You can add one more lawsuit to the mountain of litigation concerning how and when Illinois hospitals are entitled to a property tax exemption. Earlier this month a limited partnership filed a class action lawsuit naming Northshore University Health System and all other hospitals in the State currently exempt from property taxes as potential class members, along with the Cook County Clerk and Treasurer. The lawsuit seeks payment from each of the hospitals in the amount of taxes they would have paid had the hospitals not received an exemption from taxation. The suit follows a ruling from the 4^th District Appellate Court finding unconstitutional Section 15-86 of the Property Tax Code.

This suit, filed by Thornmeadow Partners L.P., contends that it and all other taxpayers in Cook County and the State of Illinois, have overpaid their property taxes to compensate for the taxes Illinois hospitals have not paid due to exemptions under Section 15-86.  The suit seeks repayment of those ‘unpaid’ taxes from 2014 to the date a judgment is entered, which could be years from now.  You can read the entire lawsuit here.

As we have recently reported, an Illinois Appellate Court struck down as unconstitutional Section 15-86 of the Property Tax Code, which created a procedure for granting an exemption to a hospital if the total value of the hospital’s charitable services exceeded the hospital’s estimated property tax liability.  A petition for leave to appeal that decision is now pending with the Illinois Supreme Court.  If the petition is denied, the Appellate Court decision striking down the exemption will stand.  If the petition is granted, the Illinois Supreme Court will consider the constitutionality of Section 15-86.  You can read more about that decision, Carle Foundation v. Cunningham Township, and the full history of the litigation here.   

The lawsuit filed on May 5^th is arguing for payment should the Carle Foundation decision be upheld by the Supreme Court and if Illinois hospitals are required to pay the taxes they were exempted from paying because of Section 15-86.  Recovery appears to us to be highly conditional on these two events occurring.  In addition to the lawsuit, the plaintiff filed a motion for class certification asking the Court to establish a plaintiff class of “all other real estate taxpayers in the State of Illinois.”  Class action litigation tends to take years to reach resolution and this filing seems unlikely to be an exception to that general rule.

This latest development adds a new wrinkle to what has been, to date, litigation primarily involving hospitals and the Illinois Department of Revenue.  We will continue to keep you apprised of issues arising in this evolving area of Illinois law.