Should Catholic Hospitals Remain Tax Exempt?

On the heels of the Catholic Health Association’s endorsement of Obamacare comes another precedent-setting decision affecting Catholic hospitals and other institutions.

The Illinois Supreme Court ruled Thursday that a Catholic hospital in downstate Urbana is not entitled to exemption from local property taxes because, among other things, it failed to devote enough of its resources to charity care of patients:

Provena Covenant Medical Center, one of six hospitals in the Provena Health system, had fought for six years to regain the tax exemption stripped from it in 2003 by a local tax board. Since then the hospital has been paying more than $1 million per year in local property taxes. The case was being watched by Catholic hospitals around the nation because of its precedent setting potential, and the Catholic Health Association intervened in the case.

I have to admit my reaction to this decision is mixed, because it could be interpreted two ways. On the one hand, it could be construed as a bad if not downright evil decision, representing yet another attempt by Big Government to control Catholic institutions or drive them out of business.

On the other hand, it could be interpreted as a difficult but necessary decision, or even as a sort of poetic justice for CHA’s collective decision to endorse government-funded health care at the cost of compromising clear Catholic teaching. It also raises the question of whether tax exemption for Catholic institutions in general has outlived its usefulness.

There is no question that removing tax exemption from Catholic institutions will greatly add to their expenses and may drive some into bankruptcy. It would require Catholics — especially middle and upper class Catholics — to increase their generosity to such institutions at the exact moment when the government is demanding more of their hard-earned money as well. Plus there likely soon will be the added insult to injury of those tax dollars (at least at the federal level) going to directly subsidize the moral outrage of abortion.

Yet it could also be argued that the economic benefits of tax exemption have come at the cost of muting or compromising the Church’s ability to preach the Gospel “in season and out of season.” Internal Revenue Service rules allow churches and other non-profit organizations to discuss issues but not to endorse or criticize specific political figures or candidates by name. However, concern about running afoul of the tax exemption rule has made many pastors fearful of even addressing political issues such as whether Catholics can ever morally justify voting for a pro-abortion or pro-gay marriage candidate. In addition, tax exemption rules and the threat of having tax exemption withdrawn seem to have been selectively invoked or enforced against churches with socially conservative teachings but rarely or never against churches with socially liberal teachings (e.g. Rev. Jeremiah Wright’s Trinity Church, Fr. Michael Pfleger’s St. Sabina) that explicitly endorse liberal candidates for office.

The one group of Catholic institutions that has historically forgone tax exemption is the Catholic Worker movement. Catholic Worker founder Dorothy Day believed that works of charity should be done for their own sake and that the government should neither encourage nor discourage them. To this day most Catholic Worker houses and other ministries are not 501(c)(3) tax exempt, and contributions to them are not tax deductible.

The Sisters who operate the Provena Health system belong to three separate religious communities — the Franciscan Sisters of the Sacred Heart, the Servants of the Holy Heart of Mary, and the Sisters of Mercy of the Americas. All appear to be affiliated with the Leadership Council of Women Religious, while the “leadership team” of the Sisters of Mercy of the Americas is among those that explicitly endorsed Obamacare in this letter (

Also, one should not assume a direct connection between the CHA/LCWR Obamacare endorsement and the court decision, since the court decision was merely made public yesterday, but was likely made some time ago.

With those caveats in mind, however, I still could not help but feel that if the decision is a slap in the face to the CHA, it is in some ways a deserved one.  If Catholic hospitals want to operate like any other business — complete with six-figure-salaried trade association CEOs — perhaps they should start paying taxes like any other business. If CHA members and the religious orders to which many of them belong really believe government funded healthcare is so wonderful that they are willing to literally sell their souls for it, perhaps it is only fair that they help pay for it like the rest of us.

For Catholic hospitals and other institutions to give up tax exemption or have it taken away from them would be a form of economic martyrdom that many would not survive. It should not be taken lightly. But could it also function as a needed corrective? What are your thoughts on this issue?

7 Responses to Should Catholic Hospitals Remain Tax Exempt?

  1. Donald R. McClarey says:

    Here is a link to the text of the decision courtesy of Illinipundit.

    Click to access Provena_107328_Filed_318.pdf

  2. Donald R. McClarey says:

    Part of me wishes to say chickens meet roost. You want government to run the show in regard to health care? This is a taste of what you can expect, you bloody fools!

    However, I do believe this is an appallingly bad decision from a public policy standpoint. I do not want government micro-managing charities. I especially do not want judges attempting to do it, since they have no expertise outside of the law. I do think that too many non-profits differ little from their for profit brethren, but my concern in that area is outweighed by my fear of government intervention doing long term damage to all charities in this country.

    A great and timely post Elaine.

  3. Art Deco says:

    I think you might reduce if not eliminate finicky controversies of this nature if you replaced property and general sales taxes with simple personal income levies as a means of state and local finance. An incorporated entity might still be held responsible for collecting Pigouvian excises, paying tolls and fees for select services (e.g. water provision), and paying excises for their purchases of supplies (of gasoline, for example). Taxes on the net profits of corporations could be limited to those which have a body of owners to which to pay dividends, which would commonly exempt philanthropies.

  4. Faustina says:

    Just recenty we had a chaplin for Ministry for Prisoners to help prepare them for life in the outside world. I was told that they cannot speak about the Gospel to their clients because they recieve money from the Faith Based Initiatives fund.

    This plus the problem of our “Catholic” Colleges and Universities speak loud and clear to me that taking Government money is the Devil’s bargin. But evidently the Hierarchy does not agree.


  5. Mike Petrik says:

    I don’t think that the “Catholicity” problem of our colleges and universities can fairly be laid at the doorstep of government funding. Most such funding actually goes directly to students or is earmarked for specific research, and this funding does not include problematic strings. Catholic primary and high schools also have similar “Catholicity” issues even though they typically receive no government funding at all. This is not to say that government funding does not create risks and problems in some environments, but I think the case against it is more murky and contextual than clearcut.

    As far as tax exemptions go, I do think the public policy of extending such exemptions to non-profit organizations is sensible to the extent such organizations provide servics that reduce the burdens that otherwise fall on government. In such cases, the exemption is not only in the interest of the non-profit, but also in the interest of government.

    But as Faustina suggests non-targeting general funding of a charitable organization by the government does present some legitimate challenges for faith-based charities. The United States Supreme Court has said that faith-based organizations may not use “direct” government support to support “inherently religious” activities. Basically, this means a grantee may not use any part of a direct federal grant to fund religious worship, instruction, or proselytization. Instead, organizations may use government money only to support the non-religious social services that they provide. Therefore, faith-based organizations that receive direct governmental funds must normally take steps to separate, in time or location, their inherently religious activities from the government-funded services that they offer. Such organizations should also carefully account for their use of all government money. This does not mean a charitable organization can’t have religious activities. It simply means it can’t use taxpayer dollars to fund them. Some faith-based organizations set up separate charitable organizations (so-called “501(c)(3) corporations”) to keep programs that receive government money separate from those that engage in inherently religious activities. Whether these encumbrances are inappropriately burdensome on a Catholic non-profits mission depends on the nature of that mission, but in some cases they would be.

  6. Faustina says:

    I guess that is a mistaken impression about the colleges; I remember reading some where about the Land o’Lakes resolution declaring their independence from the Magisterium. They opted to become like secular schools wit lay governance and government grants. Maybe the idea was that the board started to cater to the thinking of politicians who push that grant money.

    The other example I can think of is a person who use to work for the Archdiocese of ….. She said their was nothing Catholic about the local Catholic Charities. This corroborates what I have heard from some other urban Catholics in another city that “on the street” people go to the Catholic church for social services but go elsewhere for the Gospel…

  7. Phillip says:

    That would go along with what I’ve been hearing in a course I’ve been taking. Personal conversion is not important as personal orthodoxy is not important. What is important is right action or orthopraxis. When there is orthopraxis then there will be orthodoxy. Of course orthopraxis gets defined as greater govt. social programs.

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