APPEAL from the Circuit Court of Cook County; the Hon. HARRY
M. FISHER, Judge, presiding.
MR. JUSTICE BRISTOW DELIVERED THE OPINION OF THE COURT:
The Director of Labor and Commissioner of Unemployment Compensation of the State of Illinois appeal directly to this court from an order of the circuit court of Cook County reversing a decision of the Director of Labor in which the Director held that the appellee was not exempt under the provisions of section 2(f)(6)(G) of the Unemployment Compensation Act, as amended. (Ill. Rev. Stat. 1949, chap. 48, par. 218.) The action was brought in the circuit court of Cook County by appellee under the Administrative Review Act, (Ill. Rev. Stat. 1951, chap. 110, pars. 264-279,) pursuant to the judicial review provisions of section 25(a)(2) of the Unemployment Compensation Act. Ill. Rev. Stat. 1949, chap. 48, par. 242(a).
The appeal is properly taken directly to this court in accordance with the provisions of the last cited section of the Unemployment Compensation Act.
Appellee filed its claim for credit or refund with the Director of Labor in connection with unemployment compensation contributions allegedly erroneously paid by it covering the period June 1, 1945, to December 31, 1945, contending that it was exempt from coverage under section 2(f) (6) (G) of the Unemployment Compensation Act because it was organized and operated for religious purposes, that no part of its net earnings inured to the benefit of any private shareholder or individual, and that no substantial part of its activities consisted of carrying on propaganda or otherwise attempting to influence legislation. The Director of Labor denied such claim, and in addition determined that the appellee was an employer subject to the act during the year 1946 and the first three quarters of 1947, and assessed it in the amount of $2321.29 for such period. Appellee followed the prescribed procedure in filing protest, hearings were held on the question, a Director's representative report was made, to which objections were duly filed, and the Director of Labor finally overruled the objections of appellee and adopted his representative's recommendations.
Section 2(f)(6) of the Unemployment Compensation Act provides as follows: "The term `employment' shall not include * * * (G) Service performed in the employ of a corporation, community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, literary or educational purposes, or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual, and no substantial part of the activities of which is carrying on propaganda or otherwise attempting to influence legislation."
The Scripture Press Foundation is an Illinois not-for-profit corporation which was organized on May 5, 1945, and commenced operations on June 1 of the same year. The purposes for which the foundation was organized, as stated in its articles of incorporation, are: "The dissemination of the Gospel, the distribution of the Scriptures, of extracts therefrom, of devotional and other literature relating thereto, and of helps and supplies for use in Christian activities. The organization and support of organizations, institutions and movements exclusively devoted to Christian missionary, educational and other evangelical efforts. In connection with the foregoing to engage in: 1. The production, purchase, circulation, distribution and sale of Christian literature, including books, periodicals, pamphlets, tracts, placards, mottos and supplies; and 2. The conduct of publication and printing establishments."
The incorporators, first board of directors, and sole members of the foundation during the period in question were Victor E. Cory, Bernice T. Cory, his wife, and Harry G. Saulnier, a brother-in-law of Mrs. Cory.
Victor E. Cory, organizer of appellee and its president, throughout his lifetime had participated in Sunday School and other organized religious activities, including the publication of religious song books and other religious books. Believing that Christian workers, particularly in Sunday schools, were not utilizing the most modern techniques in educational teaching, in 1932 Cory entered the religious publishing field by organizing a profit corporation, and business was commenced under name of Scripture Press, Inc. In 1945, Cory and his wife, as owners of the stock of Scripture Press, Inc., told their attorney that the work of the profit corporation was a missionary work, that its success was not of themselves or for themselves but of the Lord, that they felt that this work was not their personal property even though formally so organized, and that they wanted to make the Scripture Press a permanent Christian work by donating it to a foundation. Upon their attorney's recommendation and advice they created the Scripture Press Foundation, (appellee,) and donated to it all of their stock in Scripture Press, Inc. Such stock had a net worth of about $30,000 when it was given to the foundation. Scripture Press, Inc., was thereafter dissolved and its assets distributed to Scripture Press Foundation, a nonprofit corporation.
Appellee devotes itself primarily to the publication and distribution of religious literature, Sunday school supplies and miscellaneous merchandise used by Sunday schools and churches, such as religious novels, Bibles, wallets, pencils, chalk, greeting cards, etc. Its major publications are The All Bible Graded Series of Sunday School Lessons, The All Bible Vacation Series, a Nursery Series for Pre-School Children, and weekly papers for various aged children. Appellee also published Sunday, a magazine inherited from its predecessor, until November, 1945, when a new profit corporation named Sunday Magazine Inc. was organized and took over the publication of such magazine. During its operation by appellee, such magazine had incurred a continuous deficit.
Appellee also renders advisory educational services to pastors, church officers, and teachers with respect to Sunday school work and has a brochure explaining the steps in perfecting local Sunday school organizations.
While anyone may purchase materials from the appellee, the promotional literature advertising such products hardly ever reaches individuals unconnected with churches or Sunday schools and practically all of its sales are made to such institutions. Its gross sales of incidental supplies, such as pencils, chalk, greeting cards, etc., amounted to less than four per cent of its total sales. Some of appellee's materials were given away to missionaries. However, appellee does not have missionaries and does not conduct a Bible school or Sunday school itself.
On May 31, 1946, appellee's total assets were $219,324.19, with a capital of $30,710.11 and a surplus of $2806.07. On October 31, 1947, appellee's total assets were $290,833.27, with a capital of $30,000, an earned surplus of $153,220.96, plus a profit for the quarter ending October 31, 1947, of $11,320.58. Gross sales for the nine months ending October 31, 1947, were $775,052.48, and it was anticipated that the 1947 gross sales would exceed $1,000,000.
At the time of the creation of the appellee, its president, Victor E. Cory, was receiving a $10,000 annual salary, and his wife, Mrs. Cory, as vice-president, was receiving a salary of $6000. As of October 31, 1947, their annual salaries were $15,000 and $10,000, respectively.
In 1947 almost one hundred and fifty workers were on appellee's payroll. In June of that year the Scripture Press Foundation established a pension plan for all of its employees, which was approved by the Commissioner of Internal Revenue as an exempt trust. The current yearly cost of such plan to the foundation was approximately $10,000. In addition, free sickness and accident insurance, Blue Cross hospital insurance, and group life insurance for the employees was paid entirely by the foundation. During the period in question the pay scale of all employees was raised considerably. Under the pension plan as established, based upon the then current salaries, Cory would ultimately be eligible to receive a monthly pension of $262.50 per month and a maximum of $26,000 life insurance. His wife, at the same time, would ultimately become ...