APPEAL from the Circuit Court of Cook County; the Hon. EDWARD
F. HEALY, Judge, presiding.
MR. JUSTICE GOLDBERG DELIVERED THE OPINION OF THE COURT:
On February 13, 1968, plaintiff, Ducks Unlimited, Inc., ("Ducks") filed with the State of Illinois, Division of Unemployment Compensation claims for refund of unemployment tax and contributions paid for the third and fourth quarters of 1965, all of 1966 and the first and second quarters of 1967. Ducks contended that it was exempt from payment under par. 221 of the Illinois Unemployment Compensation Act. Ch. 48, par. 331, par. 221). On February 20, 1968, the Director of Labor denied plaintiff's claim. After a protest by plaintiff, the Director's Representative released his Report on January 15, 1969 recommending that (1) the claim for refund of contributions for the third and fourth quarters of 1965 be allowed; and (2) the claim for refund for 1966 and the first and second quarters of 1967 be denied. On May 29, 1969, the Director adopted the Representative's Report in full.
Plaintiff sought judicial review of this May 29, 1969 decision of the Director pursuant to the Administrative Review Act. Ch. 110, pars. 264-279. On December 23, 1969, the trial judge affirmed the May 29, 1969 decision of the Director.
Ducks was founded in 1937 as a not-for-profit corporation, having no shareholders. Its charter provides that all property which it receives must be used exclusively for educational and scientific purposes, including the restoration and perpetuation of wild ducks and other wild waterfowl on the North American continent. It provides that no part of the corporate income shall inure to the benefit of any private shareholder or individual. Additionally, the charter states that the corporation shall not, by its activities, attempt to influence legislation by propaganda or otherwise.
The scientific operations of Ducks consist primarily of providing funds to an affiliated organization, Ducks Unlimited, Canada, which uses these funds to conduct biological and engineering analyses of Canadian prairie provinces. The main purpose of these activities is to insure adequate breeding and nesting areas for waterfowl. Extensive surveys are conducted by Ducks Unlimited, Canada, to determine indices as to the propagation of juvenile birds, the number of returning birds and the number of water areas available. These studies assist Ducks in planning future projects related to development and protection of waterfowl.
The educational activities of Ducks consist mainly in the preparation and publication of several pamphlets annually. These publications are designed to explain the nature of the waterfowl conservation program as well as the activities designed to achieve these goals. Additionally, representatives of Ducks distribute the latest information with regard to waterfowl management and production to conservation groups throughout the country. Films are also produced by Ducks to supplement its educational program.
Plaintiff's affiliate, Ducks Unlimited, Canada, was organized in 1937 as a not-for-profit Canadian corporation. Its charter objectives are to increase and perpetuate the supply of wild ducks and other migratory waterfowl within Canada. Pursuant to an agreement that plaintiff has remitted monthly since 1937 to Ducks Unlimited, Canada, approximately 80 percent of its contributions for pursuit of scientific operations. Ten percent of Ducks' contributions are used in furtherance of its educational activities within the United States, with the remaining ten percent used for administrative expenses.
The total amount of funds to be allocated to Ducks Unlimited, Canada, is determined by Ducks at its annual meeting. The decision to transfer funds to Ducks Unlimited, Canada, is based upon the submission of a Monthly Spending Control Report and Annual Reports of projected expenditures by Ducks Unlimited, Canada. Ducks can terminate at any time the transfer of money to its Canadian affiliate if these funds are used for nonscientific or noneducational purposes.
Ducks has been exempt from Federal income tax since 1938. In 1965, the exemption was extended to make contributions to plaintiff deductible for Federal estate and gift taxes. On August 31, 1965, Ducks was also exempted from the Illinois retailers' occupation service and use taxes; and, on May 22, 1958, from the New York City sales tax. Ducks contends that the decisions of the Director of Labor and the trial court denying its claim for refund under par. 221 of the Unemployment Compensation Act are against the manifest weight of the evidence.
• 1, 2 In exercising our function pursuant to the Administrative Review Act, we must commence from the premise that, "the findings and conclusions of the administrative agency on questions of fact shall be held to be prima facie true and correct." (ch. 110, par. 274.) Our duty as a reviewing court is limited to ascertaining whether the findings and decisions of the administrative agency are against the manifest weight of the evidence. We will not reweigh the evidence but we must determine whether the final decision of the agency is just and reasonable in light of the evidence presented. (See Davern v. Civil Service Com., 47 Ill.2d 469 at page 471 and cases there cited.) Where this court finds that the order of any administrative agency is without substantial foundation in the evidence, it is our duty to set the order aside. Golden Egg Club Inc. v. Illinois Liquor Com., 124 Ill. App.2d 241, 243; Evans v. License Appeal Com., 95 Ill. App.2d 121, 127; and Gasparas v. Leack, 93 Ill. App.2d 99, 109.
Par. 221 provides (ch. 48, par. 331):
"The term `employment' shall not include service performed in the employ of a corporation * * * organized and operated exclusively for * * * scientific * * * or educational purposes * * * 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."
• 3 As the decision of the Director correctly indicates, four basic requirements must be satisfied before Ducks can be exempt. The corporation must be: (1) organized exclusively for scientific and educational purposes; (2) operated exclusively for scientific and educational purposes; (3) no part of its earnings can inure to the benefit of any private shareholder or individual; and (4) no substantial part of its activities can consist of carrying on propaganda or otherwise attempting to influence legislation. The Director concedes that plaintiff satisfies requirements three and four. The central issue is whether Ducks was organized and operated exclusively for scientific and educational purposes during the period in question.
Section 501(c)(3) of the United States Internal Revenue Code of 1954 describes those organizations exempt from Federal income tax. Ducks was granted such an exemption by the Internal Revenue Service on November 29, 1938 under Section 101(6), predecessor to Section 501(c)(3). The pertinent statutory language of Section 221 of the Illinois Unemployment ...