Original petition for injunction and declaratory judgment.
MR. JUSTICE WARD DELIVERED THE OPINION OF THE COURT:
In February of 1980, the Department of Revenue and the supervisor of assessments of Fulton County reclassified as real property certain machinery and equipment of the Central Illinois Light Company (CILCO) that had been previously assessed for purposes of taxation as personalty by both of the governmental bodies.
In response, CILCO filed a motion in this court for leave to file an original action "relating to revenue" under Supreme Court Rule 381 (73 Ill.2d R. 381), in which it petitioned for declaratory and injunctive relief. We granted the motion for leave to file the action.
The petitioner is a privately owned public utility engaged in producing, transmitting and distributing electrical energy. Duck Creek Station, a steam electrical generating facility located in Fulton County, is one of several plants owned and operated by CILCO. Duck Creek Station began operations in 1974. For that year and for succeeding years, CILCO filed certain schedules with the Department of Local Government Affairs on the basis of which that department classified and assessed the utility's pollution-control equipment as personal property. The assessments were then forwarded to the Fulton County supervisor of assessments and used as a basis for the county's classifying, assessing, and taxing of property at Duck Creek Station, that was subject to ad valorem personal and real property taxes.
The statutory quadrennial assessment of property in Fulton County was scheduled for 1975, and in anticipation of it CILCO and the county's supervisor of assessments, Vernon Thompson, agreed that the following formula would be applied in assessing CILCO's property at its Duck Creek Station: 60% of the property would, for purposes of taxation, be considered to be personal property and 40% would be considered to be real property and so assessed, based on 25% of the actual book cost of all the property located at the Duck Creek Station. The agreement, however, did not identify each item of property listed on property schedules as being real or personal. The personal property taxes imposed on the Duck Creek Station property were based upon the valuations assigned by CILCO to its machinery and equipment. A letter directed by CILCO to Fulton County officials confirming this assessment arrangement included the statement: "This classification will be subject to review and possible adjustment when the effect of the abolition of personal property taxation on or before January 1, 1979 on the amount of property or replacement taxes paid by CILCO to Fulton County is known."
The Fulton County taxing officials followed the 60%/40% assessment formula for the years 1975 through 1978. As stated, the assessments for the personal property taxes were based upon CILCO's declared value of its machinery and equipment at Duck Creek, which were itemized in personal property schedules and filed with the county.
After the abolition of the ad valorem tax on personal property (see Client Follow-Up Co. v. Hynes (1979), 75 Ill.2d 208), Fulton County, in preparation for the 1979 quadrennial assessment, for the first time conducted an on-site inspection at Duck Creek for the purpose of determining the value of the real and personal property at the facility. The Real Estate Analysis Corporation, which had been retained by the county to conduct the inspection, gave an appraisal of $206,939,000. Machinery and equipment accounted for approximately $120 million of the valuation, and the structural improvements, reservoirs, and dams were appraised at $86.4 million.
On February 8, 1980, after the abolition of the personal property tax, the Fulton County board of review reclassified all of the property at Duck Creek as realty, including CILCO's machinery and equipment which had previously been assessed and taxed as personal property. This action came after the Department of Revenue had acted to reclassify CILCO's pollution-control equipment at Duck Creek as real property for the purpose of taxation. As a result of Fulton County's reclassification it was calculated that the county would derive an additional $1.7 million from the real property tax imposed on CILCO's machinery and equipment at the Duck Creek Station.
To support this reclassification, the respondents point to the Illinois Property Tax Manual, which was prepared by the Department of Revenue in 1980 as "a guide to all local officials that are involved in administering the Illinois Property Tax System." It was published in compliance with statutory directions to the Department to "[p]rescribe general rules and regulations, not inconsistent with law, for local assessment officers relative to the assessment of property for taxation, which general rules and regulations shall be binding upon all local assessment officers and shall be obeyed by them respectively until reversed, annulled or modified by a court of competent jurisdiction." Ill. Rev. Stat. 1979, ch. 120, par. 611(3).
The manual declares that the determination of whether property is to be classified as real or personal is a "matter of law." It states, too:
"If the Revenue Act, as it existed on January 1, 1979, specified that a certain kind of property shall be considered personal property for purposes of taxation then the assessor must rely on that specification. Property that has been statutorily classified as personalty as of January 1, 1979, cannot be reclassified as real estate. In those cases where no rule is provided by statute, the determination of whether a particular property shall be considered real or personal shall be made from a consideration of the distinguishing characteristics of real and personal property."
The petitioner acknowledges that there is no provision in the Revenue Act of 1939 (Ill. Rev. Stat. 1979, ch. 120, par. 482 et seq.) which specifies or requires that "machinery and equipment" be considered to be personalty. The manual does set out various characteristics as a guide to what is to be considered "real estate." One of those provisions, and one upon which the Department of Revenue and Fulton County relied in reclassifying CILCO's machinery and equipment at Duck Creek Station as real property, is the following:
"If machinery is intended for permanent use in carrying on the business for which the building was erected or is used, it becomes part of the realty on being installed and it is immaterial that the machines may be removed without injury to the building. This rule has special application to heavy machinery intended for the building and not intended to be moved from place to place, though resting in position by its own weight, and to machinery which is part of a factory or shop and indispensable thereto, though not actually fastened."
If this guide or rule is to be applied uniformly across the State, the parties say "virtually all property classified as machinery and equipment for personal property tax purposes and owned by public utilities and others in 1970 and 1978 will be ...