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In Re Application of Skidmore



Appeal from the Appellate Court for the Second District; heard in that court on appeal from the Circuit Court of Lake County, the Hon. Lloyd A. Van Duesen, Judge, presiding.


Rehearing denied March 30, 1979.

The taxing authorities of Lake County assessed real estate taxes for the year 1970 in the amount of $29,826.40 on the leasehold interest of Standard Oil Division of the American Oil Company in property owned by the Illinois State Toll Highway Authority. The property involved is the Lake Forest Tollway oasis owned by the Authority and leased to the Standard Oil Division of the American Oil Company. The Authority and Standard Oil paid the taxes under protest and filed objections to the application for judgment of the county treasurer and ex-officio collector of Lake County. The circuit court of Lake County, relying on Illinois State Toll Highway Com. v. Korzen (1965), 32 Ill.2d 338, held that the leasehold interest was exempt from taxation and enjoined the county officials and their successors in office "from assessing, levying, collecting or attempting to assess, levy or collect" general real estate taxes on the leasehold interest.

As originally enacted in 1953 and as reenacted in 1967, the toll highways act (see Ill. Rev. Stat. 1953, ch. 121, par. 314a43; Ill. Rev. Stat. 1967, ch. 121, par. 100-22) provided: "All property belonging to the Commission [Authority], and the said toll highways, shall be exempt from taxation." Effective October 1, 1973, section 22 was amended to provide: "All property belonging to the Authority, and the toll highways, shall be exempt from taxation. However, such part of that property as has heretofore been or shall hereafter be leased by the Authority to a private individual, association or corporation for a use which is not exempted from taxation under Section 19 of the Revenue Act of 1939, is subject to taxation as provided in Section 26 of the Revenue Act of 1939, regardless of any provision in such a lease to the contrary." (Ill. Rev. Stat. 1973, ch. 121, par. 100-22.) The collector filed a motion in the circuit court to vacate that part of the decree which found the leasehold interest to be exempt from taxation and enjoined the county officials from attempting to tax it. The circuit court ordered that that portion of the decree which enjoined the assessment, levy or collection of taxes on the leasehold interest be vacated and the injunction dissolved. The Authority appealed and the appellate court, finding that the amendment to section 22 of the toll highways act "was a law impairing the obligation of the contract both as to the Authority and Standard Oil," held that there was "an impairment of a valid, existing contract contrary to the provisions * * * of the Illinois Constitution." (47 Ill. App.3d 954, 960.) The collector appealed. Supreme Court Rule 317 (58 Ill.2d R. 317).

The collector contends that the termination of the tax exemption for leasehold interests in tollway oases did not impair any contractual obligation between the Authority or its lessee, or between the Authority and the holders of its bonds issued prior to the enactment of the amendment. It is the Authority's position that its property is State property and therefore exempt from all general property taxation; that leaseholds in tollway property used as oases are a part of the contemplated public service and function of the Authority and such use is therefore exempt from taxation; and that this court has previously recognized that the toll highways act is a valid and binding contract entered into by the State.

In Small v. Pangle (1975), 60 Ill.2d 510, 514, the court, in discussing the interpretation of section 6 of article IX of the Constitution of 1970, said:

"The above [article IX, section 6] is clearly nothing more than a rephrasing of a similar provision contained in section 3 of article IX of the Illinois Constitution of 1870. Those cases interpreting the permissive legislative exemptions under the Constitution of 1870 are equally relevant to the limits of exemption now constitutionally permitted.

The basic premise, that statutes providing exemption from taxation shall be strictly construed because article IX of the Constitution subjects all property to taxation (see Wesley Willows v. Munson (1969), 43 Ill.2d 203, 207), remains valid. Also see People ex rel. Nordlund v. Winnebago Home for the Aged (1968), 40 Ill.2d 91."

Since all presumptions are to the contrary, the intention that the State be bound by an exemption must be clearly stated. (People ex rel. Murray v. City of St. Louis (1920), 291 Ill. 600, 606.) As a general rule a taxpayer has no vested right in the continued existence of a taxing statute. People ex rel. Harding v. Chicago & Northwestern Ry. Co. (1930), 340 Ill. 102; People ex rel. Campe v. Board of Review (1919), 290 Ill. 467.

Whether the statute creates contractual rights is to a great extent dependent upon the language used. (Dodge v. Board of Education (1937), 302 U.S. 74, 87 L.Ed. 57, 58 S.Ct. 98.) The law enacted in 1855 granting the exemption upheld in People ex rel. County Collector v. Northwestern University (1972), 51 Ill.2d 131, provided: "`That all property, of whatever kind or description, belonging to or owned by said corporation [Northwestern University], shall be forever free from taxation for any and all purposes.'" (51 Ill.2d 131, 132.) In United States Trust Co. v. New Jersey (1977), 431 U.S. 1, 52 L.Ed.2d 92, 97 S.Ct. 1505, in which the Supreme Court held that New Jersey's repeal of a statute previously enacted by both New York and New Jersey violated the contract clause of the Constitution of the United States, the statute in relevant part provided:

"`The 2 States covenant and agree with each other and with the holders of any affected bonds, as hereinafter defined, that so long as any of such bonds remain outstanding and unpaid and the holders thereof shall not have given their consent as provided in their contract with the port authority, (a) * * * and (b) neither the States nor the port authority nor any subsidiary corporation incorporated for any of the purposes of this act will apply any of the rentals, tolls, fares, fees, charges, revenues or reserves, which have been or shall be pledged in whole or in part as security for such bonds, for any railroad purposes whatsoever other than permitted purposes hereinafter set forth.' 1962 N.J. Laws, c. 8, sec. 6; 1962 N.Y. Laws, c. 209, sec. 6." 431 U.S. 1, 9-10, 52 L.Ed.2d 92, 101-02, 97 S.Ct. 1505, 1511.

The section of the toll highways act in which the exemption was granted contained no language which would serve to create a contract that the grant of exemption would remain in force. In People ex rel. Campe v. Board of Review (1919), 290 Ill. 467, the court held that a taxpayer had no vested rights under a statute providing that a certain portion of the actual value of property was to be the basis for assessment for taxation and that the General Assembly was empowered to change the basis at any time. In Dodge v. Board of Education (1936), 364 Ill. 547, in rejecting the contention that the amendment to the Act relating to the compulsory retirement of school teachers was invalid as taking away vested rights to future installments of pensions for teachers who had retired or applied for retirement under the law as it existed prior to the amendment, the court said, "A right, to be within the protection of the constitution, must be a vested right. It must be something more than a mere expectancy based upon an anticipated continuance of an existing law. If before rights become vested in particular individuals the convenience of the State induces amendment or repeal, such individuals have no cause to complain." (Dodge v. Board of Education (1936), 364 Ill. 547, 552.) We perceive no reason to hold that absent a clearly stated intent to the contrary the grant of the exemption from taxation here created any greater rights than did the statutes upon which the claims of contractual rights in the foregoing cases were based.

We consider next the Authority's contention that the property is exempt because it is State property. We agree with the appellate court that this contention is without merit (47 Ill. App.3d 954, 956) for the reason that the property sought to be taxed is not State property, but a leasehold interest of Standard Oil. (Nabisco, Inc. v. Korzen (1977), 68 Ill.2d 451.) Concerning the contention that because the oases are a part of the Authority's contemplated public service and function the leasehold interest is exempt, we hold, as did the appellate court, that in enacting the ...

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