In Illinois, the state Department of Revenue regularly certifies non-profits, with the idea making sure that they behave in a not-for-profit manner, as opposed to accumulating mountains of cash and overpaying their executives.

Well they have now denied tax exemptions to three hospitals, and are reviewing 15 more because they are abrogating their responsibility to serve their communities:

The Illinois Department of Revenue has denied property tax exemptions to three hospitals and is reviewing applications from 15 others, officials said Tuesday, signaling that the state plans to get tough on nonprofit hospitals it believes operate more like businesses than charities.

At stake are millions of dollars in tax revenues that the hospitals could contribute to cities, parks and schools by paying taxes.

Northwestern Memorial’s Prentice Women’s Hospital in Chicago’s Gold Coast neighborhood, Edward Hospital in Naperville and Decatur Memorial Hospital in Decatur were informed of the decisions Tuesday morning, Revenue Department officials told The Associated Press.

They follow last year’s Illinois Supreme Court ruling that found a central Illinois hospital wasn’t doing enough free or discounted treatment of the poor to qualify for an exemption, obligating it to pay $1.2 million in local property tax payments per year.

The hospitals have 60 days to ask an administrative law judge to review the decisions. In Illinois, property taxes are collected by county governments, and the Department of Revenue decides which institutions are eligible for tax exemptions.

This is actually something bears on my personal past, not from the hospital angle, but from the undeserving non-profit angle.

A little over 20 years (!) ago, I incorporated a not-for profit tax exempt corporation as a 501(c)3 that puts on Science Fiction conventions, which in that case meant that I represented it as an educational organization.  While technically legal, I’ve always felt that the organization was more properly a 501(c)7, a social organization.

I filled out the forms, and chased them through the state and federal bureaucracies.  And it was all technically legal, and I did not materially misrepresent anything in the applications

That being said, even at the time, I felt that this was an undeserving use of this status.

I was aware of the differences between a (c)3 and a (c)7 at the time, but we felt that we needed the ability for people to deduct donations, and (more importantly) the postage discount available for the (c)3.

The more scrutiny that is placed on organizations that use these sorts of status as a shield (501(c)4 tend to be used as political front group, for example), the better.

There are a lot of slimy things under the rocks that are section 501 of the IRS code.

H/t Washington Monthly.