APPEAL from the Circuit Court of Cook County; the Hon. HARRY
M. FISHER, Judge, presiding.
MR. JUSTICE HERSHEY DELIVERED THE OPINION OF THE COURT:
This case is here on direct appeal to review a decision of the circuit court of Cook County, which, in an administrative review proceeding, held the plaintiff corporation, C.O. Baptista Films, was not a corporation organized and operated exclusively for religious or educational purposes without private beneficial inurement, and hence not entitled to an exemption under section 221 of the Unemployment Compensation Act. Ill. Rev. Stat. 1953, chap. 48, par. 331.
The plaintiff claims (1) it was such a corporation, (2) a prior adjudication of nontaxability involving a predecessor corporation is res judicata, (3) another prior adjudication denying benefits under the act to employees of the present corporation is also res judicata, (4) the defendant is estopped by a prior withdrawal of assessments, and (5) claims for the tax year 1948 are barred by limitations.
The defendant contends (1) the plaintiff does not qualify for exemption under any of the three issues involved organization, operation, or beneficial disposition of earnings, (2, 3) neither prior decision is res judicata, and (4, 5) estoppel and limitations are not valid defenses here.
The assessments, covering the years 1948 through 1952 and the first three quarters of 1953, totaled $10,688.49, and, with interest and penalties, resulted in a judgment against the plaintiff for $16,732.75.
In 1943, Scriptures Visualized Institute was organized as an Illinois not-for-profit corporation "to teach the Bible" by means of sound and silent films and other audio-visual aids and literature. About January 1, 1946, pursuant to an agreement between Scriptures Visualized Institute, C.O. Baptista and another corporation termed C.O. Baptista Films, all assets of Scriptures Visualized Institute and all assets of C.O. Baptista used by it, were transferred to C.O. Baptista Films, the plaintiff.
The new corporation's purposes and powers were substantially the same as those of Scriptures Visualized Institute, except that it was also to buy, sell and deal in "inventions" for recording and reproducing sound films and to consolidate the two former entities.
For the assets which he transferred (amounting to $101,755), Baptista received $300 monthly rental, plus extensive powers of management and control. These included the power to censor, cancel and revise all materials, to supervise all production, to control all expenditures, to hire and fire employees, to fix salaries, and to control all sales and transfers of real and personal property. His salary was fixed at $75 per week. The incorporators were Baptista himself, the head artist, and the bookkeeper, who were all full-time employees, sole directors, and president, vice-president and secretary, respectively.
In 1948, the corporation began manufacturing and selling sound film projectors and marketed them and other items in competition with commercial producers and dealers. These items included tape recorders, microphones, motion picture screens, projection lamps, projection lenses, projector stands, amplifiers, tubes, duplicating films, extension cords, reels and cans. Its total income has been roughly as follows: from sales of equipment, 30 per cent; from sales of films, 25 per cent; from film rentals, 30 per cent; from other sources, 15 per cent. After the transfers in 1946, the corporation had net assets of $125,000, but by 1952 it net assets had increased to $540,000.
The plaintiff's materials are religious in nature, being related to Biblical stories and teachings, and its catalog recites aims and purposes of a strictly religious character. However, no director or officer is a minister of any religious group; and despite declarations of noncommercial purpose, the corporation's sales, rental and credit policies quite closely resemble those of an efficient commercial business, and many of its sales and distributions are in competition with commercial dealers.
There is nothing in the plaintiff's charter or by-laws which impresses its assets with a trust, or which requires that on dissolution distribution be made to an exclusively religious or educational organization. C.O. Baptista personally has unlimited authority over all sales and transfers of real and personal property of every description.
On these facts, we are governed by Scripture Press Foundation v. Annunzio, 414 Ill. 339, decided in 1953, in which the taxability of such an institution was considered at length. While the religious character of the materials handled is some evidence of religious operation, their marketing exclusively or chiefly to intermediaries such as church organizations or ministers does not permit of an exemption for a claimant which itself has no direct contact with any congregation, communicant or other ultimate religious recipient. Similarly, control of the claimant by private persons rather than by an ordained minister or a religious body is evidence of non-religious organizational structure. Finally, efficient businesslike operations, with aggressive advertising and pricing competitive with commercial rivals (as in the case of the equipment here), all based on a sound capital structure and resulting in profits not committed to any religious shareholder or beneficiary, are substantial evidence of non-religious operation.
In view of Baptista's complete control, we are unimpressed by a distinction based on small salaries here and large ...