September 16, 2011
The Civic Federation urges the General Assembly to establish clear standards of eligibility on property tax exemptions for charitable organizations. We are concerned that many organizations are uncertain about their property tax liabilities due to the lack of clear, definable standards in the Illinois Constitution and state law and recent unexplained exemption denials by the Illinois Department of Revenue. To the extent that the General Assembly lacks plenary authority to define clear standards of eligibility because of judicial decisions limiting "charitable use" under Article IX, Section 6 of the Illinois Constitution to criteria defined by the courts in derogation of legislative standards, the Civic Federation recommends that a constitutional amendment be proposed to confer such authority on the General Assembly.
The Civic Federation has previously recommended that tax exemptions for charitable, religious, educational and governmental property be limited and narrowly defined. In a report on reforming the Cook County property tax system, the Civic Federation noted that the Illinois Constitution authorizes these exemptions from taxation (in part or in total) because the properties provide a public good that would be diminished if the owners were required to pay more in taxes. The Federation also noted that this exemption shifts the property tax burden onto other properties. The Federation concluded that this exempt status should be reserved for institutions that provide public benefit and should be narrowly applied so as to guard against excessive exemptions.