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05/27/87 Wheaton College, v. the Department of Revenue

May 27, 1987





508 N.E.2d 1136, 155 Ill. App. 3d 945, 108 Ill. Dec. 559 1987.IL.687

Appeal from the Circuit Court of Du Page County; the Hon. John S. Teschner, Judge, presiding.


JUSTICE INGLIS delivered the opinion of the court. DUNN and NASH, JJ., concur.


This case presents the question of whether an apartment building leased by a college and used for student housing is exempt from property taxation pursuant to section 19.1 of the Revenue Act of 1939 (Ill. Rev. Stat. 1985, ch. 120, par. 500.1). Plaintiff, Wheaton College (plaintiff), appeals from the judgment of the circuit court of Du Page County upholding the determination of defendant, the Department of Revenue of the State of Illinois (defendant), denying the exemption.

In 1976, plaintiff acquired title to the Peter Pam Apartments. Plaintiff subsequently entered into a like-kind exchange of property agreement with Mr. and Mrs. Laurel Walter. Under this agreement, plaintiff acquired several parcels of property in Wheaton from the Walters in exchange for the Peter Pam Apartments. Plaintiff transferred title to the apartments to Gary-Wheaton Bank as trustee. The Walters are the sole beneficiaries of the trust. Plaintiff then entered into a 30-year lease for the apartments. The lease provides that in addition to monthly rent, plaintiff is obligated to pay all taxes, utilities, and insurance on the property. The lease further provides that plaintiff has the sole right to alter or remove the existing structures, erect new structures, or sublet the property without the Walters' consent. Finally, plaintiff has the right to repurchase the property for $106,000 upon the death of the survivor of Mr. and Mrs. Walter. The Walters and their heirs have the reciprocal right to compel plaintiff to purchase the property at that price.

Pursuant to section 19.1 of the Revenue Act of 1939 (Ill. Rev. Stat. 1985, ch. 120, par. 500.1), plaintiff claimed a tax exemption for the apartments for the 1983 and 1984 tax years, during which time the units were used for student housing. Defendant's hearing officer denied the exemption, and the circuit court affirmed.

Section 19.1 reads, in relevant part, as follows:

"ll property of schools, . . . including the real estate on which the schools are located and any other real property used by such schools exclusively for school purposes, not leased by such schools or otherwise used with a view to profit, including, but not limited to, student residence halls, dormitories and other housing facilities for students and their spouses and children . . . and all lands heretofore or hereafter donated, granted, received or used for public school, college, theological seminary, university, or other educational purposes and the proceeds thereof . . .. The property described in this Section shall be exempt from taxation whether owned by a resident or non-resident of this State or by a corporation, whether incorporated in this or in any other state of the United States, and not leased or otherwise used with a view to profit." (Ill. Rev. Stat. 1985, ch. 120, par. 500.1.)

There is no question that the property in this case was used for a tax-exempt purpose. (See Ill. Rev. Stat. 1985, ch. 120, par. 500.1; People ex rel. Goodman v. University of Illinois Foundation (1944), 388 Ill. 363, 371.) The question is whether plaintiff may be considered to be the owner of the property.

Both parties agree that ownership of real estate is a broad concept and can apply to one other than the record titleholder. (Mason v. Rosewell (1982), 107 Ill. App. 3d 943, 946.) Title refers only to a legal relationship, while ownership is comparable to control. (People v. Chicago Title & Trust Co. (1979), 75 Ill. 2d 479, 489.) The term "owner" may include one who has the control or occupation of land with a claim of ownership. (75 Ill. 2d 479, 489.) The meaning of the term "owner" depends upon the nature and purpose of the statute involved. (Chapman v. County of Will (1973), 55 Ill. 2d 524, 531.) The primary incidents of ownership include the right to possession, use, and enjoyment of the property, the right to change or improve the property, and the right to alienate the property at will. 73 C.J.S. Property sec. 27 (1983).

The parties also agree that statutes creating tax exemptions must be construed strictly in favor of taxation. (MacMurray College v. Wright (1967), 38 Ill. 2d 272, 278; People ex rel. Gill v. Trustees of Schools (1936), 364 Ill. 131, 134.) The party claiming the exemption has the burden to show that it clearly falls within the terms of the exemption statute. (MacMurray College v. Wright (1967), 38 Ill. 2d 272, 278; Rogers Park Post No. 108, American Legion v. Brenza (1956), 8 Ill. 2d 286, 290.) Furthermore, a decision of an administrative agency relative to taxation will be reversed on administrative review only if it is contrary to the manifest weight of the evidence. Robinson v. Property Tax Appeal Board (1979), 72 Ill. App. 3d 155, 156; Thermos v. Department of Revenue (1976), 37 Ill. App. 3d 410, 412.

In arguing that it is the owner of the apartments for purposes of a section 19.1 exemption, plaintiff cites Cole Hospital, Inc. v. Champaign County Board of Review (1983), 113 Ill. App. 3d 96. In Cole Hospital, Inc., the plaintiff used a sale-leaseback arrangement to finance property for a new hospital. The plaintiff paid all taxes, insurance, and maintenance costs, had an absolute right to purchase the property on the 11th and 16th anniversaries of the lease, and had the right of first refusal in the event of a proposed sale to a third party. Furthermore, the lease could not be cancelled by third-party buyers. (113 Ill. App. 3d 96, 100.) The court found these facts to be sufficient incidents of ownership to qualify the plaintiff for a tax exemption on the property. (113 Ill. App. 3d 96, 100-01.) Similarly, in Christian Action Ministry v. Department of Local Government Affairs (1978), 74 Ill. 2d 51, 54, the seller in a real estate purchase contract held title to the property until all payments were made, but ...

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