A key battle over America’s healthcare future is being fought in one of the most unlikeliest of places: Urbana, Illinois. Scheduled for argument in front of the Illinois Supreme Court in mid-2009, Provena Covenant Medical Center v. Department of Revenue is poised to set the bar regarding the tax exempt status of nonprofit hospitals. Nonprofit hospitals, such as Provena, account for near sixty percent of the hospitals in the U.S., while the others are either for-profit or government-owned. Oddly, these nonprofit hospitals are actually faring better than their for-profit counterparts. Seventy-seven percent of the 2033 U.S. nonprofit hospitals are “in the black”, while sixty-one percent of for-profit hospitals are profitable. One of the reasons for such high success rates is the ability of non-profit hospitals to receive significant tax exemptions. The Congressional Budget Office reported in 2006 that nonprofit hospitals receive an estimated $12.6 billion in annual tax exemptions on top of the $32 billion in federal, state and local subsidies the hospital industry receives each year. Given such figures, it is not surprising that many hospitals do not make up for the exemptions they receive with the charitable services they provide. This article delves into the federal income tax code applications for nonprofit hospitals and resulting litigation.