Hospital Tax-Exemption

Not-for-profit hospitals, like many similar institutions, are tax-exempt because the charitable services they provide are considered more important to their communities and to society than the taxes they would pay. The vast majority of hospitals in Illinois are non-profit and tax-exempt. Their most important obligation is to serve their communities.

Illinois hospitals and health systems provide considerable community benefits (in some cases, many millions of dollars annually), including, but not limited to, free care for those in need. Basing tax exemption only on the dollar value of the free and discounted care a hospital provides to the poor and uninsured ignores all the other benefits hospitals bring to the entire community.  For example, not-for-profit hospitals provide much needed burn, trauma, and neonatal services, which, on average, lose money. Hospitals help the government by treating Medicare and Medicaid patients for less than the cost of that care. They help train the next generation of physicians and nurses at great expense. They supply the resources and expertise for breakthrough medical research and innovation on new lifesaving cures and treatments. Most of all, they are there when you need them, 24 hours a day.

Just over half of the non-profit hospitals in Illinois provided nearly $4.7 billion in community benefits in one year alone, as reported in the most recent community benefits reports filed with the Office of Attorney General. And many other intangible benefits, such as having an emergency room open all day and night, cannot be measured in dollar amounts. Measuring a not-for-profit hospital's worthiness of its tax exemption based on only one aspect of its charitable activities ignores the wide public value of hospitals and undervalues the community's investment in the hospital.

Whether through caring for the poor and uninsured, providing money-losing but needed specialized medical services, or carrying out research and education to find cures for the future, their first commitment is to the welfare of their communities.

What if They Lost Their Tax Exemption?
Most not-for-profit hospitals in Illinois face serious financial challenges and are struggling to survive. They use any revenue over immediate expenses to purchase necessary equipment, pay staff, and maintain and improve their facilities, programs, and services.

If they were to lose their non-profit, tax-exempt status and were forced to pay taxes, they would have to make extremely difficult choices about cutting spending. For example, they might have to reduce staff and cut back on the programs and services they offer, such as Level I trauma centers, providing for the poor and uninsured, community clinics, and community health programs. If taxed, they would pay far less to the state in property and sales taxes than the value of these services.

Non-profit hospitals are already doing more than their share. Taxing them won't help solve the problem of providing care for the poor and uninsured, it will only make it more difficult for them to continue to do so.