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06/15/94 VICTORY CHURCH AND COLONIAL BANK AND TRUST

June 15, 1994

VICTORY CHURCH AND COLONIAL BANK AND TRUST COMPANY, AS TRUSTEE UNDER TRUST NO. 872, PLAINTIFFS-APPELLANTS,
v.
ILLINOIS DEPARTMENT OF REVENUE, DEFENDANT-APPELLEE.



Appeal from the Circuit Court of Cook County. Honorable John Ward, Judge Presiding.

Cerda, Tully, Rizzi

The opinion of the court was delivered by: Cerda

JUSTICE CERDA delivered the opinion of the court:

This is an administrative action brought by plaintiffs, the Victory Christian Church (Victory Church) and the Colonial Bank and Trust Company, as trustee under trust number 872 (Colonial). After defendant, the Illinois Department of Revenue, denied plaintiffs a property tax exemption for 1990, the circuit court affirmed its decision. On appeal, plaintiffs assert that a lessee is entitled to a real estate tax exemption for property it uses exclusively for religious purposes.

The issue to be decided in this case is whether an owner who uses real estate for profit, but leases it exclusively for religious and school purposes, is entitled to a real estate tax exemption.

The facts are not in dispute. Victory Church is a religious organization that leases improved property from Colonial, whose sole beneficiary is George Apostolou. The property consists of a two-story building and three vacant lots used for parking. According to the lease, Victory Church agreed to pay $8,000 per month through May 1990, then $8,500 per month through the end of 1990. In addition, Victory Church agreed to pay any property taxes if its application for tax exemption was denied. All parties agree that the property was used exclusively for religious and school purposes.

In 1987, the property was exempt from real estate taxes, but in 1988, defendant granted a tax exemption for the building, but not for the parking lots. After plaintiffs appealed the administrative decision, the circuit and appellate courts ruled that the parking lots were not entitled to a tax exemption. See Faith Christian Fellowship, Inc. v. Department of Revenue (1992), 226 Ill. App. 3d 322, 589 N.E.2d 796, 168 Ill. Dec. 396.

In 1990, the building was returned to the tax rolls and plaintiffs applied for real estate tax exemptions. After a hearing before an administrative law Judge, plaintiffs were denied exemptions on all parcels. Plaintiffs appealed the decision relating to the building, but have dropped their objection to the taxation of the parking lots and have paid the taxes due on those lots.

The trial court reversed the administrative Judge's decision and granted a tax exemption for the building. Meanwhile, the second district rendered a decision in American National Bank & Trust Co. v. Department of Revenue (1993), 242 Ill. App. 3d 716, 611 N.E.2d 32, 183 Ill. Dec. 179, which ruled that property leased to a religious organization for profit was not exempt from taxation. On defendant's motion to reconsider, the trial court reversed its ruling and affirmed the denial of tax exemption for 1990.

We must decide whether property leased to a religious organization by a private, for-profit party and used for religious and school purposes is exempt from real estate taxes under Section 19.2 of the Revenue Act of 1939 (Ill. Rev. Stat. 1989, ch. 120, par. 500.2 (now 35 ILCS 205/19.2 (West 1992))), which exempts the following kinds of property from real estate taxes:

"All property used exclusively for religious purposes, or used exclusively for school and religious purposes, or for orphanages and not leased or otherwise used with a view to profit." Ill. Rev. Stat. 1989, ch. 120, par. 500.2 (now 35 ILCS 205/19.2 (West 1992)).

Plaintiffs assert that the statute's language refers to the nature of the activities on the premises, not the ownership of the property. Plaintiffs argue that American National Bank & Trust Co., 242 Ill. App. 3d 716, 611 N.E.2d 32, 183 Ill. Dec. 179, ignored the supreme court's rationale in People ex rel. Bracher v. Salvation Army (1922), 305 Ill. 545, 548, 137 N.E. 430.

In response, defendant asserts that it is the property owner's use, not the lessee's use, that is dispositive. While legal ownership is not a test for exemption, defendant argues, leasing a property for profit precludes exemption even when the lessee uses the property exclusively for religious purposes. Defendant contends that the property is not ...


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