United States: Provena Covenant Medical Center v. Department of Revenue: Illinois Supreme Court Suggests New, Narrow Tests for Charity Care

Last Updated: April 16 2010
Article by James R. King, David S. Boyce, David E. Cowling, Travis F. Jackson, Charolette F. Noel, Tracy K. Stratford, Gerald M. Griffith and Stephen G. Sozio
Most Read Contributor in United States, September 2019

On Thursday, March 18, 2010, the Illinois Supreme Court issued what will be a controversial opinion in the long-running saga of the Provena Covenant Medical Center real estate tax-exemption case in Illinois (available at http://www.state.il.us/court/Opinions/recent_supreme.asp ). While all five justices agreed exemption was not proper for the 2002 tax year, the court failed to advance a unified rationale as to why the exemption was not available. As discussed below, three justices offered a very narrow view of what constitutes "charity" and "charitable use." Because only three of the seven justices adopted this narrow view, and because a majority of the seven justices is required to hand down a binding, precedential decision, the Provena plurality's pronouncements do not constitute the law, even in Illinois. That said, the plurality's views will no doubt prove to be very controversial, and we can expect them to be discussed and debated across the country.

Essential Facts

The owner of the properties in question was Provena Hospitals, a 501(c)(3) organization affiliated with Provena Health, a 501(c)(3) Catholic health system. The properties in question consisted of 43 parcels of real estate located in Champaign County, Illinois. Tax revenues were shared among the county and a number of smaller governmental units. The plurality opinion considered each of these separate governmental units to have "granted" the tax exemption. There was no evidence in the record that any of these various governmental units had as part of its governmental purposes the delivery of health care, a factor the plurality deemed crucial to charitable use of the property.

Provena Hospitals had a policy of accepting all patients regardless of ability to pay, and no patient who presented for care was denied care due to inability to pay for the service. The charity-care policy provided free or discounted care based upon a sliding scale tied to the federal poverty guidelines. It also had an asset test that would require payment even for those with incomes within the poverty guidelines if their assets indicated an ability to pay. Provena Hospitals would not classify a patient as eligible for discounted or free care under its charity-care policy until it had first verified that the patient did not have sufficient insurance (whether private or governmental) and could not otherwise afford to pay for the service under the guidelines in the charity-care policy. In other words, Provena Hospitals would bill for its services if it did not have sufficient information to determine eligibility; however, there were absolutely no examples of any patient being refused care for inability to pay. During the relevant tax year, Provena Hospitals did not advertise the availability of charity care, and it referred nonpaying patients to collection agencies. In addition, virtually all patients were paying patients through either private insurance, Medicare, Medicaid, or self-pay. Virtually all of Provena Hospitals' support came from fee income, and there was nothing in the record to indicate that there were material charitable contributions to Provena Hospitals, a factor the plurality found to be crucial under Illinois law. The plurality also did not consider the level of donations to any separately incorporated foundation or other affiliates.

Illinois Two-Part Test for Exemption

Under Illinois law, real property will be exempt if the owner of the property establishes, by clear and convincing evidence, both: (i) that the property is owned by an institution of public charity, and (ii) that the property is actually and exclusively used for charitable purposes and not with a view to profit.1

The First Prong—Institution of Public Charity

As to the "institution of public charity" requirement, in Methodist Old Peoples Home v. Korzen2 the Illinois Supreme Court established a five-part test for whether or not an institution is an institution of public charity. The five criteria are: (i) the institution has no capital stock or shareholders; (ii) the institution earns no profits or dividends but rather derives funds mainly from private and public charity and holds them in trust for the purposes expressed in the charter; (iii) the institution dispenses charity to all who need it and apply for it; (iv) the institution does not provide gain or profit in a private sense to any person connected with it; and (v) the institution does not appear to place any obstacles in the way of those who need and would avail themselves of the charitable benefits it dispenses (emphasis supplied). The majority agreed that Provena Hospitals did not have sufficient evidence in the record to establish that it met the second criterion of the five-part Methodist Old Peoples Home test for charitable-institution status.

The Second Prong—Actually and Exclusively Used for Charitable Purposes

However, the plurality and the remaining justices differed dramatically on the meaning of "charity" for purposes of whether or not the property was "actually and exclusively used for charitable purposes." In this regard, the plurality conflated the disjunctive listing of charitable uses in the common law into one and only one charitable use: lessening the burdens of government. Moreover, under the plurality's view, it is not enough to show that the use lessens the burden of the state or federal government. Under the plurality's view, the activity has to lessen the burden of the specific governmental units granting the exemption for the real property. Finally, under the plurality's view, to show that a use lessens the burden of a governmental unit, it has to be shown that the use of the property is both a type of use that is charitable under the plurality's narrow view and that the use is on terms that are charitable.

The Plurality's View of Charity Care

While never expressly saying so, the plurality apparently agreed that giving away care on the premises without any intent ever to receive compensation for that care is a type of charitable use. However, the plurality made clear that, in order for free care to be on charitable terms, the applicant needs to show considerably more than merely never intending to receive payment. In this regard, the plurality indicated that some undefined quantum of care is needed. Merely having a policy of treating all comers regardless of ability to pay and never turning anyone away due to inability to pay is not enough. In the plurality's view, almost nothing Provena did was good enough. For example:

  • Any Medicare or Medicaid shortfall was disregarded and was not considered charity care on the grounds that any payment disqualifies care as being charitable, and participation in the programs is voluntary, not mandatory.
  • Emergency-room service provided to all patients presenting there was disregarded because it is mandated by state and federal law.
  • According to the plurality, screening patients to ensure that they are really eligible for charity care before spending charitable assets is not the approach of a prudent fiduciary ensuring that charitable assets are spent only for charitable purposes; rather, it is the functional equivalent of a for-profit institution's approach to writing off a bad debt. Such arguments by the IRS have been soundly rejected at the federal level in the St. David's Health Care case.
  • Provena was not allowed to "rationalize" the fact that it did not provide enough care just because it served all the indigent who applied for care. Instead, to the plurality, this was evidence that Provena was failing to carry out its Catholic health-care mission. In the plurality's view, if there were too few poor, uninsured, and underinsured in the area to meet the plurality's undefined quantum-of-care metric, then Provena should not operate there but should move its operations to where there were enough patients eligible for charity care.
  • Ambulance subsidies did not constitute sufficient charitable activity because, among other things, the ambulances delivered patients to the emergency room, which was viewed as a feeder of patients to the hospital, which was viewed as operating for profit.
  • Activities that promoted the health of the community, while providing a community benefit, were, in the plurality's view, not charitable.
  • Training of community members and wellness activities were dismissed as marketing.
  • Residency programs were dismissed on the grounds that Provena was paid for those programs.

The Dissent's View of the Plurality Opinion

Two of the five justices dissented from the overly restrictive charitable-use findings. The dissent took issue with the plurality's quantum-of-care metric, and it took issue with the notion that in order to be exempt, Provena Hospitals had to show that its charity care alleviated some identified governmental burden of one of the jurisdictions involved. As to the quantum-of-care point, the dissent concluded that the plurality had inserted a requirement into the statute which had not been there, thus usurping the legislative function, and that the quantum-of-care approach had been rejected by well-reasoned case law in other jurisdictions in favor of a more flexible community-benefit approach. As to the narrow view that the only use that is charitable is one that lessens the burden of the governmental unit granting exemption, the dissent said the plurality had turned a part of the rationale for exemption into a condition for exemption not found in the statute.


As noted, the Provena Covenant opinion settles the exemption issue for the 43 parcels of real property at issue for the 2002 tax year, but it does not establish any new law, even in Illinois. Charitable-care providers throughout the United States, however, can expect that state and local taxing jurisdictions across the country will look at the plurality opinion as a blueprint that can help them defeat real property exemption claims in their jurisdictions.


1. 35 ILCS 200/15-65 (West 2002).

2. 39 Ill. 2d 149, 156–57 (1968).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions