The U.S. Government Accountability Office said in a September 2008 report that Illinois is one of 10 states with detailed requirements for what “community benefit” activities hospitals must provide to qualify for tax exemptions.
A 1968 Illinois Supreme Court case, Methodist Old Peoples Home v. Korzen, established a six-point test for whether nonprofit hospitals qualify as charitable organizations that get property tax exemptions. In that decision, the courts ruled that the concept of property used exclusively for charitable purposes “does not lend itself to easy definition.”
It’s a case-by-case basis. “However,” the court said, “though past decisions of this court provide no precise formula for resolving questions of purported charitable use, they do furnish guidelines and criteria which should be generally applied.”
Here are the six criteria for nonprofit institutions:
1. The institution bestows benefits on all people for their general welfare, or the benefits in some way reduce the burden on the government.
2. The charitable institution has no capital, capital stock or shareholders and earns no profit from the enterprise.
3. Most of its funds are derived mainly from private and public charity and are held in trust for the purposes expressed in the charter.
4. The institution dispenses charity to all who need and apply for it.
5. It does not put any obstacles in the way of those who need charitable services.
6. The primary use of the property is for charitable purposes.
Source: Methodist Old Peoples Home v. Bernard Korzen, county treasurer, et al., the City of Evanston, Illinois Supreme Court, 1968
Illinois Issues, September 2009