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High Court Holds ‘Bed Tax’ Constitutional

We previously covered the Illinois Supreme Court’s consideration of what has been termed the “bed tax.” This tax is an assessment of a $1.50 fee for each bed in a nursing home or long-term care facility in the state of Illinois. The fee is charged per bed per quarter, which for those who can already figure out with basic arithmetic, amounts to $6.00 a year per bed. The money collected from this tax is put directly into a Long-Term Care Provider Fund, which was established by statute, and is used to help fund long-term care and other health initiatives for the state.

This is, in general, a common use for taxes by states and even the federal government in the sense that the money is used for services and costs related to the industry or subject area of the tax in the first place. In spite of this as a function of the state’s taxing power, such taxes must also pass constitutional muster – be it federal or state – and nursing homes have vehemently challenged this tax as unconstitutional, which has resulted in a case path up to the state’s highest court. The state, on the other side, has argued that the tax is applied to all nursing homes across the state, and that it is hardly arbitrary, but instead goes to the long-term care fund which helps nursing homes and other health care programs and initiatives, including Medicaid.

The opposition has stated the tax is invalid under the state constitution’s Uniformity Clause, which in part requires taxes to be administered uniformly, reasonably and not arbitrarily. The plaintiff nursing home argued that it specifically does not admit residents who have Medicaid, therefore it should not have to contribute to that funding. The plaintiff argued that it provides care without accepting outside payments like Medicaid, and that this tax would be overly burdensome for it to function.

The Illinois Supreme Court Decision

Just weeks after hearing arguments, the Illinois Supreme Court has held that the tax is constitutional under the state constitution’s Uniformity Clause. For one, the high court found that the tax helped fund not just Medicaid expenditures, but several other specific categories that included administrative costs, as well as expenses related to creating and enforcing nursing home rules and standards, as well as supporting the health department’s ombudsman program to oversee these initiatives.

Thus it was not strictly Medicaid-focused, as the plaintiff argued. Furthermore, the court also rejected the facility’s claim that the homes should not have to pay the tax if they receive no benefit; on the contrary, such taxation happens constantly, as citizens pay taxes which can fund projects and benefits from which certain taxpayers may not directly or even indirectly benefit. This is an interesting case both constitutionally, and as it affects nursing homes and long-term care facilities.

Notably, while the state Supreme Court upheld the tax as unconstitutional, it interestingly opined on its wisdom, indicating that it may not be practically necessary to tax a facility like the plaintiff, which provides its services without accepting outside government funding. While not constitutionally defunct, the tax could still be to an extent burdensome and unnecessary. Any hypothetical potential repeal or change to the bed tax law would have to come through the legislature (and with the governor’s signature).

See Other Blog Posts:

Texas Legislature Wants ‘3 Strikes and You’re Closed’ Rule

State AG Takes Aim at Major Nursing Home Chain