Provena Covenant Decision - When "Charitable Is Not Enough

We have been watching the case of Provena Covenant Medical Center v. Department of Revenue very closely because it addresses the question of how much charity care is sufficient to be considered tax exempt. Last week the Illinois Supreme Court upheld the state tax review board’s decision that, in this case, charity care that equals less than 1% of its revenues is not sufficient to warrant tax exemption in Illinois. The decision adds to the growing number of decisions challenging the exemption of a hospital or healthcare system based on the lack of sufficient charity care (despite the current standard found in IRS Rev. Rule 69-565 which holds that the provision of health services is an inherently charitable purpose that is not obviated by limited hospital access of the medically indigent).

For hospitals and healthcare systems who are starting the already daunting task of compiling the necessary information to complete Schedule H of their Form 990, this decision only adds to the stakes – and makes it clear that more than just the IRS is interested in how much charity care you provide.

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