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People Ex Rel. Bosworth v. Lowen

OPINION FILED MAY 25, 1984.

THE PEOPLE EX REL. KENT BOSWORTH, COUNTY TREASURER, ET AL., APPELLANTS,

v.

EARL LOWEN ET AL., APPELLEES. — THE PEOPLE EX REL. KENT BOSWORTH, COUNTY TREASURER, ET AL., APPELLANTS,

v.

EARL LOWEN ET AL., APPELLEES. — VALLEY VIEW COMMUNITY UNIT SCHOOL DISTRICT NO. 365U ET AL., APPELLANTS,

v.

THE DEPARTMENT OF REVENUE ET AL., APPELLEES.



Appeals from the Appellate Court for the Third District; heard in that court on appeals from the Circuit Court of Will County, the Hon. Michael A. Orenic, Judge, presiding.

JUSTICE GOLDENHERSH DELIVERED THE OPINION OF THE COURT:

In these consolidated appeals plaintiff, Kent Bosworth, county treasurer and ex officio collector of Will County, and intervenor Valley View Community Unit School District No. 365U (hereafter plaintiffs), challenged the validity of section 21a-3 of the Revenue Act of 1939 (Ill. Rev. Stat. 1981, ch. 120, par. 502a-3). In Docket No. 58718 the plaintiff collector made application in the circuit court of Will County for judgment against certain properties owned by Citizens Utilities Company of Illinois. The circuit court allowed Citizens' motion for summary judgment based on its tax objections and ordered refunds. Plaintiffs appealed and the appellate court affirmed. (115 Ill. App.3d 867.) In Docket No. 58719 the plaintiff collector made application in the circuit court of Will County for judgment against certain properties owned by Commonwealth Edison Company. The circuit court allowed Commonwealth Edison's motion for summary judgment based on its tax objections and ordered refunds. Plaintiffs appealed and the appellate court affirmed. (115 Ill. App.3d 855.) In Docket No. 58725 plaintiffs brought an action in the circuit court of Will County against the Department of Revenue of the State of Illinois and its Director, seeking a declaration that section 21a-3 was unconstitutional and an order enjoining defendants from "assessing utility pollution control facilities in a manner contrary to the Illinois Constitution." The circuit court dismissed the complaint, plaintiffs appealed, and the appellate court affirmed. (115 Ill. App.3d 865.) We allowed plaintiffs' petitions for leave to appeal and consolidated the causes for further proceedings.

In the cases in which the refunds were ordered paid (Docket Nos. 58718 and 58719), assessments of pollution-control facilities had been made by the Department of Revenue, and in each instance the taxpayer paid property taxes under protest and filed timely tax objections. Subsequent to the filing of our opinion in Commonwealth Edison Co. v. Department of Local Government Affairs (1981), 85 Ill.2d 495, the Department issued new assessment figures for the years in question. The revised assessments were computed on the basis of 1.5% of the fair cash value of the pollution facilities equalized at 33 1/3%.

Section 21a-3, as originally enacted, provided:

"For the purpose of determining 33 1/3% of the fair cash value of any certified pollution control facilities in assessing said facilities under the real and personal property tax laws of this State, the Department shall take into consideration the actual or probable net earnings attributable to the facilities in question, capitalized on the basis of their productive earning value to their owner; the probable net value which could be realized by their owner if the facilities were removed and sold at a fair, voluntary sale, giving due account to the expense of removal and condition of the particular facilities in question; and such other information as the Department may consider as bearing on 33 1/3% of the fair cash value, to their owner, of the pollution control facilities in question, consistent with the principles set forth herein." Ill. Rev. Stat. 1977, ch. 120, par. 502a-3.

The 1979 amendment added the following language:

"For the purposes of this Act, earnings shall be attributed to a pollution control facility only to the extent that the operation thereof results in the production of a commercially saleable by-product or increases the production or reduces the production costs of the products or services otherwise sold by the owner of such facility. For the purposes of this Section the land underlying a cooling pond shall not be considered a part of a pollution control facility.

This amendatory Act of 1979 is not intended to nor does it make any change in the meaning of any provision in this Section but is intended to remove possible ambiguities, thereby confirming the existing meaning of this Section in effect prior to the effective date of this amendatory Act of 1979." Ill. Rev. Stat. 1979, ch. 120, par. 502a-3.

Section 21a-1 provides:

"It is hereby declared to be the policy of the State of Illinois that pollution control facilities should be valued, for purposes of the real and personal property tax laws of this State, in relation to 33 1/3% of the fair cash value of their economic productivity to their owners." Ill. Rev. Stat. 1981, ch. 120, par. 502a-1.

Plaintiffs contend that section 21a-3 is unconstitutional both on its face and as applied. Defendants contend that plaintiffs' challenge to its validity as applied is precluded by reason of their failure to exhaust their administrative remedies. Concerning their attack on the statute in its entirety appellants contend first that it creates an exemption from taxation violative of section 6 of article IX of the Illinois Constitution, which provides:

"The General Assembly by law may exempt from taxation only the property of the State, units of local government and school districts and property used exclusively for agricultural and horticultural societies, and for school, religious, cemetery and charitable purposes. The General Assembly by law may grant homestead exemptions or rent credits." (Ill. Const. 1970, art. IX, sec. 6.)

Appellants argue that the method of valuation provided in section 21a-3 effectively proscribes the use of the "capitalization of income" method of valuing property because, if there are any "net earnings attributable to the facilities in question," section 21a-3 allows for a deduction equivalent to the expense of removing the facilities from the land. They argue, too, that the income which this property produces by virtue of its inclusion in the rate bases of the defendants, both public utilities, is improperly disregarded.

Citing Hoffman v. Lehnhausen (1971), 48 Ill.2d 323, and Elk Grove Engineering Co. v. Korzen (1972), 55 Ill.2d 393, plaintiffs contend that the statute provides for an impermissible reduction in valuation resulting in an invalid exemption. We disagree. We agree with the appellate court that the scheme here provided is a method of valuation and does not create an unlawful exemption. (115 Ill. App.3d 855, 861.) In O'Connor v. A & P Enterprises (1980), 81 Ill.2d 260, a statute provided that farm improvements neither currently in use nor contributing towards the productivity of the farm were not to be included in the ...


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