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11/23/94 CHICAGO BAR ASSOCIATION v. DEPARTMENT

November 23, 1994

THE CHICAGO BAR ASSOCIATION, APPELLANT,
v.
THE DEPARTMENT OF REVENUE, ET AL., APPELLEES.



Harrison

The opinion of the court was delivered by: Harrison

JUSTICE HARRISON delivered the opinion of the court:

The Chicago Bar Association (CBA) appeals from a judgment of the circuit court of Cook County which affirmed, on administrative review, a decision of the Illinois Department of Revenue (the Department) holding that the CBA's new headquarters at 312 South Plymouth in Chicago were not exempt from real estate taxes under section 19.1 of the Revenue Act of 1939 (Ill. Rev. Stat. 1991, ch. 120, par. 500.1). Although the appeal was initially filed with the appellate court, that court transferred the case to us in accordance with Rule 365 (134 Ill. 2d R. 365) after concluding that the appeal should have been taken directly here under Rule 302(a) (134 Ill. 2d R. 302(a)). For the reasons that follow, we affirm.

The proceedings which gave rise to this appeal commenced in October of 1990, when the CBA filed a complaint with the board of appeals of Cook County pursuant to section 117 of the Revenue Act (Ill. Rev. Stat. 1991, ch. 120, par. 598), claiming that its new headquarters should be exempt from real estate taxes for 1990. The headquarters are located in condominium units constructed on a parcel of real estate adjacent to the John Marshall Law School in Chicago. The CBA asserted that these units should be exempt from real estate taxes by virtue of the statutory exemption for school property, defined by section 19.1 of the Revenue Act (Ill. Rev. Stat. 1991, ch. 120, par. 500.1) as

"including, in counties of over 200,000 population which classify real property, property (including interests in land and other facilities) on or adjacent to (or adjacent to, except separated by a public street, alley, sidewalk, parkway or other public way from) the grounds of a school which property is used by an academic, research or professional society, institute, association or organization which serves the advancement of learning in a field or fields of study taught by the school and which property is not used with a view to profit."

The board prepared and forwarded to the Department of Revenue a complete statement of all the facts in the case. (Ill. Rev. Stat. 1991, ch. 120, par. 600.) On September 5, 1991, the Department denied the requested exemption on the grounds that the primary use of the property was not educational and the property was not "in exempt ownership." The CBA then requested a formal hearing from the Department, which was held before an administrative law Judge on January 21, 1992.

Based on the evidence adduced at that hearing, the administrative law Judge found that the CBA is a professional organization whose primary purpose, as stated in its 1874 articles of incorporation, is to

"maintain the honor and dignity of the profession of the law, to cultivate social intercourse among its members and to increase its usefulness in promoting the due administration of Justice."

It is exempt from Federal income tax, but not because of any charitable or educational purposes. Its exemption was granted under section 501(c)(6) of the Internal Revenue Code (26 U.S.C. § 501(c)(6) (1988)), which covers such groups as

"business leagues, chambers of commerce, real estate boards, boards of trade, or professional football leagues * * *, not organized for profit and no part of the net earnings of which inures to the benefit of any private shareholder or individual."

According to the administrative law Judge's findings, the CBA holds a "fraternal order or association, for sale to members only" liquor license from the City of Chicago and maintains a large food service operation. In 1990, 34 of its 88 employees worked in food service, and a substantial portion of the headquarter's total square footage was devoted to food service. This included kitchens, restaurants, a bar, and buffet areas. The CBA also holds itself out as being in the business of delivering food away from the building.

The property contains various meeting rooms, which the CBA rents to private law firms and other groups, including organizations which have no relation to the law. The rental fee, which ranges from $45 to $550 per day, is sometimes waived.

At the time relevant here, the CBA had approximately 22,000 members, only 800 of whom were law students. These included approximately 300 of the 1,100 students enrolled at John Marshall Law School, whose campus adjoins the property. The CBA and the law school had combined their libraries, but the library facilities were not housed in this property. They were located in one of the law school's buildings next door. Although the CBA's headquarters were eventually connected to that building by means of a sixth-floor walkway, the walkway was not in place during the 1990 tax year.

The CBA had 53 substantive law or practice committees, most of which held monthly lunch meetings in one of the building's meeting rooms. Several dozen other service and special committees met in the building at various times. In addition, the CBA had a Young Lawyers Section (YLS) which maintained 31 committees of its own. Among the activities organized by YLS committees were moot court and ...


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