Focus 580; Non-Profit Status Issues in Champaign County and Beyond

In this part of focus 588 will be trying to talk in a general kind of way about the issue of tax exemption. There are now across the country today a lot of organizations that are tax exempt. However one of our guests this morning for the program John Colombo says that the nation's political leaders have never really at least not recently sat down and thought carefully about why it is that we grant tax exempt status and what we expect from those organizations who get it and perhaps also what it means to a community that some kind of large organization gets that tax exemption. This is something that members of Congress both in the House and the Senate have been thinking about quite a bit recently. And in fact our guest here John Colombo and also Stan Jenkins who chairs the champagne County Board of Review both of them earlier this year testified before Congress talking about this very subject. I will try to talk a little bit about the issue of tax exemption and some of the conversation that's going on in Washington and perhaps some of the ideas that people there on the Hill have about. Debating this and perhaps making some changes in the laws that govern the tax

exemption and people who are listening of course have questions and our guests will take their best shot at responding to what people might have to say here in Champaign-Urbana 3 3 3 9 4 5 5 is the number to call. We do also have a toll free line so that means if it would be a long distance call for you and you may use that number and the calls on us. That's 800 to 2 2 9 4 5 5 and again just to introduce our guests. John Colombo He's a professor of law here at the University of Illinois and tax exemption is a particular special focus and interest of his in his work. And Stanley Jenkins chairs the Champaign County Board of Review and this is the body that's responsible for reviewing applications for property tax exemptions here and in Champaign County. And as I said the questions are welcome at any point here you want to give us a call. We would be happy to hear from people. Well thank you both for being here. Thank you. We appreciate it. Just in in a general way maybe I could start by asking John Colombo and I know that I have have come across some quotes from you on this subject where you said something to the

effect of people would be surprised they might be shocked in fact if they knew how many different kinds of organizations there were across the United States that had a tax exemption. Can you give some some overview that that's true there. At last count there were over a million organizations on the Internal Revenue Services list of tax exempt organizations and. Under the Internal Revenue Code there are twenty eight different kinds of organizations that are eligible for tax exempt status. For example most people don't realize that the National Football League is a tax exempt organization now not the individual teams the individual teams obviously are for profit organizations but the league itself qualifies for tax exemption under under Section 5 of the NC 6 of the code which is for trade associations. So you have lots of trade associations fraternities and

sororities are tax exempt and then you have this whole classification of organizations that we call charitable organizations which actually is the biggest subset of tax exempt organizations and charitable organizations are very important because they get even more tax benefits than just the exemption. It's charitable organizations that have the ability to get tax deductible contributions charitable organizations can issue bonds that the interest is tax exempt. They even get postal breaks for on the on their mailing so. So the sector is very very broad and a lot of organizations qualify for tax exemption but it's important to remember that there are different kinds of tax exemption and not all the organizations that qualify for tax exemption are ones that we consider charitable organizations. Is it in minimum qualification that you'd be a nonprofit. That's correct. All tax exempt organizations have to be nonprofit. But it's again it's important to realize that

just because you're nonprofit is not mean you're automatically tax exempt. Tax exemption is governed by federal and state tax law. Non-profit status really just means that you have no owners that you can distribute any profits that you may have. It's funny because the word nonprofit people think it means you can't make a profit Well that's not true in fact nonprofit organizations often make profits many of them make very substantial profits. The word nonprofit means that you don't have any owners you can't distribute that profit to any individuals. In champagne County Mr. Jenkins Do you know just offhand how many tax exempt organizations there are. No I don't or a lot of them. Yeah I don't well I'm sure that there are many and significant ones and actually we're sitting in the building that belongs to one of them the University of Illinois. Are there a lot. Are there many that are of that size of the size of the U.S..

No. I mean obviously the you advise going to have the most state owned property which is going to be tax exempt municipal properties exempt. And then we get into the categories of property Dr. Colombo referred to is for you the you and the board that the people in the position of making the ruling when someone comes in they are applying for tax exempt status and you have to decide when do they qualify. How clear are the rules to you. And is it a matter where any anyone almost anyone we could sit them down and say OK here are the rules here's this organization that's applying for the tax exemption What do you think would most people just say well yes that's that's pretty clear or there are many cases where you could argue one way or another that a particular organization either is or is not how clear is it. Well. As with a lot of the state laws there's ambiguity and it's. And though it is spelled out pretty clearly in terms of charitable status

that's directly or is directly referenced in the Illinois constitution. It's addressed in the Illinois property tax code and it's also addressed over almost nearly a century of case law has addressed what qualifies as a charitable institution dust being tax exempt as a charitable institution. And in every case the constitution statutes it says that the organization has to be exclusively. Charitable and it cannot be charitable by any secondary or incidental purpose it has to be exclusively charitable. And what this does is sets the bar very high for organizations to meet that qualification of being tax exempt as a charitable organization. Now the way it works in Illinois is when an organization applies for tax exempt status.

That application goes to the local Board of Review the Board of Review writes a recommendation to the Illinois Department of Revenue But then as the Department of Revenue actually grants already Nies exempt status in is how how often is it that they would overrule their or rule differently from the recommendation of the of the of the local boards did they pretty much go with what local boards say or no. I mean it's not uncommon that they do not uphold a particular recommendation. But it it certainly is not a rubber stamp process. We can do our best efforts to gather all the information we're supposed to before we forwarded on to the apartment of revenue but it is very common that the Department of Revenue then has further questions of the applicant and then they will directly contact the applicant and requests for specific information. In addition to what's already been submitted. Where are the where the big questions

though here. You know where where is that where is the wiggle room in this whole process. Well the biggest question really boils down to the category of organizations that we call charitable organizations those are the ones that are the most important for federal tax law and they are the ones that are most important for state property taxes because as Stan has pointed out only charitable organizations are eligible for state property tax exemptions so the question the major question and the question that we grapple with at the federal level and at the state level is what exactly is it that causes you to be a charity. How do we define. What a charity is. And the interesting thing is that at least at the federal level this is a question that is not very well explained in federal law. Federal law says you have to be a charity to get tax exemption under 5 1 C3 to give some examples educational organizations religious organizations but it doesn't really give you any specific

standards for what constitutes being a charity and as a result you find organizations that operate in many different ways we have organizations that are dedicated to poor relief and those are the kinds of things that many people automatically think of as being charities the Red Cross the Salvation Army those kinds of organizations. But you have organizations that also operate as they look a lot like for profit businesses that manage to get tax exemption as well. Credit Counseling Agencies are a big issue with the with the federal government right now and hospitals are a big issue with the federal government because these organizations tend to charge for their services and look a lot like for profit businesses in some ways. You know that's I guess the this is one of the really difficult issues that you could have an organization that provides a very kind of the direct service a homeless shelter. And it seems pretty clear that

what that organization does and. There's the function and that that that's not much doubt about that. That is a charitable organization and it's deserving of all of the rights and privileges that attach. But when you For example if you have a hospital. Yes it's true that they may provide some of that kind of same sort of service but it seems that people in that business have another argument that they make and there is some law that they can refer to to back them up and they say but but we're providing a general kind of benefit to the community because we're in the healthcare business and we treat people who are sick and we make the community healthier and that's a good thing I mean that that we're providing a public benefit and no one is going to argue with that really on the face of that. But then the question is well OK you know you would say well wait a minute there's there is some sort of fundamental difference between between the hospital and the the homeless shelter. How do you negotiate

that whole argument. Well that's the problem. And at the federal level hospitals have long since 1969 we've recognized that hospitals are exempt under what we call the community benefit theory that is that they're providing this general benefit of providing health care for the community. But it is an issue because when I teach my tax exempt organizations class I often I start the class with asking students this question I say it's Suppose you're a you're a resident of Redmond Washington which happens to have a pretty well-known corporation by the name of Microsoft there and you're asked to make a choice do you want to keep Microsoft Corporation in your local community or do you want to keep your local hospital you get a choice you can't have both. Which one would you choose to keep. And almost invariably the students say well we would keep Microsoft because of the jobs they provide because of the contribution to the local tax

base and so on and so forth. So there is there is a very strong argument that a lot of for profit businesses provide very strong community benefits as well I'm not I'm not doubting that hospitals provide very strong community benefits but a lot of community benefits are provided by the for profit businesses that pay taxes and employ people and and provide benefits to their community the businesses who support Little League provide benefits to their community as well. So it's a real problem for at the federal policy level to to define what kind of community benefit it is that ought to result in tax exemption and what kind of community benefits don't result in tax exemption. And it's been a particular problem in the hospital sector where we have some very difficult issues deciding why hospitals which very often operate as fee for service businesses ought to receive tax exemption. And a lot of that debate ends up centering on charity care that is

free care for the poor and how much of it the hospitals nonprofit hospitals provide. Well professor Columbia here was just talking about the fact that the national level perhaps this is a difficult sort of distinction to make. How about at the local level. Well at the local level under state law for a property to be exempt. It has to be both an exam to use and it has to be an exempt ownership. Both hurdles have to be crossed locally in the case of the two hospitals in each case and let me back up and say case law goes on to say that the statute goes on to say that the property cannot be leased or otherwise used with a view to profit. Well in the case of both hospitals there were significant areas of the. Exempt hospital itself being leased out to other for profit entities that were working inside of the hospital in terms of use that is somewhat of a deal breaker it's not a complete deal breaker because there can be certain pro

ration staking out to determine what what portion in terms of square footage is used by these for profit entities and the Department of Revenue may in fact rule that well 30 percent is taxable but the other 70 percent is tax exempt. But the use is certainly an issue as well as the ownership. And then when we get into ownership it does become more of a question of some of the issues Dr Colombo referred to and that is how much charity is dispensed to the community in return for that tax exempt status and looking at bat as well as a variety of other issues around that ownership. It became increasingly apparent to us that we did not feel at that standard that burden of proof had been met to demonstrate that it was in charitable ownership or in charitable use or exempt ownership or exempt use I should say.

I might I might point out that Ellen Noir is actually pretty unique among the states in the way it defines its tax exemption standards particularly as they apply to health care providers and hospitals. Ellen like case law. I think it's pretty clear that in order to be exempt hospitals have to have a charity care program. They have to be a dispensing charity. And the case law indicates that that means they have to be providing free care for the poor. That's not true. And a lot of other states a lot of other states have standards for exemption that are as vague as the federal standard so you don't really know what it is that hospitals have to do in order to get exemption and some other states. What do you I just I'm wondering as a kind of a general question to the extent you can answer it as you look at various nonprofits around the country whether you think that there are a lot of cases where. Where are the organizations that are claiming the tax exempt status are pushing it. If they are that they're pushing things to the to the very limit that they that they can push it to to maintain their tax exempt status. And yet

just come as close as as possibly to to stepping over the line as they possibly can and you know maybe that we maybe we wouldn't blame them for doing that. Well it's all going to be surprised of that. It's pretty clear at the federal level at least that the two kinds of organizations that I think push the envelope are credit counseling agencies and hospitals and I should say that we have part of the problem is as a society we sort of have this schizophrenia about nonprofit organizations we want them to be entrepreneurial we want them to generate funds to help to help their mission. And then when they become entrepreneurial when they when they start to operate like a business then we get very concerned about that and say well now what are they doing to to to. What are they doing to qualify for exam status. So as a society we have our own problems with this issue. We we need to make a decision do we want our nonprofits to be entrepreneurial or or don't we.

But it is clear that those that are the hospitals and credit counseling agencies are two of the prime examples those are the ones where individual cases not all cases but in individual cases you will see organizations going as far as possible up to the line of hospitals that want to and want to do as little charity care as they possibly can. Credit Counseling Agencies that are really just accepting fees almost as almost as referral fees so that they can and then channel people into into different lenders. And those are those are the issues that are I think a primary concern in terms of qualification for exempt status to join it. I just wanted to introduce real quick. Both of you again for people who might have tuned in and also we have a caller here we want to bring into the conversation. John Colombo is professor of law here at University of Illinois law school and this whole subject of tax exemption is a particular interest of his in his work he teaches classes that deal with the subject.

And Stanley Jenkins is the chairman of the Champaign County Board of Review and this is the body that's responsible for reviewing applications for property tax exemptions and has he explained that they review it. They go over all the information. They make a recommendation that ultimately then it goes to the Illinois Department of Revenue that are the that's the final voice one one way or another. And it is possible that the Illinois Department of Revenue would go with the recommendation or not or. Take the process further collect more information and so forth and we're talking generally about the idea of the tax exemption how it is that we decide what organizations can qualify and what they are expected to return to the community and the questions are are welcome 3 3 3 9 4 5 5 toll free 800 to 2 2 9 4 5 5 here we do have a caller in Urbana to talk with. Line 1. Hello. Good morning. Yes I wanted to ask for more information. Something that's rarely discussed and you brought it up earlier that is the theory

under which tax exemption is granted. And in particular I wondered based on the article we heard this morning about inheritance taxes what generally is the theory under which some inheritance is can be taxed and others can't. There's always a lot of political discussion on individual cases and particular laws. But. I've never heard an underlying theory of inheritance. And could you address that. Thank you. I don't know can you address that. Well the inheritance tax or the estate taxes is out of my field but I have I have colleagues at the college who know a lot about the estate tax laws. What I can comment on is is that a couple of other questions one the first one which is why do we grant tax exemptions Well that's a really good

question. I know the answer that historically the historic answer to that was that churches were tax exempt and the reason they were tax exempt is because people thought it wasn't a nice thing to tax God so. So historically it's quite clear where we got our tax exempt status from. It was the notion that that men could not tax God and therefore churches and temples were tax exempt and then over time that expanded to other kinds of activities. Schools for example educational organizations. But but they were exempt largely because in the in the 16 17 even 18 hundreds. Most schools were religiously organized so they were related to religion so they were related to this concept of. We shouldn't tax God in the United States we began to expand tax exemption to many other secular activities. And now I would say that our general thought is we grant tax exemption because these are organizations that provide some kinds of public

benefits that are not being provided by either the private market or by government. So they operate in an area in which services are unavailable either from the private market or from government. And that's the basic theory I think on why we grant tax exemption. The question about the caller's question also raised another thing which is why do we allow people to take deductions from their tax taxes for donations and that's often where you get large estates being escape escaping tax because they donate a lot of money to charitable organizations. And the answer there I think is pretty simple if we have decided as a society that we want to encourage private philanthropy and giving a tax deduction is the way to encourage private philanthropy. So if you don't like that idea well I would tell you talk to your congressman about it but it's pretty clear that that's why we do it. There is a I think one of the questions and I don't I don't know if this is something that we can talk about in a general way but I think one of the reasons that we want to have Mr. Jenkins on the show is at least to try to

get at the issue of. What it costs what granting tax exemption cost the community. We we think that there are benefits certainly tax exempt organizations would argue that they that they benefit the community and in many ways by the very services that they provide and in many cases I'd say well we would agree. Yes indeed they do provide benefits to the community but we also do have to acknowledge the fact that there's a cost because we're losing that revenue that would come from the taxes that they would otherwise pay that we would use for all of the services that municipalities provide. So we may be gaining on the one hand we may be losing on the other. Is it actually possible in some general way to talk about what for example what in Champaign County we did we lose because we grant the tax exemption to these organizations. I can't give you a dollar amount but I mean it's literally millions and millions of dollars. As Dr. Colombo said exemption in

my view at least is by virtue of the charitable benefit that is returned to the community. And the tradeoff is if the organization is tax exempt one example. One of the local hospitals by their own numbers contribute about one point three million dollars in charitable care to people who deserved free or discounted care at at their cost on just two parcels of property. The tax savings was about two million dollars. This isn't even a dollar for dollar tradeoff this is one of the issues we looked at. So two million dollars worth of tax savings versus one point three national charity care returned to the community now. Never mind the other properties that this institution own that are also tax exempt and the savings from those properties. Never mind the sales tax exemption which saves them millions of dollars a year that they're not paying and sales tax. Never mind the fact that they're exempt

from paying corporate and state and federal corporate income tax. Never mind all those. We're talking just two parcels there was a two million dollar savings and there is one point three return to the community natural charity care. This just didn't make sense to us. Well that now let me get some callers here we'll get right to but now let me come back to John Colombo then. As people particularly now in Washington are thinking about this whole business. I mean how would they how do they view a case like that and do they say. Do they say that it's in any way a federal responsibility to this say well this is State of Illinois business. Do they do they also look at this this business of the gain versus the cost and do they say well at least at all there ought to be a dollar for dollar kind of swap and if you get into a situation where you're actually losing more than you get then then what do we do about that. It is a concern the property tax obviously is a local concern that Congress doesn't really have any any particular interest in how Illinois administers its property

tax laws. But there is a similar concern at the congressional level because of the revenue lost by tax exemption at the at the federal income tax level. For example one number that's often thrown around with respect to nonprofit hospitals is that the federal government loses about 8 billion dollars a year. Because of the federal tax exemption and researchers have shown that hospitals as a whole do not give back 8 billion dollars a year in charity care. So there is concern at the congressional level about what are we getting for tax exemption What is the quid pro quo. Now I might know that you know that hospitals would make the argument that they give back more to the community than just charity care that they provide educational programs that that the fact that we have a level one trauma center in in Champaign-Urbana is a big benefit to the community there are a lot of communities that have level one trauma centers so they would make the argument that that the concept of community benefit

extends far beyond the notion of just charity care. The problem with that and the problem that I've often had with that is is that you can argue that almost anything is a community benefit. And and when you start quantifying things it gets it gets very difficult to figure out what the tradeoff is. And that means of course that you know you can always argue that we're giving back more to the community than the than the exemption is worth but yeah the the the dollar tradeoff is of serious concern to to some people on Capitol Hill. Let's talk with some of the folks here of champagne callers next line number two. Hello. Oh yes I remember hearing once that the champagne country club that was struck me is totally unfair and when did I hear that correctly. I don't know specifically whether the champagne country club is tax exempt but I could tell you that as a general matter a club's fraternal organizations and clubs do get tax exemption under federal tax law. They're

not charities that is you can't make tax deductible contributions to these organizations but they are tax exempt and do not have to pay federal income tax. Now what about real estate tax the amount of land prime real estate taken up by the sampling country club would be a significant revenue loss in real estate terms and doesn't seem to me to be any justification for them not paying us a very exclusive owners only private club. Well let's have well-tested Jenkins answer that question. He ought to know. Well I don't specifically know if the champagne country club is taxable or if it is exempt. Just as some background information as to how this process works once exemption is granted by the Department of Revenue. Subsequent to that each year a status form has to be re submitted to the local supervisor of assessments and that status forms simply says that the ownership in the use is the same now as it was when the exemption was really granted

those status forms. We never did. We the Board of Review. We never deal with them we typically don't even see them. Went on tour with it on the front end when they're first applying. If one were to sit in my situation right now and look at that and say on the face of it it strikes me is unfair and equitable perhaps was pushed through. Underneath someone's eyes when you know there was no scrutiny and perhaps this should be revisited How would how would that become revisited some time talk about real estate taxes in particular here. Well it's a good question and I'm not sure there's a simple answer to it because once that exemption is granted and as long as those status forms are returned on an annual basis affirming that the use is the same in the ownership is the same then that exempt status continues about the only way that realistically that that would ever change would be at the local township assessor took it upon himself or

herself to go out and revalue that property put it on the tax rolls and then trigger a new application process. And in each case with a local hospitals for varying reasons that is what happened they were put back on the tax rolls. That triggered a re-application process. And who would one speak to to have that done. Well I mean you'd certainly start with your local assessor of the township assessor or the supervisor of assessments in Chester. And Joanne Chester is the township assessor for Cunningham Township. And it was the same kind of club in hand Township. Now the champagne country club is actually in the city of champagne Township. And who is the. The tax assessor for that. That's Brian Christie. Christie let let me just break in for just a second because I personally don't know whether whether the champagne country club pays taxes or not but I'd be very surprised if they didn't and the reason for that is because

under L in the law a property tax exemption is available for charitable institutions not for private clubs. So it would be it would be surprising if champagne County if the champagne country club was not paying property taxes because I don't believe they would qualify as a charitable organization. It we're OK with I'm glad here that you you know that it struck me as unfair and I just kind of can't believe it then I never thought about it again until I heard this conversation I thought well you know we should really make sure that isn't true. Well I'd be totally inequitable if you want to say if you want to find out if in fact they are exempt or not you can call 3 8 4 3 7 5 8 and just whoever answers the phone ask them to punch up the Country Club and see if they've been exempted or if they're actually paying a property tax bill. OK. Appreciate your hope thank you and that this is the kind of thing that is a matter of public record. Yes you can so it's not it's not a secret no big secret here and it is all public radio to go to

county records. All right let's go to Urbana. This is lie number three. Hello hello. Yes I think when you look closely what you're going to find is the champagne country club isn't part of the city of champagne there too big the city can't take them in without their willingness and they're not willing that that that may be that if they have not been annexed in but just divert by virtue of not being part of the city champagne does not mean that they would not be paying property taxes right now but they won't be paying for say champagne school. As an example no yes they would be I'm sorry to disagree with you here but the your the tax dollar is actually broken up to about nine or 10 different taxing bodies in the city of champagne corporate city of champagne is just one of those taxing bodies now if they have not been annexed into the city of champagne. They may not be pained champagne city tax but they would be paying tax into the school districts Parklane college to force

preserve county government township government so on and so forth. Well somebody better look at that but they have they've never voted being part of champagne. OK well I don't want to be. Thank you bye bye. Conan to another caller this is someone on the cell phone line number one. Well hi I'd like to make two brief comments. I missed part of the show so you may have already covered this but in my accountant's office he has the original tax form that was developed with nearly nineteen hundred or so and it's very interesting because there's a tax exemption built right into the a very original form where the merchant to emotions of vessels more or did not have to pay taxes. Not the sum of their profits. So there may have been a concept of we don't tax God but there was certainly political influence from the very beginning of the of the

taxation of the American people and the second point I want to make that is just sort of relevant to something you said is that we have a one time good governor. I'm not going to comment on the government we have now. And he pointed out that we would never have a fair education in this state as long as educational money was being based on local property taxes and nobody wanted to do that. And that's never been popular and I think when sometimes we talk about the government and what they're willing to do and what they're not willing to do in helping people make themselves self-sufficient you find over and over and over again that the American population is more than willing to help people using other people's income but not their own. But what they don't want their property tax for anybody else's purpose and we ought to

recognize that. And that's what the American reduce not just the government involved in that. I think I see. Why make that comment. Thank you John. Well I don't know if you want to comment on that. This whole business of school funding as long as I can remember. So we're talking about probably a good 30 years and maybe longer than that. People have been talking about changing that mechanism. And in fact just recently some members of the legislature in Springfield again put out this proposal there to change the reliance on the property tax to fund the schools and I don't think it went too far and there doesn't seem to be a whole lot of sentiment in Springfield to make that change. I expect we're going to be talking about it next year and the year after that and the year after that but where they are whether anything is ever changed. I don't know. It would surprise me actually if that change happened. Yeah I you know that gets to a sort of general tax policy that's sort of far out of range of tax exemption. And certainly you can have opinions about whether

property taxes are an appropriate way to fund any kind of local local service and particularly local schools. But that's just sort of a general tax policy question that the politicians are going to have to resolve sooner or later. Well let me just say that we are. We started out at least talking about the issue of tax exemption Why is it that some organizations get tax exempt status what do we expect from them. What's the mechanism. And part of the reason that we're doing it is that we know that in Washington now recently there has been some conversation both in the House and the Senate about this whole issue and about whether in fact the rules for tax exemptions should be changed or possibly should be tightened. And a both of our guests have this past spring testified in I think it was it was the house was yeah. It was always seen as committee both of them were there in Washington among the many people that I'm sure were there testifying talking about this issue of John Colombo who's professor of law here at the University of Illinois and tax exemption is a particular special interest of his.

Stanley Jenkins is chair of the champagne County Board of Review and they're obviously responsible for reviewing applications for tax exemptions. One quick clarification. The chairmanship of the board rotates periodically I'm no longer chairman. But I was it's time I just was going on that's OK he's a former chairman and a member current member of the champagne County Board of Review and questions are welcome. 3 3 3 9 4 5 5 toll free 800 2 2 2 9 4 5 5. Urbana is up next going to. Hello good morning. I missed the first half of the program. So if you've already touched on these issues you can move on to other things and I'll listen later on the Internet the first thing I was wondering about was how the university's tax exempt status affects Urbana versus champagne. There's an impression among people that I know in Abana anyway that Urbana get hurt more than this by them and I was hoping I'd comment on that. And the second thing is exactly

really the tax exemptions. So maybe you don't want to discuss it but periodical you there are areas that the MTV decides and America that don't want to be on XM for the MTV because they don't want higher taxes. I was wondering Will we've seen this just in the last couple they've assessed Southwest Sampaio I was wondering what your thoughts were on those two issues. OK well this the second I don't know I don't know that it is something that we can comment on or does it really just doesn't fall within the area that we're talking about or really that the area that the guests deal with the first question though I expect by that perhaps. Stan Jenkins does have an answer. When you take a look at the amount of university property that's how much is in Champaign how much is in Urbana How do you know how they're Brixton. I don't know the exact breakdown I believe Urbana probably suffers more grateful that I supposedly do than the city's champagne although I do know there's been some agreements drawn up between the university and I don't know if the

city or the school district to lessen the impact of those tax dollars not coming in to help educate children and in many respects you have a lot of university families come in living in Urbana that have children in the school district but yet those properties. That the university owns and oftentimes where these families live with their children may be tax exempt because they are university owned. But there have been some agreements to mitigate the impact on the school district between the school district and the university. OK let's talk next with someone in Savoy 1:3. I have a couple questions. If in a previous example a tax exempt hospital provides one million dollars of of charitable care to patients who are in need of that care and the

local tax system loses say two million dollars in real estate taxes. Is that is that accurate or fair to assess that relationship on a dollar to dollar comparison because one million dollars is being directly or one million dollars is is being directly applied to health care patients who need that type of assistance. But if if the house were not tax exempt in giving. Say two million dollars in real estate taxes to the municipality would one million of that 2 million end up benefiting health care patients. Or would it be put into more of a general type fund that would that really benefit patients to the same extent that it would be under the scenario that the House those tax exempt in providing that type of care. And my second question is do the speakers have an opinion as to whether or not there was any relationship between the tax exempt status

hospitals and the rate of increase of health care costs and if so could you please speak to whatever the that your theories might be on that relationship. OK I'll take a stab at it both of those questions with respect to the first of the dollar for dollar comparison that that is an issue. They the hospitals would would argue that it's not fair to make a dollar for dollar comparison because as you point out there is a flow of money directly to a need for health care. And they would also say that they do a lot more than just provide charity care. My own view about that one is you've really asked a question about how much do you trust your local government and I would say you know if you if you don't trust your local government to collect the 2 million dollars in taxes and spin them for the right things then you might prefer the system we've got now. If you do like your low if you do trust your local government to to make appropriate decisions in the public good and that's in theory why we have a government

then. Seems to me it would be a better deal for the government to collect the 2 million dollars and spend it on the things that it believes is important for the citizens to have as as part of their governmental functions with a now forgotten with the second question. The second question was to. I have an opinion as to whether or not there is any relationship between the tax yes hospitals and the state of increased health care. The answer to that is probably not the. There been a lot of studies done of comparing both nonprofit and for profit hospitals and what those studies generally find is that there's not much difference in the rates that are charged there's not much difference in in the services that are provided. There's not much difference actually in the amount of charity care they provide. People actually don't realize that a lot of for profit hospitals provide charity care. They call it bad debt because their accounting for it in a for profit way but they

actually do provide charity care. And interestingly enough many academic studies as shown that for profit hospitals tend to provide similar amounts of charity care as as nonprofit hospitals. But it doesn't appear that there is any relationship any at least not one that we can track down between exempt status and the increases in health care costs that seems to be driven by market factors that are beyond sort of the ownership method that you have for health care organizations and very much. If I can if I can also add that charitable status is driven by driven by more than just an analysis of that dollar for dollar tradeoff. I mean the three major controversies that are. Really caught fire and gained a lot of national attention is how the uninsured patient is charged and it is not uncommon it is very typical and the hospital industry today if if two people

go in the hospital for exactly the same care service and one has no insurance in the other one is insured that person with no insurance is going to be billed 2 to 5 times higher than the person with insurance for exactly the same bandaid or aspirin. The second part the second controversy that's that's gotten legs here in regards to charitable status is the availability of charity care in the amount of it that's what we've been talking about. And the third is the collection practices of hospitals. And how they deal with patients who have been unable to pay and hair is kind of the scenario that we ran into that just didn't make sense to us. If you have an uninsured patient who goes to hospital and is billed more for the same service than anyone else is billed. First of all it should be recognized that most people who do not have insurance it's not by choice it's because of economic circumstance they can't afford insurance in the first place. So then you have

someone goes in the hospital. They're billed more than anybody else for exactly the same service and then when they can't pay they wind up getting dragged through the court system for payment and the results of these collection practices have been pretty profound in terms of how it affects people's lives. I mean once a judgment is made against a patient who is unable to pay I mean and these are examples that come right out of this community property has been seized wages are being garnished. People have been forced into bankruptcy. Arrest warrants have been issued and in some cases people have actually been jailed because they did not appear in court over a hospital bill. Now when we looked at the entire picture of what was going on dealing with the pricing of the uninsured the amount of charity care provided and the collection procedures we didn't think these activities were be fitting in a charitable organization. And especially when measured against the

language of the Constitution the statutes and case law. Yeah and I think and that's here. There are some very specific questions here for this community in this particular situation I think also do. What would a prosecutor saying before it raises to me sort of some general questions that again sort of go to the policymakers particularly when you take a look at the you take hospitals for profit nonprofit and you set them aside one another and you look at what they do and you have to ask the question what exactly is the difference here. What's the difference between the port the nonprofit and the for profit. There doesn't really seem to be much of any difference. That's exactly right I mean the the bulk of academic studies that have been compared and comparing nonprofit and for profit operations show that there is no discernible difference in the quality of care in the cost of care. There's not much of a difference in how much charity care is given. There was one recent study done by a person at the Michigan Law School who that indicated that nonprofit hospitals may provide more unprofitable

services then for profit hospitals but query why that is that may just be a historical artifact because hospitals historically have been tax exempt so it may just be that that's a historical artifact so the bulk of evidence that we have is that in markets where you have both for profit and nonprofit hospitals the behavior really converges and there really isn't any difference between the two. And and many respects I mean personal view here. I think hospitals have every right to be paid for goods and services provided. Like any other business I think they have a right like a for profit hospital or any other business they have every right to set their charges however they want. They have every right like any other business to pursue collections to court system. But I would submit that you can't have it both ways you cannot conduct business like any other business yet expect tax exemption unlike any other business. We're really at the point we're going to quit my apologies here we have a couple of cars we can't take just real quick. When

asked on Columbia. Obviously they've been as I said there's been some discussion of this whole business of the law and should it be changed in Congress now that a lot of members of Congress have a lot of other things that might seem to have a higher level of priority but do you expect this is something that perhaps over the next couple of years there might indeed be some serious action taken in Congress. I think there will be some action taken with regard to some peripheral issues. How nonprofits report their activities maybe some some issues regarding nonprofit governance. I don't really believe there's going to be much activity on the essential core question of the test for tax exemption. We went through this back in the early 1990s there were hearings specifically on nonprofit hospitals. There was actually legislation proposed at that time. Nothing happened then. There are a lot of other things a lot of other big issues on Congress's plate at this time. And while there is interest I

believe it at the congressional level. I for my own health I'm not going to be holding my breath on this. Well I want to thank you both very much John Colombo He's Professor of Law University of Illinois. Thank you thank you and Stanley Jenkins he is a member of the champagne County Board of Review. Thank you. Thank you.