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05/16/88 Knox College, v. the Department of Revenue

May 16, 1988





523 N.E.2d 1312, 169 Ill. App. 3d 832, 120 Ill. Dec. 401 1988.IL.754

Appeal from the Circuit Court of Knox County; the Hon. Stephen C. Mathers, Judge, presiding.


PRESIDING JUSTICE BARRY delivered the opinion of the court. STOUDER and SCOTT, JJ., concur.


Knox College appeals from an order of the circuit court of Knox County affirming the decision of the Illinois Department of Revenue to deny tax exemptions to seven parcels of real estate owned by Knox College. Five of the parcels are leased to fraternities, and two of the parcels are vacant lots.

The college applied for property tax exemptions for these parcels for the year 1985, and the Knox County Board of Review granted the exemptions as requested. The Illinois Department of Revenue reversed the board of review and denied the exemptions. Thereafter, a formal administrative hearing was held after which the administrative law Judge held that the college had failed to establish that the fraternity houses were actually used exclusively for educational purposes. He denied exemptions as to the five houses and as to one vacant lot, but as to the other lot, he approved the exemption. The college then obtained judicial review of that decision, and the circuit court of Knox County affirmed the decision of the Department of Revenue. This appeal followed.

Looking first at the fraternity property, three of the fraternities signed 99-year leases with the college in 1920. Another leased its house in 1968, and another in 1981. The original leases each provided that the house is "to be used and occupied as a dormitory by the men students who may from time to time be the active members of [the] local chapter." Later leases merely indicated that each house was to be used "as a fraternity house." In each case the college provides maintenance and repairs, funds any capital improvements, and provides insurance. College regulations require residents of the fraternities to be regularly enrolled college students and require that pledging memberships be open to all students regardless of race, creed, or color.

Students who live in the fraternities must eat at the college dining hall and pay the same room rate as residents of campus dormitories. In fact, the college collects the room rent from fraternity residents and closely monitors the house budgets of the fraternities. At the administrative hearing, the dean of students of the college testified that students who are not members of the fraternities have lived in the fraternity houses and that the college would place nonmembers in the fraternities if there was a need and space available. The dean also testified that the college believes fraternities benefit the educational program of the college by providing leadership training and experience, by developing social and group relationships, and by achieving ongoing contact with alumni of the chapter.

The administrative law Judge filed a decision following the administrative hearing. Included in his findings of fact were the following:

"Five of said seven parcels and the buildings thereon, I find, while owned by Applicant, were leased to fraternities which occupied said buildings during 1985, and controlled who lived in said houses. With one exception during 1985, the residents were either pledges or members of the respective fraternities. Said houses then, during 1985, were only open to the members of the fraternities pursuant to the rules of said fraternities. Consequently, I find that said houses were not used primarily for educational purposes during 1985."

Following judicial review, the circuit court held that the decision of the Department of Revenue was not against the manifest weight of the evidence and was not contrary to law.

Administrative agency findings on questions of fact are prima facie true and correct (Ill. Rev. Stat. 1985, ch. 110, par. 3-110) and should not be disturbed on review unless they are contrary to the manifest weight of the evidence. (Burke v. Board of Review (1985) 132 Ill. App. 3d 1094, 477 N.E.2d 1351.) The standard for judicial review is as follows:

"Courts will not reweigh the evidence adduced at an agency hearing; their review is restricted to making an assessment of whether the agency's final decision was just and reasonable in light of the evidence presented. [Citation.] Where a Conclusion opposite to that of the agency's is 'clearly evident' from the evidence, a court must overturn the agency's factual ...

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