APPELLATE COURT OF ILLINOIS, SECOND DISTRICT
532 N.E.2d 1116, 177 Ill. App. 3d 895, 127 Ill. Dec. 287 1988.IL.1942
Appeal from the Circuit Court of Du Page County; the Hon. S. Bruce Scidmore, Judge, presiding.
JUSTICE NASH delivered the opinion of the court. LINDBERG, P.J., and REINHARD, J., concur.
DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE NASH
In this consolidated appeal, defendants, the county collector of Du Page County and the Illinois Department of Revenue, appeal from a judgment exempting property owned by plaintiff, the Du Page Art League, from real estate taxes for 1983, contending that plaintiff does not meet the test set forth in Methodist Old Peoples Home v. Korzen (1968), 39 Ill. 2d 149, 233 N.E.2d 537, so as to qualify it as a charitable organization.
On May 10, 1978, the circuit court of Du Page County found that two adjacent parcels of land owned by plaintiff were exempt from real estate taxes on the ground plaintiff was a charitable organization within the meaning of section 19.7 of the Revenue Act of 1939 (Ill. Rev. Stat. 1987, ch. 120, par. 500.7). The trial court ordered the county collector to refund 1975 real estate taxes paid by plaintiff and enjoined him from collecting taxes for 1976 and subsequent tax years. That decision was not appealed. In 1982, plaintiff combined the two parcels of land under one legal description and a new permanent index number was assigned. Thereafter, real estate taxes were assessed against the property for the tax year 1983, which the owner paid under protest. The Du Page County Board of Review recommended to the Illinois Department of Revenue that plaintiff's exemption request be granted based on the prior judicial determination made in 1978 that the property was exempt from tax. The Director of the Department of Revenue denied the exemption request; however, on administrative review, the circuit court found, as a matter of law, that plaintiff was a charitable organization and its property was exempt from real estate taxes. This appeal followed.
The record discloses that the Du Page Art League was incorporated in 1959 as a not-for-profit corporation to "promote art consciousness and provide [a] meeting place for painting sessions and kindred arts." Its bylaws state that the "object of the League is to encourage those interested in all forms of creative art; to promote high artistic standards and to stimulate interest and understanding of art in Du Page county through art instruction, education, art awareness, dissemination of information, programs and exhibits." At the end of 1983, plaintiff had 513 members who volunteered over 4,800 hours to staff the art building. The bylaws set forth membership requirements that active members must be at least 17 years old, reside in Du Page County, and have paid the annual dues fixed by plaintiff's board, which are payable September 1 of each year and are considered delinquent if not paid by October 1. In 1983, membership dues were $20 per year for an individual and $30 for a couple. Sustaining members pay annual amounts stipulated by the board to give support to plaintiff and a regular life membership can be obtained by donating to plaintiff a significant amount of money to be determined by the board. The bylaws do provide that membership applications requiring "special consideration" must be acted upon by the board and that the board can confer honorary life memberships, but no definitions or guidelines are contained therein. Kathy Young, plaintiff's president, testified that honorary memberships are available for hardship cases, and that plaintiff did have one hardship member. Neither plaintiff's bylaws nor its 1984-85 activity schedule indicates that membership fees would be waived if an inability to pay was shown.
Plaintiff's real estate for which it sought an exemption contains a one-story building in which there is a classroom for teaching art classes, two display galleries, a small gift area, an office area, and a parking lot. All parking spaces are reserved for gallery staff volunteers, teachers, officers of plaintiff and sustaining members of the organization. The galleries are open to the public without charge, and are used, with minor exceptions, to display the art work of its members and students. Only members whose dues are paid can exhibit their work in the galleries and all of their work in the gallery must be marked for sale. The artist determines the sales price of his work and, if it is sold, the gallery receives 20% of the sales price as a commission and the artist retains the balance, which was $33,431 and $33,582 for fiscal years ended April 30, 1983, and April 30, 1984, respectively.
Plaintiff conducts art classes for adults and children, and its program has expanded to meet the demands caused by a decrease in art classes in the school system. Plaintiff's brochure stated that a scholarship would be awarded in each of the three children's classes in the fall of 1984, and plaintiff also offers annually two $200 and one $300 scholarship to colleges based on the students' ability. When asked whether any scholarships were awarded based on need during 1983, plaintiff's president stated that she did not know. Plaintiff charges tuition for all other classes, and its 1984-85 activity schedule states that "[registration] MUST BE accompanied by full payment." The registration form states that full payment is due at the time of registration. Neither brochure suggests that tuition will be waived in the case of an inability to pay. Nonmembers can register in art classes but there is a $5 surcharge. Senior citizens are offered a 10% discount on classes and regular gallery workers and class monitors can take art classes at half of the regular fee. The art instructors receive 80% of the tuition paid and plaintiff receives the balance.
Plaintiff also conducts school demonstrations where three artists would work at a school and students would come in by class and observe them in operation. Occasionally, plaintiff sponsors an "artists in action" program where students come to see artists at work in plaintiff's building.
Plaintiff sponsors programs open to the public at no charge which include demonstrations, critiques, educational films and lectures which are held on six days each year on the third Monday of February, March, April, September, October, and November. It also arranges to have its members display their art work in over 40 locations, including city and county offices, banks, professional buildings, libraries, park district buildings, hospitals, and savings and loan associations. The organization's 1984-85 activity schedule states that "[special] services is a personal shopping service for DPAL customers in order to increase sales by making use of the vast and varied talents of our artists. . . . Viewings are arranged for representatives of clubs, banks, and corporations for purchase for their personal collection."
Plaintiff had net income of $3,680 for its fiscal year ended April 30, 1983, and incurred a $392 net loss for its fiscal year ended April 30, 1984. Donations accounted for 11.5% and 1.8% of plaintiff's gross income for 1983 and 1984, respectively; membership fees, tuition, commissions from the sale of art work, and interest income accounted for the remaining gross income. While plaintiff is exempt from Federal income tax on the ground that it is organized exclusively for educational purposes, plaintiff does report, as shown in its 1983 tax return, the commissions it receives from the sale of art work as unrelated business income subject to tax.
In the event plaintiff is dissolved, its bylaws provide that assets remaining after the payment of legal obligations are to be distributed to an organization which operates exclusively for charitable or educational purposes and that qualifies as an exempt organization under section ...