Appeals Court Rules Glenview Hospice Center Not Tax Exempt

CHICAGO — A unanimous state appellate court ruling found this week that a Glenview hospice center should have to pay property taxes and does not qualify for an charitable use exemption. A panel of three judges from the Illinois Appeals Court sided with the Illinois Department of Revenue, an administrative law judge and a Cook County Circuit Court against Midwest Palliative Hospice and Care Center.

Originally incorporated in 1978 as "Hospice of the North Shore," Midwest has operated on 4.1 acres in Glenview since 2008, starting with a palliative care center. The 501(c)(3) nonprofit was granted a 91.9 percent tax exempt status for the care center as a result of a 2014 settlement with the Department of Revenue. That was not the issue in this case.

The dispute came after Midwest built the Marshak Family Hospice Care Center on the property at 2050 Claire Court in Glenview. It opened in 2012, and Midwest's 2013 tax bill was at issue in the legal proceedings after the department rejected its request for tax exemption because it did not establish the property had an "exclusively charitable use."

An administrative law judge's analysis found that in 2013 Midwest generated $30 million in revenue and provided $157,000 in charitable care. The judge also noted that just 0.4 percent of Midwest's operating revenue came from charitable contributions.

"The fact that 94 percent of Midwest's revenue comes from providing paid-for service forces me to conclude that the primary use of the Marshak Pavilion is not charitable,"said administrative law judge Kenneth Galvin. He agreed with the Department of Revenue's decision not to grant an exemption to the property in a May 2017 recommendation, finding the hospice center's primary purpose was to serve paying customers, not to provide charity.

Galvin said less than 1 percent of Midwest's revenue was devoted to charitable care at the hospice center, which "represents an incidental act of beneficence that is legally insufficient to establish that Midwest 'exclusively' uses the Marshak Pavilion for charitable purposes."

Midwest tried to have the ruling overturned in Cook County Circuit Court. After a judge found against the Glenview-based firm in 2017, it filled an appeal with the Illinois Appeals Court.

Justice John Griffin delivered the Feb. 25 ruling, siding with the Department of Revenue and the lower court, with justices Daniel Pierce and Carl Walker concurring.

Midwest claimed the pavilion "provided massive community benefits, raised large sums of charitable contributions and is indisputably run as a nonprofit," but the court pointed out the firm spent almost none of its revenue on charitable services and received almost no money from charitable contributions.

"Instead, Midwest generates revenue almost exclusively by performing services to patients for pay. The revenue that Midwest generates gives it the opportunity to offer more services and do more good deeds," Griffin said. "Midwest made out the case that it is a noble institution. But just because an institution is a nonprofit and performs good deeds does not mean that the institution is using its real property exclusively for charitable purposes as that term is used in the Illinois Constitution."

Last September, the Illinois Supreme Court unanimously upheld the constitutionality of the state's 2012 hospital property tax exemption law in Oswald v. Beard. State law allows nonprofit hospitals to receive property tax exemptions if they demonstrate they are providing at least as much in charitable assistance as they would have to pay in property taxes. The ruling reiterated that hospitals still "must show that the subject property meets the constitutional test of exclusive charitable use."

Representatives of the company, which in 2015 merged with Barrington-based JourneyCare and Horizon Hospice and Palliative Care of Chicago to become the state's largest hospice care provider, declined to say whether they plan to appeal or provide any comment on the ruling.