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05/19/88 the Salvation Army, v. the Department of Revenue

May 19, 1988

THE SALVATION ARMY, PLAINTIFF-APPELLANT

v.

THE DEPARTMENT OF REVENUE ET AL., DEFENDANTS-APPELLEES



APPELLATE COURT OF ILLINOIS, SECOND DISTRICT

524 N.E.2d 628, 170 Ill. App. 3d 336, 120 Ill. Dec. 598 1988.IL.792

Appeal from the Circuit Court of Lake County; the Hon. Wallace B. Dunn, Judge, presiding.

APPELLATE Judges:

JUSTICE HOPF delivered the opinion of the court. LINDBERG, P.J., and UNVERZAGT, J., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE HOPF

Plaintiff, the Salvation Army, sought administrative review in the circuit court of Lake County of a decision by the Department of Revenue (Department) denying tax-exempt status for a parcel owned by plaintiff. The Department had determined that the parcel, operated as a thrift store, was not exempt from property taxation since the parcel was not used primarily for charitable purposes. The circuit court affirmed the Department's decision as not being against the manifest weight of the evidence. The court also denied the Salvation Army's motion for reconsideration of the court's affirmation of the Department's ruling. Additionally, the court denied Salvation Army's motion to remand the case to the Department for further testimony and evidence regarding the factual similarities between the Salvation Army Thrift Store in Waukegan and the Society of St. Vincent De Paul Thrift Store in Chicago, which was granted a tax exemption by the Department. The Salvation Army filed a timely notice of appeal.

In this court the Salvation Army contends that (1) the trial court erred in affirming the Department's decision that the Salvation Army Thrift Store is not entitled to a charitable use exemption from real property tax and (2) the trial court abused its discretion in refusing to remand this action to the Department for further hearing regarding the similarities in the uses of the Salvation Army Thrift Store and the Society of St. Vincent De Paul Thrift Store.

The Salvation Army is a Protestant Christian religious movement which, in addition to preaching the gospel, provides an array of social services to the poor, including alcoholic rehabilitation. The Salvation Army is an exempt organization under section 501(c)(3) of the Internal Revenue Code. I.R.C. § 501(c)(3) (1954).

Prior to 1983 and 1984, the tax years in question, the Salvation Army operated a thrift store and Adult Rehabilitation Center from one building located at 115 S. Sheridan Road in Waukegan. No property tax was assessed against this building. The building, however, was condemned to make way for road improvements, requiring the Salvation Army to relocate its ARC and thrift store.

Due to changes in local zoning restrictions, the Salvation Army was unable to combine the thrift store and the ARC in the same structure. A new building was constructed at 506 S. Sheridan Road in Waukegan to house the ARC. The thrift store moved to a building located on several parcels of land at 133-139 South Genesee Street. The Salvation Army purchased the property for $120,000 and spent an additional $100,000 in improvement costs before opening the thrift store in June of 1983.

The thrift store sells used clothing, furniture, glassware, and household furnishings of all kinds, donated to the Salvation Army by individuals in the community. The donated items are collected once or twice weekly and taken to the ARC for processing and grading before being sold at the store for below market value. The thrift store participates in an emergency services disaster program with other disaster relief services. In the event of a disaster, the store may be called upon to supply disaster victims with food and clothing although no such relief was required during 1983 or 1984.

Subsequent to the purchase of the Genesee Street property, the Salvation Army filed a petition with the Board of Review of Lake County (the board) for exemption from 1983 real property taxes. The petition sought tax exemption pursuant to section 19.2 of the Revenue Act of 1939, dealing with property used exclusively for religious purposes. (Ill. Rev. Stat. 1983, ch. 120, par. 500.2.) The board approved the exemption request on June 28, 1983, but on May 22, 1984, the Department of Revenue, which renders final decisions concerning tax exemption petitions (Ill. Rev. Stat. 1983, ch. 120, par. 589(6)), denied the request, finding that the primary use of the thrift store was not charitable.

The Salvation Army requested review of the Department's decision and submitted a memorandum supplemented with exhibits and an affidavit in support of its position. Following reconsideration of its decision, the Department, on August 31, 1984, again denied the exemption request, finding once more that the primary use of the thrift store was not charitable. Additionally, the Department concluded that the primary use of the property was as a "retail outlet" and that the use of the income was not controlling. The Salvation Army requested a formal hearing of the Department's decision.

On November 13, 1984, the Salvation Army submitted an application for real property tax exemption for the 1984 tax year to the Lake County board of review. This application sought tax exemption pursuant to sections 19.2 and 19.7 of the Revenue Act of 1939, the religious and charitable use provisions of the Act. (Ill. Rev. Stat. 1983, ch. 120, pars. 500.2, 500.7.) The board recommended the 1984 tax exemption, pending confirmation by the Department of Revenue.

On March 29, 1985, the Department denied the Salvation Army's 1984 tax exemption request, finding that the primary use of the property was not charitable. The Salvation Army requested review of the Department's decision, subsequently submitting a supporting memorandum and exhibits. Upon review, the Department again denied the exemption request, concluding that the primary use of the property was not charitable.

Pursuant to an agreement between the Salvation Army and the Department, formal hearings on the 1983 and 1984 tax exemption applications were consolidated. At the consolidated hearing on August 13, 1985, four witnesses testified on behalf of the Salvation Army. Numerous exhibits were ...


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