Continuing Care Retirement Community Denied Property Tax Exemption

The Illinois Appellate Court recently upheld the denial of a property tax exemption on both charitable and religious grounds for the Meridian Village continuing care retirement community (CCRC) in Glen Carbon. A CCRC provides a range of senior living options from independent living to skilled nursing care. CCRCs are rapidly growing in popularity. In upholding the denial of the exemption, the court made clear that the retirement community failed to meet the requirements for granting a property tax exemption based on either charitable or religious grounds.

In Meridian Village Association v. Hamer, et. al., the operators of a CCRC sought property tax exemptions from tax years 2003 through 2006 based on charitable and religious uses of the property. The Department of Revenue denied their application. The denial was based primarily on the finding that the primary use of the property was neither charitable nor religious. The circuit court affirmed the Department’s decision, and Meridian Village Association appealed.

On appeal, the Fifth District Appellate Court affirmed, holding that the Department of Revenue’s decision was not clearly erroneous. With regard to a charitable property tax exemption, the Court relied on Illinois Supreme Court precedent establishing the factors that must be met before a property may receive a charitable property tax exemption. Those factors are:

  1. the benefits derived are for an indefinite number of persons for their general welfare or in some way reducing the burdens on government; 
  2. the organization has no capital stock or shareholders and does not profit from the enterprise; 
  3. funds are derived mainly from private and public charity, and the funds are held in trust for the objects and purposes expressed in the organization's charter; 
  4. charity is dispensed to all who need and apply for it; 
  5. no obstacles are placed in the way of those seeking the benefits; and
  6. the exclusive, i.e., primary, use of the property is for charitable purposes.

The Appellate Court found the evidence presented to the Department did not meet these factors. First, Meridian Village placed limits on the amount of charity care provided. Second, the operation of the home did not reduce the burden on government any more than a for-profit retirement facility does. Third, funding for Meridian Village was derived primarily from fees for services, not private or public charities. Fourth, the substantial fees placed obstacles in the way of people seeking charity. Finally, the fees charged to residents also meant the primary use of the property was not for charitable purposes.

Additionally, the Court found that being associated with a religious denomination is insufficient to make the primary use of the property religious in nature. The Court concluded the primary use of the property was caring for the elderly, not promoting religion. Therefore, the property was not entitled to a religious property tax exemption.

This decision supports the Department of Revenue’s ability to strictly construe the requirements for granting property tax exemptions to CCRCs and other senior living facilities. Given the growth in popularity of these facilities in recent years, this ruling has the potential to positively impact the property tax base of Illinois taxing bodies including school districts.

* Jamel Greer is a third-year law student at Loyola University Chicago School of Law.

Topics:  Exempt Organizations, Nursing Homes, Property Tax, Tax Exemptions

Published In: Constitutional Law Updates, Nonprofits Updates, Commercial Real Estate Updates, Tax Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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