Last March, Provena Covenant Medical Center lost an Illinois Supreme Court case when their evidence fell short of proving that it was operating as a charity or religious institution deserving of property tax exemption. In turn, they had to pay millions of dollars back for five years of missed tax payments.

The Carle Foundation is looking at a similar legal battle in the future as it clashes with local government bodies over their taxability status. The foundation includes Carle Foundation Hospital, Carle Clinic Association and Health Alliance Medical Plans.

Over the years, Carle committed to being a charitable organization and is recognized as a nonprofit corporation. In fiscal year 2010, Carle provided $97 million in community charity support. Of that amount, $54.6 million was in unpaid Medicare and Medicaid.

“I don’t think you can go anywhere in this community where you don’t see Carle supporting a number of different organizations,” said Laurence Fallon, senior vice president of legal affairs for the hospital.

In 2004, the foundation was asked to begin paying property taxes for five separate properties.

“Without reason, the rules were interpreted differently by state and local authorities,” Fallon said. “There was no change in ownership or use of those properties, and we had enjoyed a property tax exemption for years.”

In December of 2007, the Carle Foundation filed a suit claiming that they were entitled to property tax exemption and that Cunningham Township, the Champaign County Board of Review and the Illinois Department of Revenue “improperly revoked” the Carle Foundation’s property tax exemptions, according to a May 10, 2010 news release.

In addition to these proceedings, the Carle Foundation also made a series of complaints against various bodies of local government and other organizations including: Cunningham Township, Urbana School District, Urbana Park District and the City of Urbana.

A Payment in Lieu of Taxes agreement made in March 2002 with those bodies put the foundation in a position where it must pay the agreement sum, as well as the property tax now expected of them.

It is the opinion of the hospital that those bodies are under breach of contract of the agreement and that, specifically, the Cunningham Township assessor was responsible for reassigning them property tax.

“Cunningham Township, through its assessor, put those properties on the tax rolls,” Fallon said. “We don’t believe the assessor had the authority to do that.”

Fred Grosser, attorney for Cunningham Township, on the other hand, said decisions about tax exemptions are made only by the Illinois Department of Revenue. Thus, he, as well as others on this case, filed motions to dismiss many of the complaints. The Carle Foundation will have a chance to file a response to those memorandums in late February, Grosser said.

“My clients had absolutely nothing to do with tax exemptions,” Grosser said.

In response to that opinion, Fallon said the answer will become apparent as the lawsuit proceeds.

Proceeding, though, could be a long way off. It will take until all the motions are received and the foundation has had a chance to respond to make progress.

Carle is attempting to regain the taxes it had to pay since 2004. In 2010, this figure was $14 million. If Carle were to win this case, it would negatively affect the city, said Charlie Smyth, Ward 1, Urbana City council member.

“There’s an impact from having such a large entity like that,” Smyth said. “That would be putting property off the tax rolls and putting a support burden on the city for maintaining the streets and all that. I find it very hard to not have some kind of payment for the services the city provides.”

The motions to dismiss the complaints set forth by Carle will be heard in the first week of April. Grosser said hopefully after that, a date will be set for the trial in the circuit court.