Illinois Appellate Court Reports

(Ill.App. 12-18-2006) COMMUNITY HEALTH CARE, INC.,
Petitioner — Appellee, v. ILLINOIS DEPARTMENT OF
REVENUE, Respondent — Appellant. No. 3-06-0001.
Appellate Court of Illinois, Third District. December 18,

Appeal from the Circuit Court of the 14th Judicial Circuit.
Rock Island County, Illinois, 05-MR-81.

JUSTICE McDADE delivered the opinion of the court:

Petitioner, Community Health Care, Inc. (CHC), operates a
community-based primary care clinic in Rock Island,
Illinois. In October 2003 CHC applied for a property tax
exemption on the basis of the property’s use for charitable
purposes. Respondent, the Illinois Department of Revenue
(Department), denied CHC’s request for a property tax
exemption. CHC appealed and the matter proceeded to a
hearing before an administrative law judge (ALJ). The ALJ
upheld the Department’s decision to deny CHC’s application
for a tax exemption. The ALJ concluded that CHC failed to
demonstrate that it qualified as a charitable organization
pursuant to section 15-65 of the Property Tax Code (35 ILCS
200/15-65 (West 2002)) or that it used the subject property
exclusively for charitable purposes. CHC filed a complaint
in the circuit court of Rock Island County for
administrative review of the ALJ’s order. The court
reversed the ALJ’s order. For the reasons that follow, we
reverse the trial court and affirm the ALJ’s ruling
upholding the Department’s decision.


CHC applied for, and was granted, permission to operate in
Illinois as a not-for-profit corporation. It does not have
stock or shareholders. The clinic serves medically
underserved populations, residents of public housing, and
the homeless. CHC’s clients pay for services themselves,
with private insurance, and through Medicare, Medicaid, and
grants. CHC offers a sliding scale for fees whereby
patients receive a discount of 25%, 50%, 75%, or 100%
depending on their income. CHC offers the discount to any
person with an income at or below 200% of the poverty level
and advertises its availability through a variety of media.
A patient with an income at or below the poverty level
receives a 100%o discount. In 2003, approximately 27% of
CHC’s patients received some level of discounted services.
Of those, 58% received the 100 per cent discount.
Regardless of the sliding scale CHC requires all patients,
excluding homeless persons, to pay at least a $ 10
co-payment for medical services or $20 for dental services;
but CHC will not turn away a patient who cannot provide the

CHC reports charity care on its financial statements as
“the sum of all patient adjustments which are
non-contractual adjustments related to private insurance
agreements.” “Charity care” includes discounted services as
well as Medicare and Medicaid. CHC receives 64.8% of its
revenue from patient fees, 29.7% from federal and state
grants, and 5.5% from donations. Of the patient fees, 16.7%
were discounted and 12.8% came from other payors or private
grants. The remainder of the patient fees were paid by
Medicare, Medicaid, private insurance, or the patient. CHC
reinvests any revenue surplus in its clinics in the form of
new equipment and supplies. CHC pays its physicians a base
salary and annual bonuses based on productivity. CHC
measures productivity as the physician’s gross revenues
before any adjustments for Medicare, Medicaid, private
insurance, or the sliding scale discount. CHC, which
operates four other facilities in the Quad Cities area,
opened its Rock Island location in March 2003. The facility
houses16 examination rooms for use by three full-time and
part-time medical providers. CHC also plans to have three
dental stations in the facility.

The Department appeals the circuit court’s order reversing
the ALJ’s order affirming the denial of CHC’s application
for a tax exemption.


“To determine whether the clinics are eligible for a
property tax exemption under section 15-65, we use the
test established in Methodist Old Peoples Home v. Korzen,
39 111. 2d 149, 233 N.E.2d 537 (1968). In order to be
eligible, the alleged charity must show that: (1) it is
set up for the benefit of an indeterminate number of
persons; (2) it has no capital, capital stock or
shareholders and earns no profits or dividends; (3) it
derives its funds primarily from public and private
charity and holds those funds in trust for the objectives
and purposes expressed in its charter; (4) it dispenses
charity to all who need and apply for it, does not provide
gain or profit in a private sense to any person connected
with it, and does not appear to place obstacles of any
character in the way of those who need and would avail
themselves of the charitable benefits it dispenses; (5)
the property is actually and factually used exclusively for
the charitable purpose, regardless of any intent expressed
in the organization’s charter or bylaws; and (6) charity
use is the primary purpose for which the property is used
and not a secondary or incidental purpose.” (Emphasis
added.) Riverside Medical Center v. Department of
Revenue, 342 Ill. App. 3d 603, 607, 795 N.E.2d 361, 365

“An appellate court’s role is to review the administrative
decision, not the circuit court decision.” Calabrese v.
Chicago ParkDist., 294 111. App. 3d 1055, 1065, 691 N.E.2d
850, 857 (1998). M[T]he findings and conclusions of an
administrative agency on questions of fact are considered
primafacie true and correct.” Calabrese, 294 111. App. 3d
at 1065, 691 N.E.2d at 857. The decision of the
administrative agency should not be overturned unless it is
clearly erroneous Lutheran Church of the Good Sheperd of
Bourbonnais v. Department of Revenue, 316111. App. 3d 828,
831, 737N.E.2d 1075, 1078(2000). “In other words, the
determination should not be overturned unless the record
leaves the reviewing court with the `”definite and firm
conviction that a mistake has been committed.”‘ [citation]”
Riverside Medical Center v. Department of Revenue, 342 111.
App. 3d 603, 607, 795 N.E.2d 361, 364-65 (2003). Statutes
exempting property from taxation are to be strictly
construed in favor of taxation. Harrisburg-Raleigh Airport
Authority v. Department of Revenue, 126111. 2d 326, 331,
533 N.E.2d 1072 (1989). The burden of proving the right to
exemption rests upon the party seeking it. Chicago
Patrolmen’s Ass’n v. Department of Revenue, 171 111. 2d
263, 271, 664 N.E.2d 52, 56 (1996).

The Department argues CHC did not satisfy any of the six
criteria used in determining whether a tax payer is
entitled to a charitable-use exemption. CHC responds it
meets the definition of “charity” because it provides free
or reduced-fee health care to any patient who presents him
or herself to its facility and does not set a limit on the
number of people who can receive free or reduced-fee health
care services. CHC argues it uses its property primarily
for this purpose because it only uses the property for the
provision of medical and dental care.

We reverse the decision of the circuit court and affirm the
ALJ’s ruling affirming the Department’s decision to deny
CHC’s application for a tax exemption. CHC’s primary use of
its facility is not for its “charitable purpose.”

“The law in Illinois exempts from taxation that property
of charitable institutions that is `actually and
exclusively used for * * * charitable or beneficent
purposes.’ (111. Rev. Stat.1985, ch. 120, par. 500.7.)
Exclusive use refers to the primary purpose for which the
property is being used, not a secondary or incidental
purpose. Northwestern Memorial Foundation v. Johnson, [141
111. App. 3d 309, 490N E.2d 161 (1986)].” Norwegian
American Hospital, Inc. v. Department of Revenue, 210
111. App. 3d 318, 322-23, 569 N.E.2d 83, 86(1991).

CHC’s “charitable purpose” is to provide discounted or free
medical service to a medically underserved community. By
its own admission it uses the property for that purpose
only 27% of the time. The remaining 73% of the time, CHC
uses the property as a not-for-profit medical clinic.
Further, CHC’s evidence as to the level of charitable
operations at this facility is speculative. CHC relied on
“organization-wide financial data to extrapolate the
patient and payor mix” at the Rock Island facility. In
fact, CHC states that it “had little concrete data to
support its conclusion other than reliance on its previous
years of historical data and knowledge” at other

“`[The] burden of proving the right to exemption is upon
the party seeking it, and in determining whether property
is included within the scope of an exemption, all facts are
to be construed and all debatable questions resolved in
favor of taxation.'” Pontiac Lodge No. 294, A.F. & A.M. v.
Department of Revenue, 243 111. App. 3d 186, 192-93, 611
N.E.2d 62, 67 (1993), quoting Methodist Old Peoples Home, 39
111 .2d at 155, 233 N.E.2d at 540. Because CHC admits that
its application is based on data from other facilities and
an assumption that the facility in question will serve the
same number and type of patients, we find that CHC has not
carried its burden of proving a right to an exemption at
the Rock Island facility. As the question of how much CHC
uses the Rock Island facility for its “charitable purpose”
is, at best, “debatable,” we must resolve the issue in
favor of taxation. See Pontiac Lodge No. 294, A.F. & A.M.,
243 111. App. 3d at 192-93, 611 N.E.2d at 67.


We hold that a 27% use is insufficient to find the property
is used primarily for a charitable purpose and, regardless,
that CHC has failed to provide clear and convincing
evidence of its charitable operations — providing
reduced cost health care — at the Rock Island
facility. The circuit court of Rock Island County’s order
is reversed, and the ALJ’s ruling is affirmed.


HOLDRIDGE and O’BRIEN, JJ., concur.