Publication No. 68 
March, 1945 
THE TAXATION OF HOSPITALS 
Report Pursuant to Proposal No. 201 
Sponsored by Representative Edward J, McCabe 
Research Department 
ILLINOIS LEGISLATIVE COUNCIL 
Springfield ILLINOIS LEGISLATIVE COUNCIL 
Senator John W, Fribley, Pana, Acting Chairman 
Representative Elroy C. Sandquist, Chicago, Secretary 
Representative Robert H. Allison, Pekin 
Senator Richard J. Barr, Joliet 
Senator Norman C. Barry, Chicago 
Senator Louis E. Beckman, Kankakee 
Senator 0. E. Benson, Ottawa 
Senator R. G. Crisenberry, Murphysboro 
Senator Richard J. Daley, Chicago 
Representative Abner Field, Golconda 
Representative William F. Gibbs, Quincy 
Representative Stanley A. Halick, Chicago 
Representative Charles J. Jenkins, Chicago 
Representative Edward J. McCabe, Chicago 
Representative Ben S, Rhodes, Normal 
Representative Henry F. Scarborough, Payson 
Representative Sam Schaumleffel, Monmouth 
Members Ex-Officio 
Lieutenant Governor Hugh W. Cross 
Speaker Hugh Green 
Research Department 
J. F, Isakoff, Director (on military leave) 
Richard G. Browne, Acting Director 
Orville Alexander, Assistant Director 
G, F. D, Zimmerman, Research Associate 
Charles M. Kneier, Consultant (on military leave) 
This report is intended to provide a factual source of 
information with regard to problems concerning which the 
General Assembly may be called upon to act. The research 
department of the Legislative Council Is engaged in 
objective fact-finding under the general supervision of 
members of the Council, who also serve In the General 
Assembly. No recommendations for consideration of pro* 
posed legislation or particular policies are made by tha 
research department. ,r* CONTENTS 
Page 
The Taxation of Hospitals • . . . . 1 
Amount of Tax Exempt Property • . . . . 2 
Provision of Free Beds /*. 
Tax Exemption in Other States ...... 5 
Constitutional and Statutory Exemption of Hospitals from 
Taxation ..... 6 
Tax Exempt Property in Illinois 21 
Conclusion 22 THE TAXATION OF HOSPITALS 
Most schools, orphanages, and hospitals were originally operated by 
the church. Since these institutions rendered service that otherwise the state 
might have had to render through taxation it has been the custom to refrain 
from taxing these agencies. Tax exemption became a type of community endow- 
ment. Out of this situation arose the general principle that charitable 
institutions are exempted from taxation for the reason that they confer a 
benefit on the public, and relieve to some extent the burden imposed on the 
state of the care and relief of its citizens. Society thought that to compel 
these agencies, through taxation, to pay for the privilege of rendering such 
services was an unreasonable imposition. 
These institutions were at first almost entirely community affairs 
but their growth in some cases has made them nation wide in scope. Thus, large 
portions of the social wealth are relieved of the tax burden leaving a 
diminishing portion to carry a constantly increasing load. 
The courts have said that "An exemption from taxation is an 
extraordinary grace of the sovereign power and is not to be lichtly inferred."1 
It has also been stated that many legislatures have been generous in 
granting tax exemptions, considering them a type of subsidy given in lieu of 
cash contributionsIt would be constitutionally difficult for the state to 
grant subsidies to the exempted institutions and societies, especially reli- 
gious societies, but the same result is reached through tax exemption. However 
a subsidy or direct payment would be more visible and more easily evaluated 
than the invisible tax exemption. 
There is no doubt that charitable institutions and societies have 
lightened the burden on the state and the state recognizes this fact by a 
reimbursement by way of tax exemption. It is possible that some charitable 
institutions are not fully reimbursed for their contributions to charity while 
others are over-remunerated. There are no data available on which to base such 
decision. 
Some writers in discussing the question of tax exemption versus 
subsidies suggest that subsidies are preferable for the reason that the amount 
of the bounty should depend on such factors as the actual needs of the favored 
institution, or the extent of its benefactions rather than the value of its 
property. Further, a direct subsidy is more quickly detected by the public, is 
more easily understood, and is more certain as to cost. Also a direct subsidy 
can be allocated in such way that the areas of benefit, need, and cost can be 
more equitably balanced.3 
1. Boston Safe Deposit & Trust Company v. Commissioners of Corporations and 
Taxation, 17U N.E. 11A, Tl'ass,, 1930). 
2. Texas Law Review, vol. 7, p. 50 (1928), 
3. California Law Review, vol. 21, p. 18 (1933)• 2 
Amount of Tax-Exempt Property 
There are no recent data on the amount of tax exempt property in 
Illinois, nor in practically any other state, for the reason that the evaluation 
of such property does not appear on the tax lists, and the institutions them- 
selves do not publish such information for the public. 
In 1922 the value of exempt realty in the United States was 
$20,500,000,000, or 11,6$ of the value of all the real property in the United 
States. This included all types of tax exempt property both government-owned 
and that owned by private organizations. Between 1890 and 1922 the total value 
of exempt property increased more rapidly than the total value of all realty. 
The increase in value of exempt property between 1890 and 1922 was 205$ while 
the increase in value of all property was In the last report available 
Iowa had the lowest percent of exempt property, 4.4$, while Wyoming had the 
highest, 55.4$ which was tax exempt. In 1890 Illinois had $186,001 in tax 
exempt realty and in 1922 it had $1,041,845 that was exempt, or 8.3$ of the 
total value of the realty within its borders.5 
During the past few years the large increase in federal holdings has 
no doubt resulted in a more rapid increase in the amount of property which is 
exempt from taxation. There is no source of information as to the value of 
exempt personal property. 
A survey of 52 cities of over 100,000 population was made by the 
Census Bureau in 1936, The ratio of tax exempt property to the taxable realty 
was 22,04$. Of the tax exempt property 28.6# was privately owned. The total 
exempt property owned by the public was $7,912,985,000 and the holdings of 
private institutions and societies amounted to $3,171,933,000. Of privately 
owned property, charitable institutions, v/hich include hospitals, owned 
$564,954,000 or 17.8$ of the property exempted,6 
As has been previously suggested in this report, complete, recent 
data as to value of tax exempt property and its classification is not avail- 
able. Without this information any investigation similar to this can only 
result in a series of conflicting personal opinions none of which can be based 
on known facts. 
It is reported that 32 states have no recent data on the valuation 
of exempt real estate. The State of Illinois is in this group. In some of 
these states attempts have been made to list tax exempt property and its value 
but such efforts have met such hostility on the part of tax exempt groups that 
the efforts were discontinued. Ten states have made spasmodic attempts to 
4. Minnesota Law Review, Vol. 18, p. 41, (1933~193^)• 
5. Wealth, Public Debt, and Taxation, 1922. 
6. The American City, Vol, 53, p. 69 (June, 1938); United States Bureau of 
Census, Value of Exempt Real Property in Fifty-two Cities, 1936. 3 
list such property but only six states have made any real progress in compiling 
such lists,' A summary of these lists follows in Table 1. 
Table 1 
Tax Exempt Real Estate 
in Certain States 
State 
Year 
Total Exempt Real Estate 
Arizona 
1938 
$ 29,879,000 
Connecticut 
1937 
579,07A,000 
Louisiana 
1937 
283,^33,000 
New Jersey 
1938 
977,531,000 
New York 
1937 
6, A92,930,000 
Pennsylvania 
1935 
% 
1,771,919,000 
What part of these exemptions is made up of private institution 
exemptions and what part is public is not given. Where the private institution 
exemptions are given there is no indication of what proportion is hospital 
property. 
There is, however, some recent data available in a few states as to 
the ratio of tax exempt realty to taxable realty. This information is given 
in Table 2. 
Table 2 
Estimated Ratio 
of Tax Exempt Realty to 
Taxable Realty 
State 
Year 
Ratio 
Connecticut 
1937 
19.02& 
Louisiana 
1937 
30.58$ 
New Jersey 
19 3B 
20.30$ 
New York 
1937 
25.31* 
Pennsylvania 
1935 
20.59$ 
Rhode Island 
1938 
20.^0$ 
It is estimated that taking all the states together the ratio of 
private exempt property amounts to 3r’*5$ of the total exempt How 
this percent is divided among various exempt institutions and societies of a 
private nature is unknown. 
7. The Tax Magazine, Vol. 18, p. 116, (July, 1910) 
8. The Tax Magazine, Vol. 18, p. 122, (July, 1910) California, before submitting a tax exemption amendment to its 
constitution in 1915, sent a questionnaire to all hospitals and other 
charitable and religious organizations in the state inquiring as to the 
assessment of taxes paid by them. The replies to this questionnaire indicated 
that the total annual property tax paid by them was approximately $760,000. 
There was no break-down in the replies that would indicate the amount of taxes 
paid by hospitals alone.^ 
Formal application for exemption of institutional real property 
appears to be required by law in only nine states.10 But in most of these 
states exceptions exist. In Illinois written application for exemption is 
apparently required by law only in Cook County.H In Illinois the application 
is made to the County Board of Review or Board of Appeals. 
It is the practice in Illinois for the assessor to omit from his 
list property which he believes to be exempt or to list such property without 
valuation. If he assesses property which deems itself to be exempt, applica- 
tion can be made to the County Board of Review, or Board of Appeals, for 
exemption. If the board denies the exemption recourse may be had to the 
courts. If the board grants the petition of exemption it must be referred to 
the Illinois Tax Commission (now the Department of Revenue) for approval or 
disapproval.12 
A large number of states require the assessor to list all exempt 
property on the assessment roll. This is for the purpose of preventing 
accidental or wilful omission of taxable property, and also to produce 
statistics which are helpful in appraising exemption policies.13 
Provision of Free Beds 
There is a surprising scarcity of data on the question of how much 
actual charity is dispensed by the various hospitals. The public is left 
entirely in the dark. It is reported that in Illinois, during the year 1935, 
general hospitals of the non-profit type received 67.U% of their income from 
patients who paid for their care, 22,6% from tax sources, and 10,0% from 
endowment and other sources. 
9. Letter from California State Board of Equalization to Illinois 
Legislative Council, dated January 2, 1915. 
10. Alabama, California, Connecticut, Illinois, Indiana, Massachusetts, 
New Mexico, Texas, Washington. 
11. 111. Rev. Stat., 191-3, ch, 120, par. 598. 
12. Ill. Rev. Stat., 1913, ch. 120, par. 589, 600. 
13. Alabama, Arkansas, Colorado, Connecticut, Louisiana, Massachusetts, 
Minnesota, Mississippi, New Jersey, New Mexico, New York, North Carolina, Ohio 
Pennsylvania, Rhode Island, South Carolina, Vermont, Washington, West Virginia 
11. Business Census of Hospitals. 1935, Supplement No, 151, Public Health 
Reports. 5 
Each year various governmental units have interested themselves in 
various forms of charitable relief and assistance. The state and the federal 
government grant aid to mothers, children, and the blind in various ways which 
include certain payments to medical institutions and for necessary hospitali- 
zation. The state pays for medical assistance and hospitalization of crippled 
children. In administering old age assistance certain payments are made for 
hospital or medical attention. The county pays for hospitalization of children 
that are its wards or are in the custody of the county or juvenile courts. 
During the 10 months, February 1, 1911 to December 1, 1911, one township alone, 
in the City of Springfield, raid approximately $61,706.16 for hospital services 
rendered to residents of the township, Another township in the same city paid 
during the year of December 1, 1913, to December 1, 1911, the sum of 
$13,115.12. These payments, plus other payments by various governmental units, 
amount to a rather substantial sum. These payments relieve the charity load on 
charitable institutions and the amount and scope of such payments is constantly 
increasing. It seems to be the policy of society to pay for the services 
rendered to its members rather than depend on the ministration of charity. How 
much pure charity is left to be provided for by the exempted institutions is 
problematical. 
Tax Exemption in Other States 
The tax exemption laws of the various states are almost unanimous 
in exempting both the land and buildinrs of charitable institutions from 
taxation. Indiana and North Dakota, however, do not exempt the land. In 
deciding whether the institution is tax exempt or not the general test is the 
use to which it is put. 
Three states specifically exempt hospitals in their 
while nineteen exempt hospitals by specifically naming them in their 
statutes.16 The situation in the various states is indicated in Table 3* 
15. Minnesota, Montana, Virginia. 
16, Alabama, Arizona, Connecticut, Idaho, Maryland, Mississippi, Nevada, 
New Jersey, New York, North Carolina, North Dakota, Oklahoma, Pennsylvania, 
Rhode Island, South Dakota, Vermont, Washington, West Virginia, Wyoming.  
Constitutional and Statutory Exemption of Hospitals from Taxation 
State 
Constitutional Provisions 
Statutory Provisions 
Typical Case 
Alabama 
The state shall not tax 
lots (area described) with 
buildings thereon if used 
exclusively for charitable 
purposes. (Sec. 91). 
All property, real or personal, used 
exclusively for hospital purposes, to 
amount of .£20,000 is exempt if such 
hospital maintains wards for charity 
patients and treatment of charity 
patients constitutes at least of 
the business of such hospital, (Ala. 
Code of 1928 Ami*—Sec. 3022). 
Gray et al v. State 
et al, 153 So. 767 
(1934). 
Arizona 
There may be exempted from 
taxation property of edu- 
cational , charitable, and 
religious associations or 
institutions not used or 
held for profit. 
(Article IX, sec. 2). 
Hospitals and the lands appurtenant 
with their fixtures and equipment 
are exempt if not used or held for 
profit. (Rev, Code of Arizona, 1928. 
Sec. 3066, cl, 3). 
Lois Grunow Memorial 
Clinic v, Oglesby, 
County Treasurer, et 
al. 22 Pac, (2nd) 
1076 (1933). 
Arkansas 
Buildings, grounds, and 
materials used exclusively 
for public charity are 
exempt, (Article XVI, 
sec. 5 (h). 
All buildings belonging to institu- 
tions of purely public charity with 
land actually occupied, not leased 
or otherwise used with a view to 
profit, and all money and credits 
used to sustain and belonging 
exclusively to such institution 
is exempt. (Statutes of Arkansas, 
1937 * section 13603). 
Hot Springs School 
Dist. v. Sisters of 
Mercy Female 
Academy of Little 
Rock, Ark. 106 S.W, 
954 (1907). 
Table 3 7 
State 
Constitutional Provisions 
Statutory Provisions 
Typical Case 
California 
Proposed an amendment to the 
state constitution to author- 
ize the legislature to exempt 
all or any portion of property 
used exclusively for religious, 
hospital, or charitable purposes 
not for profit. (Adopted 
Nov,, 1944). (Laws of 1943, 
p. 3342). 
No statutory provisions. 
> 
No case. 
Colorado 
Property used for religious 
worship, for schools, or for 
strictly charitable purposes 
are exempt. (Article X, 
sec. 5). 
Lots with buildings thereon 
if used for strictly 
charitable purposes are exempt. 
(Colorado Statutes, Ann,, 1935* 
ch. 142, sec. 22, cl, 4). 
Bishop and Chapter 
of Cathedral of St. 
John the Evangelist 
v. Treasurer of City 
and County of Denver, 
(86 Pac. 1021, 1906). 
Connecticut 
No provisions as to exemptions 
in the constitution. 
Subject to Sec. 1165, all 
property of, or held in trust 
for, any hospital society or 
sanitarium, which is supported 
wholly or in part by state 
appropriations is exempt. 
(General Statutes of Connecticut, 
1930, Sec. 1163 (14). 
Manresa Institute 
et al v. Town of 
Norwalk. (23 A, 
1088, 1891). 
« 
Delaware 
General Assembly may exempt 
such property as will best 
promote the general weIfare. 
(Article VIII, section 1). 
All property used wholly or in 
part by charity is exempt. 
Exemption cf Homes for Incurables 
limited tc $15,000. (Revised 
Code of Delaware, 1935. 
Sec. 1258). 
Trustees of New 
Castle Commons v. 
Megginson. (77 A. 
565, 1910). 
Table 3 (cont’d.) State 
Constitutional Provisions 
Statutory Provisions 
Typical Case 
Florida 
Property may be exempted by 
Property of educational, literary. 
State ex rel Miller 
law for educational, literary. 
benevolent, fraternal, charitable. 
v. Doss, County Tax 
scientific, religious, or 
and scientific institutions, pro- 
Assessor, 2 So. 
charitable purposes. 
vided not more than 75$ of the 
(2nd) 303 (1941). 
(Article IX, sec. 1). 
floor space is rented and all the profits 
are used for the purposes of the insti- 
tution. (Florida Statutes, 1941. 
Ch, 192, sec, 192,06). 
Georgia 
The General Assembly by law 
Exempts all institutions of purely public 
Richardson Tax 
may exempt all institutions 
charity. (Georgia Code of 1926,. 
Collector v. Executive 
of purely public charity. 
sec, 998). 
Committee of Baptist 
(Article VII, sec. 2, 
Specific and occupation tax in addition 
Convention. 169 S.E. 
par, 2). 
to any ad valorum tax to be levied upon 
hospitals and sanitariums conducted for 
gain. If within 5 miles of city of 
20,000 or more, tax of $100, If within 
5 miles of city of less than 20,000 a 
tax of $25, not to apply to public 
hospitals maintained by municipal cor- 
porations for charitable purposes only. 
(Laws of 1935 * p. 50). 
18 (1933). 
Idaho 
All taxes to be uniform 
Hospitals and their furniture and 
Bristine et al.v. 
but the legislature may 
equipment, owned, controlled, and 
Bassett et al,. Board 
allow exemption from 
operated by any religious or benevolent 
of Equalization, 
time to time, (Article 
corporation or society, with the 
272 Pac. 696 (1928). 
VII, sec. 5). 
necessary grounds used therewith, and 
from which no profit or gain is 
derived is exempt. (Idaho Code, Ann., 
1932, sec. 61-105, cl, 12), 
Table 3 (cont’d.) State 
Constitutional Provisions 
Statutory Provisions 
Typical Case 
Illinois 
Property used exclusively 
by agricultural, horticul- 
tural, school, religious, 
cemetery, and charitable 
purposes may be exempt by 
general law. (Article IX, 
sec, 3)- 
All property of institutions of public 
charity, all property of beneficent 
and charitable organizations, and all 
property of old peoples' homes, when 
such property is actually and exclu- 
sively used for such purpose and not 
leased or used for profit is exempt. 
(Illinois Revised Statutes, 1943, 
ch. 120, sec. 500, cl. 7). 
Indiana 
General Assembly by law 
may exempt property used 
for municipal, educational, 
literary, scientific, 
religious, or charitable 
purposes. (Article X, 
section 1)* 
Every building, or part thereof, 
used and set apart for educational, 
literary, scientific, religious, or 
charitable purposes is exempt. Land 
limited to 40 acres. (Burn's Indiana 
Statutes, Annotated, 1933, sec. 64- 
201, cl. fifth). 
Sec. 64-221. Every city and town 
shall be exempt on its municipally 
owned hospitals, (Burn’s Indiana 
Statutes, Annotated, 1933, sec. 64- 
221). 
Barr et al. v. 
Geary, County 
Auditor, et al,, 
142 N.E. 622 
(1924). 
Iowa 
No provision as to 
exemptions in the 
constitution. 
All grounds and buildings used by 
literary, scientific, charitable, 
benevolent, agricultural, and 
religious institutions and societies, 
solely for their appropriate objects, 
not for profit, are exempt. Land 
owned limited to 320 acres. (Code of 
Iowa, 1939, section 6944, cl, 9)* 
Readlyn Hospital 
v. Hath, County 
Treasurer, et al, 
272 N.tf. 90 (1937). 
Table 3 (cont!d.) State 
Constitutional Provisions 
Statutory Provisions 
Typical Case 
Kansas 
All property used exclusively 
for literary, educational, 
scientific, religious, benevo- 
lent, and charitable purposes 
shall be exempt. (Article XI, 
sec. 1). 
Property and buildings used for 
literary, educational, scientific, 
religious, benevolent, and chari- 
table purposes is exempt. Exempt land 
for charitable purposes limited to 5 
acres. (General Statutes of Kansas, 
Annotated, 1935, sec. 79-201). 
Nuns of Third 
Order of St, 
Dominic v. 
Younkin, et al. 
235 Pac. 869 
(1925). 
Kentucky 
Institutions of purely public 
charity shall be exempt. 
(Section 170). 
No statutory provisions. 
Mason County et al. 
v. Hayswood Hospital 
of Maysville, 179 
S.V;. 1050 (1915)* 
Louisiana 
The legislature shall exempt 
property devoted to chari- 
table undertakings, but not 
if used for profit or income. 
(Article X, section 4). 
No statutory provisions. 
State ex rel, 
Cunningham, Attorney 
General, et al, v. 
Board of Assessors 
of Parish of New 
Orleans. 26 So. 
S?2 (1898). 
Maine 
No provisions as to exemp- 
tions in the constitution. 
The real and personal property 
ef all benevolent and charitable 
institutions incorporated by the 
state are exempt, (Rev. Stat. 
of Maine, 1930, ch. 13, sec. 6, 
Cl. 3). 
Osteopathic Hospital 
of Maine, Inc., v. 
Inhabitants of City 
of Portland, 26 A. 
(2nd) 641, (1942). 
Table 3 (coni’cU) State 
Constitutional Provisions 
Statutory Provisions 
Typical Case 
Maryland 
No provisions 
exemptions in 
tution. 
as to 
the consti- 
Buildings, equipment, and furniture of 
hospitals, asylums, charitable or 
benevolent institutions, no part of the 
income of which insures to the benefit 
of any private shareholder or individual, 
and ground not to exceed 4C acres in 
area appurtenant thereto and necessary 
for the respective uses thereof is 
exempt. (Annotated Code of Maryland, 
1939, Article 8, section 7, clause 7). 
The County Commis- 
sioners of Frederick 
County v. The Sisters 
of Charity of St. 
Joseoh, 48 Md. 34 
(1877). 
Massachusetts 
No provisions 
exemptions in 
tution. 
as to 
the consti- 
Personal property of literary, bene- 
volent, charitable, and scientific 
institutions and the real estate 
occupied by them or their officers 
for the purposes for which they are 
incorporated are exempt. 
(a) If any of the income or profits 
are divided among stockholders 
or members, or used for other 
than literary, educational, 
benevolent, charitable, 
scientific, or religious 
purposes, its property is not 
exempt. (Annotated Laws of 
Massachusetts, ch. 59, sec. 5). 
New England Sani- 
tarium v. Inhabitants 
of Stoneham, 91 N.E. 
385 (1910). 
Table 3 (cont’d.) State 
Constitutional Provisions 
Statutory Provisions 
Typical Case 
Michigan 
No provisions as to exemp- 
tions in the constitution. 
Real estate, buildings, and other property 
of library, benevolent, charitable, educa- 
tional, or scientific institutions, and 
memorial homes of World War veterans, 
while occupied solely for the purposes for 
which they were incorporated, are exempt. 
(Laws of Michigan, Second Extra Session, 
1942, p. 47). 
Gondry, Auditor 
General v. R, 3. 
Smith Memorial 
Hospital Associa- 
tion, 291 N.E. 
385 (1910). 
Minnesota 
Public hospitals shall be 
exempt. (Article IX, 
section 1). 
(3) All public hospitals are exempt. 
(Minnesota Statutes, 1941, sec. 2?2.02). 
State v. Wilman 
Hospital, Inc. 
et al., 2 N.W. 
(2nd) 564 (1942). 
Mississippi 
No provisions as to exemp- 
tions in the constitution. 
(f) All property belonging to religious, 
charitable, or benevolent organizations, 
which maintain one or more charity wards, 
and when entire income is used for the 
purpose thereof, is exempt. (Mississippi 
Code, 1931, sec. 3108). 
City of Natchez 
v. Natchez 
Sanitorium 
Benevolent Asso- 
ciation, 2 So. 
(2nd) 798 (1941). 
Missouri 
* 
Lots within town or 1 mile 
thereof to the extent of 1 
acre or lots more than 1 
mile distant to extent of 
5 acres, with buildings 
thereon, may be exempted 
from taxation, when used 
exclusively for religious 
worship, for schools, or 
for purposes purely 
charitable. 
Lots within town or 1 mile thereof to the 
extent of 1 acre or lots more than 1 mile 
distant to extent of 5 acres,' with build- 
ings thereon, are exempted from taxation, 
when used exclusively for religious 
worship,, for schools, or for purposes 
purely charitable, (Rev. Stat. of Mo., 
1939, sec. 10937). 
The State ex rel, 
Alexian Brothers 
Hospital v. 
Powers, 74 Mo. 
476 (1881). 
Table 3 (contM.) State 
Constitutional Provisions 
Statutory Provisions 
Typical Case 
Montana 
The legislature may exempt 
property as may be used 
exclusively for hospitals 
and not used or held for 
private or corporate 
profit. (Article XII, 
section 2), 
The property used exclusively' for 
hospitals and places of burial 
and not used for private gain or 
corporate profit is exempt. (Rev. 
Codes of Montana, 1935, sec. 1998). 
Montana Catholic 
Missions, S.J, v, 
Lewis and Clarke 
County et al., 
35 Pac. (2nd) 2, 
(1893). 
Nebraska 
The legislature may by general 
law exempt property owned by 
and used exclusively for edu- 
cational, religious, 
charitable, or cemetery 
purposes, when such property 
is not owned or used for 
financial gain or profit. 
(Article VIII, sec. 2). 
The following property'- shall be 
exempt from taxation; (2) prop- 
erty owned by and used exclusively 
for educational, religious, 
charitable, and cemetery purposes 
when such property is not owned or 
used for financial gain or profit. 
(Compiled Statutes of Nebraska, 
1929, 77.202). 
St, Elizabeth 
Hospital v. 
Lancaster County 
et al. 189 N.-W. 
981 (1922). 
Nevada 
Legislature may exempt by 
law property' used for 
municipal, educational, 
literary, scientific, or 
other charitable purposes. 
(Article X, section 1). 
Hospitals and asylums may incorporate 
and the property of such institution 
on which its buildings stand, 
together with the buildings shall 
while occupied for its objects and 
purposes be exempt. (Nevada 
Compiled Laws, 1929, section 3254). 
No case. 
New Hampshire 
No provision as to exemp- 
tions in the constitution. 
The personal property' of charitable 
and religious societies and the 
real estate owned and occupied by 
them are exempt if incorporated or 
organized within the state and such 
property is not used for profit or 
any other purpose, (public Laws of 
New Hampshire, 1926, ch. 60, sec. 22), 
Young Men’s 
Christian Assn, 
v. City of Keene, 
46 A 186 (1900). 
Table 3 (cont’d.) State 
Constitutional Provisions 
Statutory Provisions 
Typical Case 
New Jersey 
No provisions as to exemp- 
tions in the constitution. 
All buildings actually and exclusively 
used for charitable or hospital 
purposes if incorporated or organized 
under the laws of this state and the 
land upon which they are erected, 
together with their furniture and 
fixtures are exempt if the whole 
income is used for such purposes. 
Denville Township 
v. St, Francis 
Sanitarium, 98 A 
254 (1916). 
New Mexico 
All property used for 
educational or charitable 
purposes is exempt, 
(Article VIII, section 3). 
No statutory provisions. 
Opinion of Attorney 
General, 1912-1913, 
p. 3b. 1914 - p. 
225. 
New York 
Exemptions from taxation 
may be granted only by 
general law and may be 
altered or repealed except 
those exempting real or 
personal property used 
exclusively for religious, 
educational, or charitable 
purposes, as defined by law, 
and not operated for profit. 
(Article XVI, section 1). 
The real property of a corporation 
or association organized exclusively 
for hospital or infirmary purposes 
is exempt if no officer, member, or 
employer thereof receives no 
pecuniary profit except reasonable 
compensation. If property is used 
for other purposes it is not exempt. 
(Laws of New York, 1943. Tax Law, 
sec. 4, cl. 6). 
people ex rel. 
Doctor*s Hospital, 
Inc., v. Sexton et al, 
48 N.Y.S. 201 (1944). 
North Carolina 
The General Assembly may 
exempt property held for 
educational, scientific, 
literary, charitable, or 
religious purposes. 
(Article V, section $), 
Real property belonging to, actually 
and exclusively occupied by hospitals 
and nuneries not conducted for profit. 
(North Carolina Code of 1939, Ann., 
Sec. 7971 (129), cl. 5. 
Piedmont Memorial 
Hospital, Inc. v. 
Guilford County 
et al. 12 So. E. 
(2nd) 265, (1940). 
Table 3 (cont!d,) State 
Constitutional Provisions 
Statutory Provisions 
Typical Case 
North Dakota 
The Legislative Assembly 
shall by general law exempt 
from taxation property used 
exclusively for school, 
religious, cemetery, or 
charitable purposes. 
(Article XI, section 173)• 
All buildings and contents thereof, 
belonging to institutions of public 
charity, including public hospitals 
under the control of religious or 
charitable societies, used wholly 
or in part for public charity, not 
leased or otherwise used for profit 
is exempt, (Compiled Laws of North 
Dakota, 1913* 1925 Supplement, 
section 207B, cl. 8), 
Engstad v. Grand 
Forks County et al. 
84 N.W. 577 (1900). 
Ohio 
General laws may be passed 
to exempt burying grounds 
and institutions used ex- 
clusively for charitable 
purposes but all such laws 
to be subject to alteration 
or repeal. (Article XII, 
section 2), 
Property belonging to institutions 
used exclusively for charitable 
purposes shall be exempt. 
(Throckmorton's Ohio Code Ann. 
Baldwin's 1936 ed,, sec. 5353). 
O’Brien, County 
Treasurer v. 
Physicians 
Hospital Assn., 
116 N.S. 975 
(1917). 
Oklahoma 
All property used exclu- 
sively for religious and 
charitable purposes shall 
be exempt, (Article X, 
section 6). 
All property of any hospital 
organized and chartered as a non- 
profit or charitable institution 
under the laws of this state, 
provided the net income is used 
exclusively for charitable 
purposes and no profit to any 
private stockholder is exempt. 
(Oklahoma Statutes, 1941* 
Title 68—15.2, cl. 10). 
In re Farmers' 
Union Hospital 
Assn, of Elk City, 
126 Pac. (2nd) 
244* (1942). 
Table 3 (cont!d.) State 
Constitutional Provisions 
Statutory Provisions 
Typical Case 
Oregon 
No provisions as to exemp- 
tions in the constitution. 
The personal property of all literary, 
benevolent, charitable, and scientific 
institutions, incorporated within the 
state, and such real estate belonging 
to such institution as shall be 
actually occupied for the purposes for 
which the;/ are incorporated are exempt. 
(Oregon Compiled Laws, Ann., sec. 110- 
201, cl. 3). 
Benton County v, 
Allen et al. 
133 Fac. (2nd) 
991 (1943). 
Pennsylvania 
The General Assembly may, 
by general laws, exempt 
from taxation institutions 
of purely public charity. 
(Article IX, section 1). 
All hospitals, with grounds, maintained 
by public or private charity, provided 
all revenue is used for no other purpose 
is exempt from county, city, borough, 
town, township, road, poor, and school 
taxes. (Purdon1s Pennsylvania 
Statutes, 1936, title 72, sec. 5020-204). 
In re Appeal of 
Children's 
Hospital of 
Philadelphia, 
82 Pa, Superior 
Ct. 196 (1923). 
Rhode Island 
No provisions as to 
exemptions in the 
constitution. 
Hospitals for the sick and disabled 
are exempt. (General Laws of Rhode 
Island, 1938, ch, 29, sec. 2). 
Woonsocket 
Hospital v, 
Quinn, City 
Treasurer, 
173 A. 550 
(1934). 
South Carolina 
i 
The legislature may ex- 
empt by law, property 
used for municipal, edu- 
cational, literary, 
scientific, or charitable 
purposes. (Article X, 
section 1). 
All property belonging to institu- 
tions of purely public charity and 
used exclusively for the maintain- 
ance and support of such institutions 
is exempt. (Code of Laws of South 
Carolina, 1932, sec. 2578, cl, 10). 
Ellerbe v* 
David, County 
Treasurer, et 
al. 8 S.E. (2nd) 
51s, (1940). 
Table 3 (contfd.) State 
Constitutional Provisions 
Statutory Provisions 
Typical Case 
South Dakota 
The legislature shall by 
general law, exempt from 
taxation, property used 
exclusively for religious, 
cemetery, and charitable 
purposes. (Article XI, 
sec. 6). 
All property belonging to charitable 
societies and used for charitable 
purposes are exempt. If only partly 
used for such purpose, it is 
partially exempt. (South Dakota 
Code of 1939, sec. $7.0311)* 
Lutheran Hospital 
Association of 
South Dakota v. 
Baker, County 
Treasurer, 167 N.W. 
148 (1918). 
Tennessee 
The legislature may exempt 
property used for purposes 
purely religious, charitable, 
scientific, literary, or 
educational. (Article II, 
sec. 28), 
The real estate owned by any chari- 
table institutions and occupied by 
such institution, and its personal 
property, used for its purposes 
is exempt. If not used exclusively 
the tax to be prorated, (Tennessee 
Code of 1932—1937 Cura. Supp. 
(Michie), sec. 108$). 
Baptist Hospital 
v. City of 
Nashville, 3 S.W. 
(2nd) 1059. 
(1928). 
Texas 
The legislature may exempt 
the property of an insti- 
tution of purely public 
charity. (Article VIII, 
sec, 2), 
All buildings belonging to institu- 
tions of purely public charity, 
together with the land, not used 
for profit is exempt. (Vernon's 
Texas Code, 193&, sec. 71$0, 
cl. 7). 
City of Longview 
v, Markham - 
McRae Memorial 
Hospital, 1$2 
S.U. (2nd) 
1112 (1941). 
Utah 
Lots with buildings used 
exclusively for either 
religious worship or 
charitable purposes are 
exempt, (Article XIII, 
sec. 2). 
Lots with buildings thereon used 
exclusively for either religious 
worship or charitable purposes and 
not held or used for private or 
corporate profit are exempt. 
(Rev. Stat. of Utah, 1933, sec, 
80-2-1). 
William Budge 
Memorial 
Hospital v. 
Maughan, 
County Treasurer, 
3 Pac. (2nd) 258, 
(1931). 
Table 3 (cont!d.) State 
Constitutional Provisions 
Statutory Provisions 
Typical Case 
V ennont 
No provisions as to exemp- 
tions in the constitution. 
Real and personal property granted, 
sequestered or used for public, pious, 
or charitable uses is exempt. 
Charitable use means - - - hospital 
and lands used for lawn, playgrounds, 
and glebe lands. (Public Laws of 
Vermont, 1933, sec. 590 and sec. 592). 
St. Alban’s 
Hospital v. Town 
of Enosburg et al. 
120 A. 97, (1923). 
Virginia 
Real estate belonging to, 
actually and exclusively 
used by, and personal 
property including endow- 
ment iunds belonging to 
hospitals and nunneries, 
conducted not for profit 
but exclusively as charity 
are exempt. (Appendix 
sec. 183 (e). 
Real estate belonging to, actually 
and exclusively used by, and personal 
property including endowment funds 
belonging to hospitals and nunneries, 
conducted not for profit but ex- 
clusively as charity, are exempt. 
(Virginia Code of 1942, Tax Code 
Appendix, sec, 435 (e). 
Commonwealth v, 
Lynchburg Y. M. 
C. A., 80 S.W. 
589 (1913). 
Washington 
Such property as the legis- 
lature may by general law 
provide shall be exempt. 
(Article VII, section 1). 
Hospitals for the care of the sick 
and all income and profits which 
after paying expenses that are 
devoted to the purposes of such 
institution are exempt, (Pierce*s 
Code of Washington, 1939, sec. 
6882-7, cl. fourth). 
In re Rust’s 
Estate, 12 
Pac, (2nd) 
396 (1932). 
West Virginia 
Property used for educa- 
tional, literary, 
scientific, religious, or 
charitable purposes may 
be exempted by law, 
(Article X, section 1). 
The property of any hospital not 
held or leased out for profit is 
exempt. (West Virginia Code, 
1937, sec. 678). 
Reynolds Memorial 
Hospital et al. v, 
Marshall County 
Court, 90 S.E. 
238 (1916). 
Table 3 (cont»d.) State 
Constitutional Provisions 
Statutory Provisions 
Typical Case 
Wisconsin 
No provisions as to exemp- 
Personal property owned by any 
Riverview Hospital 
tions in the constitution. 
religious, scientific, literary, 
or benevolent association which 
is used exclusively for the 
purposes of such association and 
the real property necessary for 
the location of the buildings of 
such association, if not leased 
or otherwise used for pecuniary 
profit, and not exceeding 10 
acres is exempt. (Wisconsin 
Statutes, 1943, sec. 70.11, 
cl. 4). 
v. City of 
Tomahawk, 11 N.W. 
(2nd) 188, (1943). 
Wyoming 
Certain specified property 
Lands with buildings thereon 
Harkin v. Board 
is exempt and such other 
used for orphan asylums or 
of Commissioners 
property as the legisla- 
hospitals are exempt. (Wyoming 
of Niobrara 
ture by general law may 
Revised Statutes, 1931, sec, , 
County, 222 Pac. 
designate as exempt. 
(Article XV, sec. 12). 
115-104). 
35, (1924). 
Table 3 (cont^d,) 20 
The extent to which hospitals are tax exempt depends on the 
language used or lack of language in the various state constitutions. These 
provisions are strictly construed by the courts. With the exception of 
Minnesota, Montana, and Virginia, the constitutional exemption provisions do 
not refer to hospitals by name but usually use the more general term 
"charitable" or "benevolent" institutions. Seven states in their constitu- 
tions say the legislature "shall" exempt charitable or benevolent 
institutions.17 states, however, in their constitutions merely 
authorize the legislature to exempt charitable or benevolent institutions from 
taxation by using the words "the legislature may exempt" such institutions 
from taxation.18 
A few states grant tax exemption in a limited manner. Alabama 
exempts hospital property to the extent of $20,000 provided at least 15$ of 
the hospital facilities are used for charity patients, Florida provides that 
not over 75$ of the floor space be used for profit and such profits must be 
used for the purposes of the institution. Georgia levies an occupational tax 
if the hospital is operated for gain. In Iowa, 320 acres is the limit of 
exempt land. Kansas places the limit of tax exempt land at 5 acres, Maryland 
taxes all land above U0 acres, Wisconsin allows an exemption of 10 acres. 
Thirteen states make no reference to tax exemption of hospitals or 
charitable institutions in their constitutions, which leaves it entirely within 
the power of the legislature to exempt such property if they deem it 
expedient.19 
The Constitution of Arkansas simply says that buildings, grounds, 
and materials used exclusively for public charity are exempt, while Kansas and 
Kentucky say such shall be exempt, and New Mexico says they are exempt. 
The Constitution of California formerly prevented the legislature 
from exempting the property of hospitals and charitable institutions from 
taxation but in 1%3 the California legislature proposed an amendment to the 
Constitution, to empower the legislature to exempt from taxation all or any 
portion of property used exclusively for religious, hospital, or charitable 
purposes.20 This amendment was adopted on November 7, 19UU* 
In a few states the constitutional provisions are regarded as being 
self executing.21 
17, Alabama, Colorado, Louisiana, North Dakota, Oklahoma, South Dakota, 
Utah. 
18, Arizona, Delaware, Florida, Georgia, Idaho, Illinois, Indiana, Missouri, 
Montana, Nebraska, Nevada, New York, North Carolina, Ohio, Pennsylvania, 
South Carolina, Tennessee, Texas, Washington, West Virginia, Wyoming. 
19, Connecticut, Iowa, Maine, Maryland, Massachusetts, Michigan, Mississippi, 
New Hampshire, New Jersey, Oregon, Rhode Island, Vermont, Wisconsin. 
20, Laws of California, 19/t3> 33^2. 
21, Kentucky, Louisiana, New Mexico, 21 
Tax Exempt Property in Illinois 
The Illinois Constitution provides that property used exclusively 
by agricultural, horticultural, school, religious, cemetery, and also 
charitable purposes may be exempted from taxation by general law,22 The state 
statutes provide that all property of institutions of public charity, all 
property of beneficent and charitable organizations, and all property of old 
people’s homes is exempt from taxation when such property is actually and 
exclusively used for such purpose and not leased or used for profit.23 It is 
to be noted that in Illinois the General Assembly may exempt property used for 
charitable purposes if it sees fit. It has chosen to do so. The case law 
has explained and elaborated to some extent the intent of the legislature as 
expressed in its exemption legislation. 
An early Illinois case decided that tax exemption was conferred only 
on corporations created by the laws of this state, and doubted whether exemp- 
tion extended to institutions founded by private enterprise for the 
dispensation of private charities.2A 
A later case held that a public charity to be within the meaning of 
the statute must be one that extends to all members of the community and not 
confined to a particular class. The fact that it exacts pay from those able to 
pay for its services, and devotes all money thus received to carry out its 
purpose, does not remove it from the tax exempt class. It also held that a 
hospital open to all is a public charity and the fact that the number of 
charity patients is small does not affect its character as a public charity.25 
It has also been said that the distinctive features of a charitable 
organization are that it has no capital stock and makes no provisions for 
dividends, or profits, but derives its funds mainly from public and private 
charity and holds them in trust for the charitable purposes expressed in its 
charter.26 
Several tests have been suggested in order to decide whether a 
particular institution was a charitable institution or not. The more prominent 
tests are the (1) ownership test; (2) use test; (3) occupancy test; and (4) 
profits test. In fact all these tests have their proper use in testing any 
particular institution claiming tax exemption. 
22. Constitution of Illinois, Art. XI, sec. 3* 
23» HI• Rev. Stat., (State Bar Assn. Ed.) 1943* ch. 120, sec. 500, cl, 7. 
24. The People ex rel. Louis C. Huck v. The Western Seamen's Friend Society, 
87 111. 246 (1877). 
25• The Sisters of the Third Order of St. Francis, Appellants, v. The Board 
of Review of Peoria County. Appellee, 231 111. 317 (1907). 
26. The Congregational Sunday School and Publishing Society, Appellant, v. 
Board of Review, Appellees, 290 111. 108 (1919)• 22 
In Illinois the "use test” seems to be predominant. The courts say 
that it is the primary use to which the property is put which determines 
whether it is exempt from taxation and the conclusion in each case depends on 
the facts. Incidental use of property for purposes other than charitable or 
religious does not destroy its claim of exemption. The court goes on to say 
that the fundamental ground upon which all exemptions are based is the benefit 
conferred upon the public, with consequent relief to some extent, of the 
burden on the state to care for and advance the interests of its citizens.27 
Tax exemption extends to homes maintained for the members of fraternal 
societies,28 
Conclusion 
There is very little statistical material available on the value of 
hospital property. Nor is there any material available as to the amount of 
charity service rendered by them. In order for the state to properly appraise 
its exemption policy this data should be obtained. The taxing authority of 
the state should be advised as to the value of tax exempt property within its 
borders and to what extent the state is relieved of necessary social functions. 
In the case of hospitals the state, in order to frame a legislative 
policy, should be informed as to the following items: 
1. Description and value of real estate occupied by its 
buildings and all personal property used in the operation 
of the hospital, 
2. Description, use, and value of other tax exempt real 
estate owned by the institution. 
3. Description and value of buildings used in its operations. 
h* Income from paying patients. 
5. Income from donations and endowments. 
6. Income from governmental agencies for services rendered. 
7. Number of patients for the year and the number of charity 
patients. 
8. Detailed operating expenses. 
9. Expenditures for equipment and repairs. 
10. Number of available beds (private and ward). 
11. Number of beds reserved for charity patients. 
12. Value of services rendered to charity patients. 
With this information the taxing authority could weigh the benefit 
conferred by tax exemption on the reporting institutions against the benefit 
conferred by the reporting institutions on society, and determine whether 
such exemption should be continued as a general taxing policy or replaced by 
some other mode of compensation for services rendered. 
27. The School of Domestic Arts and Science. Appellant, v. P. J. Carr, 
County Collector, Appellee. 322 111, 562 (l926). 
28. People ex rel. Jay B. Morse, County Collector, Defendant in Error, 
v. The Grand Lodge of the Independent Order of Vikings» Plaintiff in Error, 
35h 111. hU7 (1933)-