Oswald v. Hamer
Oswald v. Hamer
Opinion
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¶ 1 Section 15-86 of the Property Tax Code ( 35 ILCS 200/15-86 (West 2012) ) provides for a charitable property tax exemption specifically to eligible not-for-profit hospitals and their hospital affiliates (hereinafter hospitals). Plaintiff, Constance Oswald, filed an action in the circuit court of Cook County seeking a judgment declaring that section 15-86 of the Property Tax Code, on its face, violates section 6 of article IX of the Illinois Constitution ( Ill. Const. 1970, art IX, § 6 ). The circuit court granted summary judgment in favor of defendants Brian Hamer, Director of Revenue,
1
the Department of Revenue, and the Illinois Hospital Association. The appellate court affirmed.
¶ 2 This court allowed plaintiff's petition for leave to appeal ( Ill. S. Ct. R. 315 (eff. Mar. 15, 2016) ). For the following reasons, we affirm the judgment of the appellate court.
¶ 3 I. BACKGROUND
¶ 4 Section 15-86(c) of the Property Tax Code provides that a hospital applicant "shall be issued" a charitable property tax exemption if the value of certain qualifying services or activities provided by the hospital in a given year equals or exceeds the hospital's estimated property tax liability for the same year. 35 ILCS 200/15-86(c) (West 2012). In her single-count complaint, plaintiff alleged that section 15-86(c) commands that the hospital applicant receive the charitable property tax exemption if the statutory criteria are satisfied. Plaintiff contended that section 15-86 was facially unconstitutional because the statute mandates the issuance of the charitable property tax exemption without consideration of the constitutional requirement that the subject property be "used exclusively for * * * charitable purposes" ( Ill. Const. 1970, art. IX, § 6 ). Plaintiff sought, inter alia , a judgment declaring that section 15-86 was "unconstitutional on its face" and an order enjoining defendants from granting any section 15-86 exemptions and requiring defendants to collect property tax from those hospitals that already had been granted such exemptions.
¶ 5 The complaint named as defendants the Department of Revenue and its director. The circuit court granted the Illinois Hospital Association's petition for leave to intervene as a defendant. Plaintiff and defendants filed cross-motions for summary judgment contesting solely the facial constitutionality of section 15-86. The circuit court denied plaintiff's motion for summary judgment and granted summary judgment in favor of defendants. The court found that section 15-86 does not dispense with the Illinois Constitution's requirements for charitable property tax exemption but, rather, the Department of Revenue must still evaluate a hospital applicant's claim for a section 15-86 exemption *631 *186 under constitutional requirements and precedent. Also, the court found that plaintiff failed to show that section 15-86 was inherently flawed in all circumstances. Accordingly, the circuit court concluded that the statute was not facially unconstitutional.
¶ 6 The appellate court affirmed.
¶ 7 Plaintiff appeals to this court. The Champaign County Treasurer et al. , Cunningham Township et al. , and the Illinois Association of School Boards et al. were each granted leave to submit an amicus curiae brief in support of plaintiff. Ill. S. Ct. R. 345 (eff. Sept. 20, 2010).
¶ 8 II. ANALYSIS
¶ 9 The ultimate question presented for our review is whether section 15-86 of the Property Tax Code, on its face, violates section 6 of article IX of the Illinois Constitution. This matter comes before us in the context of cross-motions for summary judgment. Summary judgment is appropriate "if the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." 735 ILCS 5/2-1005(c) (West 2012). When parties file cross-motions for summary judgment, they mutually agree that there are no genuine issues of material fact and that the case may be resolved as a matter of law.
Jones v. Municipal Employees' Annuity & Benefit Fund
,
¶ 10 In construing section 15-86, we are guided by familiar principles. When presented with an issue of statutory construction, a court's primary objective is to ascertain and give effect to the intent of the legislature.
Murphy-Hylton v. Lieberman Management Services, Inc.
,
¶ 11 A. Article IX of the Illinois Constitution
¶ 12 The constitutional backdrop of charitable property tax exemption legislation in Illinois is well established. Generally, the Illinois Constitution does not grant power to the legislature but rather restricts the legislature's power to act. The State's inherent power to tax is vested in the General Assembly. The legislature's power to tax is plenary and is restricted only by the federal and state constitutions. Article IX of the 1970 Illinois Constitution (Ill. Const. 1970, art. IX) generally subjects all real property to taxation.
Eden Retirement Center, Inc. v. Department of Revenue
,
¶ 13 However, section 6 of article IX limits the power of the legislature in the area of property tax exemption in pertinent part as follows:
"The General Assembly by law may exempt from taxation only the property of the State, units of local government and school districts and property used exclusively for agricultural and horticultural societies, and for school, religious, cemetery and charitable purposes." Ill. Const. 1970, art. IX, § 6.
Section 6 of article IX is not self-executing but authorizes the General Assembly to enact legislation providing for an exemption. It is permissible, not mandatory, for the legislature to exercise that authority.
Provena
,
¶ 14 Section 6 of article IX divides property that the legislature may exempt from taxation into two categories: (1) property owned by "the State, units of local government and school districts" and (2) property used exclusively for the purposes defined in the second clause of the section. Ill. Const. 1970, art. IX, § 6. By
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designating the categories of property that the legislature may exempt from taxation, section 6 of article IX limits the legislature's authority to exempt.
Eden
,
¶ 15 One category of property that the legislature may exempt from taxation is property used for charitable purposes. "Charitable use is a
constitutional
requirement. An applicant for a charitable-use property tax exemption must 'comply unequivocally with the constitutional requirement of exclusive charitable use.' [Citation.]" (Emphasis in original.)
Eden
,
¶ 16 Additionally, the term "exclusively used" "means the primary purpose for which property is used and not any secondary or incidental purpose."
Methodist Old Peoples Home
,
¶ 17 This court has repeatedly acknowledged the difficulty of framing a universally applicable definition of an exclusive charitable use.
People ex rel. Nordlund v. Association of the Winnebago Home for the Aged
,
¶ 18 "While the General Assembly has no authority to grant exemptions beyond those authorized by section 6, it 'may place restrictions, limitations, and conditions on [property tax] exemptions as may be proper by general law.' "
Provena
,
¶ 19 B. Section 15-65 Charitable Use Exemption
¶ 20 In conformity with section 6 of article IX, the General Assembly chose to create a charitable-use property tax exemption but with the additional restriction that the property be owned by a statutorily designated organization. Section 15-65 of the Property Tax Code requires not only that the property be "actually and
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exclusively used for charitable or beneficent purposes, and not leased or otherwise used with a view to profit," but also that the property be owned by "[i]nstitutions of public charity," "[b]eneficent and charitable organizations," "[o]ld people's homes," not-for-profit health maintenance organizations, free public libraries, or historical societies. 35 ILCS 200/15-65 (2012) ; see
Provena
,
¶ 21 Prior to the enactment of section 15-86 of the Property Tax Code, private hospitals could apply for property tax exemption as charitable organizations. See,
e.g.
,
People ex rel. County Collector v. Hopedale Medical Foundation
,
¶ 22 In
Provena
, this court, with two justices recusing, unanimously concluded that Provena failed to satisfy the requirements for the charitable use property tax exemption. The plurality opinion reached this conclusion by recounting that the underlying purpose of charitable property tax exemption is the benefit that private charity confers upon the public and, consequently, to some extent, a relief of the State's burden to care for and advance the interests of its residents.
Provena
,
"Conditioning charitable status on whether an activity helps relieve the burdens on government is appropriate. After all, each tax dollar lost to a charitable exemption is one less dollar affected governmental bodies will have to meet their obligations directly. If a charitable institution wishes to avail itself of funds which would otherwise flow into a public treasury, it is only fitting that the institution provide some compensatory benefit in exchange. While Illinois law has never required that there be a direct, dollar-for-dollar correlation between the value of the tax exemption and the value of the goods or services provided by the charity, it is a sine qua non of charitable status that those seeking a charitable exemption be able to demonstrate that their activities will help alleviate some financial burden incurred by the affected taxing bodies in performing their governmental functions." Id. at 395,339 Ill.Dec. 10 ,925 N.E.2d 1131 .
After reviewing the record, the plurality determined that "both the number of uninsured patients receiving free or discounted care and the dollar value of the care they received" were
de minimis
.
Id. at 397,
¶ 23 However, two members of this court concurred in part and dissented in part.
Id. at 411,
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Id. at 412,
¶ 24 C. Section 15-86 Hospital Charitable Use Exemption
¶ 25 In response to this court's decision in
Provena
, the General Assembly enacted Public Act 97-688 (eff. June 14, 2012), which,
inter alia
, added section 15-86 to the Property Tax Code ( 35 ILCS 200/15-86 (West 2012) ). The legislature expressly discussed
Provena
and the legislative intent underlying the statute. The legislature observed that, subsequent to
Provena
, "there is considerable uncertainty surrounding the test for charitable property tax exemption, especially regarding the application of a quantitative or monetary threshold."
"(5) Working with the Illinois hospital community and other interested parties, the General Assembly has developed a comprehensive combination of related legislation that addresses hospital property tax exemption, significantly increases access to free health care for indigent persons, and strengthens the Medical Assistance program. It is the intent of the General Assembly to establish a new category of ownership for charitable property tax exemption to be applied to not-for-profit hospitals and hospital affiliates in lieu of the existing ownership category of 'institutions of public charity.' It is also the intent of the General Assembly to establish quantifiable standards for the issuance of charitable exemptions for such property. It is not the intent of the General Assembly to declare any property exempt ipso facto, but rather to establish criteria to be applied to the facts on a case-by-case basis."Id. § 15-86(a)(5).
¶ 26 Section 15-86(c) provides for the hospital charitable property tax exemption in pertinent part as follows:
"(c) A hospital applicant satisfies the conditions for an exemption under this Section with respect to the subject property, and shall be issued a charitable exemption for that property , if the value of services or activities listed in subsection (e) for the hospital year equals or exceeds the relevant hospital entity's estimated property tax liability, as determined under subsection (g), for the year for which exemption is sought." (Emphasis added.)Id. § 15-86(c).
Subsection (c) also provides guidelines in specific situations, including where "the relevant hospital entity is a hospital owner that owns more than one hospital" and where the hospital applicant is "a multi-state hospital system or hospital affiliate."
¶ 27 Subsection (e) lists the "services and activities" that are considered in making the calculations required by subsection (c). These include "[c]harity care," defined as "[f]ree or discounted services * * * measured at cost"; health services to low-income and underinsured individuals; subsidy of state or local governments; support for State health care programs for low-income individuals; subsidy for treating dual-eligibility Medicare/Medicaid patients; relief of the burden of government-related health care of low-income individuals; and "[a]ny other activity by the relevant hospital entity that the Department determines
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relieves the burden of government or addresses the health of low-income or underserved individuals."
¶ 28 Before this court, plaintiff contends that section 15-86 is facially unconstitutional because it mandatorily awards a property tax exemption based on satisfaction of its statutory criteria, without regard to whether the subject property satisfies the constitutional "exclusive charitable use" requirement. We disagree.
¶ 29 Statutes carry a strong presumption of constitutionality.
Walker v. McGuire
,
¶ 30 Plaintiff observes that section 15-86 does not provide, as a condition for the charitable property tax exemption, that the subject property must be used exclusively for charitable purposes. Further, according to plaintiff, section 15-86 lacks even "any general reference" to the constitutional requirement of exclusive charitable use.
¶ 31 Admittedly, neither subsection (a) nor (c) of section 15-86 contains an explicit reference to the constitutional requirement of exclusive charitable use, as is provided in section 15-65. While such plain language crystallized the intent of the legislature in enacting section 15-65 (see
Eden
,
¶ 32 We presume that the legislature enacts statutes in light of the constitution and intends to enact constitutional legislation (
Gill v. Miller
,
¶ 33 In the case at bar, while section 15-86(c) does not expressly provide that the hospital charitable property tax exemption is limited to applicants that satisfy the constitutional requirement of exclusive
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charitable use, section 6 of article IX of the Illinois Constitution does say so, and we presume that the legislature intended to comply with this constitutional limitation. See
North Wichert Drainage District
,
¶ 34 Beyond this presumption, the legislature stated in section 15-86(a)(5) : "It is the intent of the General Assembly to establish a new category of ownership for charitable property tax exemption to be applied to not-for-profit hospitals and hospital affiliates in lieu of the existing ownership category of 'institutions of public charity'." 35 ILCS 200/15-86(a)(5) (West 2012). This is an explicit reference to section 15-65, which in turn contains the explicit reference to the constitutional limitation of exclusive charitable use.
¶ 35 Nevertheless, plaintiff contends that section 15-86(c), which provides that if the hospital applicant satisfies the statutory requirements for a hospital charitable property tax exemption, the hospital " shall be issued a charitable exemption for that property" (emphasis added) ( 35 ILCS 200/15-86(c) (West 2012) ), mandates the issuance of the exemption without consideration of the constitutional requirement of exclusive charitable use. Indeed, according to plaintiff, there is "nothing in the language" of section 15-86 suggesting that, if the requirements of subsection (c) are met, a hospital may nevertheless be refused the hospital charitable property tax exemption. On the other hand, defendants contend that section 15-86(c) is not mandatory but, rather, permissive or directory.
¶ 36 Plaintiff and defendants invoke the rules of statutory construction pertaining to the separate questions of whether a statutory provision is mandatory or permissive and whether the provision is mandatory or directory. See
People v. Delvillar
,
¶ 37 "Legislative intent, however, remains the primary inquiry and controls the court's construction of a statute. [Citations.] Traditional rules of statutory construction are merely aids in determining legislative intent, and those rules must yield to such intent."
Collins v. Board of Trustees of the Firemen's Annuity & Benefit Fund
,
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Gill
,
¶ 38 In the case at bar, the legislature was certainly aware of section 6 of article IX of the constitution and its requirement of exclusive charitable use, and it intended to enact a constitutional hospital charitable property tax exemption. To construe subsection (c) as plaintiff argues would cast doubt on the constitutionality of section 15-86, which, as we have concluded, is a result the legislature could not have intended. "Accordingly, an interpretation under which the statute would be considered constitutional is preferable to one that would leave its constitutionality in doubt."
Braun v. Retirement Board of the Firemen's Annuity & Benefit Fund
,
¶ 39 Therefore, a hospital applicant seeking a section 15-86 charitable property tax exemption must document the services or activities meeting the statutory criteria. Additionally, the hospital must show that the subject property meets the constitutional test of exclusive charitable use.
¶ 40 Significantly, plaintiff's action is framed solely as a
facial
challenge to the constitutional validity of section 15-86 of the Property Tax Code. As such, we have before us only the statute itself.
Reno v. Flores
,
¶ 41 Several of plaintiff's supporting
amici
invite this court to discard the "no set of circumstances" test in determining the facial constitutionality of legislation. However, plaintiff herself does not raise this issue. An
amicus
takes the case as it finds it, with the issues framed by the parties. Accordingly, this court has repeatedly rejected attempts by
amici
to assert issues not raised by the parties.
Bruns v. City of Centralia
,
¶ 42 In the case at bar, plaintiff concedes before this court, as she did before the appellate court (
¶ 43 While it is possible that specific future applications of section 15-86 may produce actual constitutional problems, it will be time enough to consider any such problems when they arise. See
Napleton
,
¶ 44 III. CONCLUSION
¶ 45 For the foregoing reasons, the judgment of the appellate court is affirmed.
¶ 46 Affirmed.
Chief Justice Karmeier and Justices Thomas, Kilbride, Garman, Burke, and Theis concurred in the judgment and opinion.
Brian Hamer is no longer the director of the Illinois Department of Revenue. Thus, the current director, Constance Beard, has been substituted as a party by operation of law. See 735 ILCS 5/2-1008(d) (West 2012).
Because section 6 of article IX of the 1970 Illinois Constitution merely rephrases its predecessor provision in the 1870 Illinois Constitution, " 'cases interpreting the permissive legislative exemptions under the Constitution of 1870 are equally relevant to the limits of exemption now constitutionally permitted.' "
Eden
,
Also, section 15-86 expressly provides that an otherwise eligible hospital applicant is not precluded from obtaining or maintaining a property tax exemption pursuant to other provisions of the Property Tax Code. 35 ILCS 200/15-86(i) (West 2012).
Reference
- Full Case Name
- Constance OSWALD, Appellant, v. Brian HAMER, Director of Revenue, Et Al., Appellees.
- Cited By
- 8 cases
- Status
- Unpublished