Legal Principles

- Taxation is the default rule; property-tax exemptions are strictly construed, and doubts are resolved in favor of taxation.
- The claimant bears a heavy burden and must prove entitlement to exemption by clear and convincing evidence.
- Charitable exemption requires more than nonprofit status; the inquiry centers on whether the property is actually, exclusively, and primarily used for charitable purposes.
- In evaluating charitable status and use, Illinois courts consider factors associated with institutions of public charity, including the degree to which benefits are intentionally provided to those in need without substantial barriers.
- Bad-debt write-offs are not charity because they reflect unsuccessful collection of billed services rather than intentional, donative provision of free or reduced-cost care.
- Participation in Medicaid and treating Medicaid patients, including any under-reimbursement, is not itself charitable use where services are provided under statutory, contractual, or ordinary business conditions rather than donative intent.
- A religious-use exemption requires exclusive religious use; operation of a general hospital serving the public for fees is not exclusive religious use even if motivated by religious principles.

## Conclusion

The Illinois Supreme Court upheld denial of Provena’s property-tax exemptions because the hospital did not prove that its property was primarily used for charitable purposes and did not meet the statutory requirement of exclusive religious use, reinforcing that nonprofit and religious affiliation alone do not establish entitlement to exemption without substantial, intentional charity care.


Provena Covenant Med. Ctr. v. Dep’t of Revenue, 236 Ill. 2d 368, 925 N.E.2d 1131 (Ill. 2010)