APPEAL from the Circuit Court of Cook County; the Hon. WILLIAM
v. BROTHERS, Judge, presiding.
MR. JUSTICE DAILY DELIVERED THE OPINION OF THE COURT:
Claiming exemption both as a school and as a charitable organization, Coyne Electrical School, a corporation not for profit, filed a complaint in the circuit court of Cook County to enjoin the collection of taxes on its property for 1951 and 1952, and to perpetually enjoin the county collector and other officials from assessing and collecting taxes on its real and personal property. A master, who heard the evidence in the cause, concluded that plaintiff was a school but not a charitable organization; the chancellor found it was neither and denied relief. The revenue being involved, plaintiff has appealed directly to this court for review.
Section 3 of article IX of our constitution provides that the General Assembly may, by laws general in their application, exempt from taxation such "property as may be used exclusively * * * for school * * * and charitable purposes." Accordingly, the legislature has exempted, first, "* * * all property of schools, including the real estate on which the schools are located and any other real estate used by such schools exclusively for school purposes, * * *." (Ill. Rev. Stat. 1951, chap. 120, par. 500(1),) and, second, "All property of institutions of public charity, all property of beneficent and charitable organizations, * * * when such property is actually and exclusively used for such charitable or beneficent purposes, * * *." (Ill. Rev. Stat. 1951, chap. 120, par. 500(7).) It is under these two provisions that the plaintiff claims exemption, and in considering such claim it is to be borne in mind that courts have always taken the position that statutes granting tax exemption should be construed strictly in favor of taxation, (People ex rel. Gill v. Trustees of Schools, 364 Ill. 131; In re Petition of Walker, 200 Ill. 566; International College of Surgeons v. Brenza, 8 Ill.2d 141,) and have held that the burden is on the person asserting the claim of exemption to prove clearly and conclusively that the use of the property in question is within both the constitutional authorization and the terms of the statute under which the claim of exemption is made. People ex rel. Kelly v. Avery Coonley School, 12 Ill.2d 113; People ex rel. Cannon v. Southern Illinois Hospital Corp. 404 Ill. 66.
Facts pertinent to plaintiff's claim that it is a school within the meaning of the constitution and the exemption statute show that it was reorganized as a nonprofit corporation in 1950, "to provide courses of study relating to, but not necessarily limited to, electricity, radio, radar and electronics generally." The school does not teach mathematics, rhetoric, language, science, history, or the like, but has a curriculum of seven courses bearing the following titles: Electrical and Refrigeration Course, Radio and Refrigeration Course, Combined Electrical and Radio-Television Course, General Electrical Technicians Course, Radio-Television Service Course, and Electrical and Radio-Television Service Course. These courses vary in length from 18 to 66 weeks and in cost from $300 to $1100. Thirty-five hours of instruction, embracing both shop and theory, is given each week, and students, who need only a high school education or the ability to pass an entrance test to qualify for enrollment, must maintain an average of 75 per cent or better to merit a diploma. To qualify as an instructor for the plaintiff it appears that one need only be a high school graduate with six years experience in the subjects taught and, in this regard, the defendants introduced evidence that at least 14 of plaintiff's 65 instructors had not graduated from high school and that at least 20 others had no more than a high school education. Judicial notice may be taken, therefore, that many of plaintiff's instructors are not qualified to teach in common schools or high schools of this State. (See: Art. 21, School Code, Ill. Rev. Stat. 1951, chap. 122, pars. 21-1 et seq.) During 1951, 1952 and 1953 plaintiff trained approximately 5,000 students a year, many of them servicemen who received financial aid from the Veterans Administration under the so-called G.I. Bill of Rights.
Plaintiff urges that under modern concepts of education, as reflected by decisions in other jurisdictions and by legislation in our own State, it is a "school" within the plain meaning of the term as employed in both the constitution and the exempting statute. The defendants, however, insist that the constitutional meaning of the term has not been altered and contend that plaintiff is not a "school" for the purposes of tax exemption within the definition arrived at in the decisions of this court.
Little aid can come to the plaintiff from the decisions in other jurisdictions for it is apparent that courts of other States are divided as to the taxable status of the class of institution into which the plaintiff falls. See: City of Detroit v. Detroit Commercial College, 322 Mich. 142, 33 N.W.2d 737; City of Birmingham v. Birmingham Business College, 256 Ala. 551, 56 So.2d 111; German Gymnastic Ass'n v. City of Louisville, 306 Ky. 810, 209 S.W.2d 75, favoring taxation; and Lawrence Business College v. Bussing, 117 Kans. 436, 231 P. 1039; Board of Commissioners of Tulsa County v. Tulsa Business College, 150 Okla. 197, 1 P.2d 351; Wilson's Modern Business College v. King County, 4 Wn.2d 636, 104 P.2d 580, granting exemption.
Speaking in People ex rel. McCullough v. Deutsche Gemeinde, 249 Ill. 132, wherein exemption was denied a religious corporation which used its property for "religious uses generally, and school uses," the court said, at p. 137: "A school, within the meaning of the constitutional provision, is a place where systematic instruction in useful branches is given by methods common to schools and institutions of learning, which would make the place a school in the common acceptation of the word. What are called schools are conducted for teaching dancing, riding, deportment and other things, which are not schools in the ordinary sense." This restrictive definition was applied in the recent case of People ex rel. Brenza v. Turnverein Lincoln, 8 Ill.2d 198, to deny tax exemption to an institution which conducted classes in swimming and gymnastics, even though it was recognized such instruction was educational in a broad sense and in fact a part of the curriculum in ordinary schools. In that case we further restricted the constitutional meaning of the word "school" by adopting the view that constitutional tax exemption for private educational institutions was intended to extend only to those private educational institutions which provide at least some substantial part of the educational training which would be otherwise furnished by various publicly supported schools, and thereby lessen the tax burden imposed upon our citizens as the result of our public educational system.
On the basis of the foregoing decisions it is manifest that two things are necessary to qualify a private institution for tax exemption as a school: first, a course of study which fits into the general scheme of education founded by the State and supported by public taxation; second, a course of study which substantially lessens what would otherwise be a governmental function and obligation. In the case at bar there is neither a claim nor a showing that plaintiff's course of study fits into the scheme of education offered by public schools. Neither is there a showing that the instruction given by plaintiff substantially lessens the burden of taxation occasioned by our public school system. Thus whether plaintiff's activities are measured by the restrictive meaning which has attached to the constitution and exempting statutes, or by the public gain which must inure before property is released from bearing its proportionate share of taxes as required by section 1 of article IX of the constitution, it is apparent that its claim to exemption must fail.
The plaintiff urges that the restrictive definition of a "school" employed in People ex rel. McCullough v. Deutsche Gemeinde, 249 Ill. 132, was broadened in the later case of School of Domestic Arts and Science v. Carr, 322 Ill. 562, and also that it has become outmoded because of our legislature's recognition of vocational schools. We do not find, however, that either contention lends aid to plaintiff's bid for tax exemption. In the Carr case an institution teaching the domestic arts of cooking and homemaking sought exemption both as a school and as a charitable organization. The court, after a painstaking inquiry into the characteristics needed for exemption as a charity, concluded the appellant was a charity because the courses it taught "indirectly benefits the public and improves the happiness of man." In arriving a such conclusion the court said: "In the case at bar the school is supported by pay students, the proceeds from the public restaurant and gifts from various people. The facts alleged and admitted are that no profit whatever is made; that a deficit exists each year and is paid by gifts from benevolent women; that every cent of revenue goes toward the operation of the school, which, so long as seating capacity remains, receives all girls or women applying, whether able to pay for such instruction or not." Throughout the opinion the appellant was referred to as a school and, without discussion or analysis, the court concluded its opinion by stating: "The facts presented in this record show the property was used exclusively for school purposes and should be held exempt from taxation under the first paragraph of section 2 of the Revenue Act." In view of the previous finding that appellant was a charitable organization exempt from taxation under the seventh paragraph of section 2 of the Revenue Act, it would appear that the finding of exemption as a school was surplusage. Additionally, we find no reason to say that the court's assumption in that case, without any analysis of the issue, serves either to broaden the constitutional definition of a school earlier established, or to bind us in this case. Each individual claim for tax exemption must be determined from the facts presented. People ex rel. Goodman v. University of Illinois Foundation, 388 Ill. 363; People ex rel. Pearsall v. Catholic Bishop, 311 Ill. 11.
Nor is the plaintiff aided in its claim to a broader definition by the fact the legislature, in 1909, amended the Revenue Act to exempt "schools" rather than "institutions of learning," (See: Laws of 1909, p. 309, amending Ill. Stat. 1872, chap. 89, par. 437,) or by the further fact that the legislature has recognized vocational schools by adopting a statute that regulates and licenses them. (See: Ill. Rev. Stat. 1951, chap. 144, pars. 17j-17j.36.) As to the former, the legislature did no more than to make the statute use the term employed in the constitution; as to the latter, it is sufficient to say, without analysis of whether the constitution would so permit, that the legislature has made no attempt to bring vocational schools within the provision of the Revenue Act which implements the constitutional authority to exempt school property. It should be noted, too, that plaintiff is not a vocational school within the definition of the statute. (See: Ill. Rev. Stat. 1951, chap. 144, sec. 17j.6(6).) Similarly, the circumstance that the Veterans Administration has considered the plaintiff an institution at which eligible veterans may pursue "education or training" does not serve to bring it within our Revenue Act, or to alter the constitutional definition of a school. Apart from the fact that the Federal regulations themselves distinguish between "education" and "training," it does not follow that training at the plaintiff institution is either indicative or conclusive on the matter of its exemption. We conclude the court below properly refused to define the plaintiff corporation as a school exempt from taxation.
Facts relating to the plaintiff's claim that it is an "institution of public charity" and a "beneficent and charitable organization," so as to be exempt from taxes under section 19(7) of the Revenue Act, (Ill. Rev. Stat. 1951, chap. 120, par. 500(7),) date back to 1899 when the Coyne National Trade School was founded. Bennett W. Cooke, the plaintiff's president in 1951 and 1952, joined the school in 1909 and became its manager in 1912. In 1919, after the name had been changed to Coyne Trade and Engineering School, Cooke purchased the school and thereafter served as its president and general manager until 1926 when it was reorganized as the Coyne Electrical School, Inc., a Delaware corporation organized for profit. At that time the school issued capital stock, as well as bonds valued at $1,118,000, and of these Cooke received 85 per cent and H.C. Lewis, the school manager, received 15 per cent. The school continued on this basis until 1941 when Cooke and Lewis made an agreement whereby each acquired 50 per cent of the stock and outstanding bonds. In 1946, following the death of Lewis, Cooke purchased the latter's stock for $84,000 and his bonds for $485,000, subject to a condition that a debt of $99,000 owed by Lewis to the school would be paid. From that time until the plaintiff-successor corporation was organized, either Cooke or his wife owned all of the stock and outstanding bonds, as well as all the shares of stock in a building corporation which leased its premises to the school.
On April 30, 1950, the present plaintiff, Coyne Electrical School, was organized under the laws of Illinois as a nonprofit corporation and took over the assets of the Delaware corporation, subject to its liabilities. The Delaware corporation then had $304,200 cash on hand, all of which was subsequently used to retire bonds and to pay interest thereon, leaving outstanding bonds of $107,000 which the plaintiff assumed. Cooke and his wife, being the sole owners of all the bonds, received the $304,200.
Concurrent with the organization of the plaintiff corporation, a plan was submitted to the Commissioner of Internal Revenue whereby plaintiff proposed to acquire all the assets and stock of the predecessor corporation for the sum of $1,450,000. In addition plaintiff planned to purchase for $375,000 the building leased to the school by the Coyne Building Corporation, and to purchase at a cost of $45,000, another school building owned by Cooke and his wife. The total expenditure of $1,870,000, which was found in this proceeding to represent the fair market value of the assets purchased, was to be paid by a cash payment of $8,000 and by installment bonds issued by plaintiff in the aggregate amount of $1,862,000. Thereafter, in September and October, 1950, plaintiff received rulings from the Bureau of Internal Revenue exempting it from Federal income ...