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Illinois Supreme Court delivers partial win for hospitals on property taxes

The Carle Foundation Hospital is seen May 2, 2016, in Urbana. The hospital is at the center of a court battle over whether to nonprofit hospitals in Illinois should have to pay property taxes. (Robin Scholz / The News-Gazette)

The Illinois Supreme Court has vacated a lower court’s decision against a law that allows many hospitals to skip paying property taxes — a ruling that helps hospitals but doesn’t go as far as they would have liked.

The decision could save Illinois hospitals hundreds of millions of dollars, while disappointing municipalities that have been hoping to pull in additional tax revenue from hospitals.

Under a 2012 state law, Illinois nonprofit hospitals don’t have to pay property taxes if the value of their charitable services is equal to or greater than their estimated tax liability. Last year, the Illinois 4th District Appellate Court ruled that law unconstitutional. On Thursday, the Illinois Supreme Court vacated that appellate ruling and sent the case back to a lower court for reconsideration.

The Supreme Court declined to rule on the law’s overall constitutionality — something hospitals in the case had wanted — saying doing so would be "premature." But its decision to vacate the lower court’s ruling leaves the law exempting Illinois’ nonprofit hospitals from having to pay property taxes in place.

The Supreme Court said the appellate court lacked jurisdiction in the case when it made its decision.

The case involves the city of Urbana, among other taxing bodies, and the Carle Foundation Hospital there, but it has statewide implications.

About 156 of Illinois’ more than 200 hospitals are not-for-profit, including many of the biggest names in health care in the Chicago area, such as Advocate Health Care, Northwestern Memorial Hospital and Rush University Medical Center.

More to come.

Twitter @lschencker