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05/16/96 COUNTY HAMILTON v. DEPARTMENT REVENUE

May 16, 1996

THE COUNTY OF HAMILTON, PLAINTIFF-APPELLEE,
v.
THE DEPARTMENT OF REVENUE, DEFENDANT-APPELLANT. THE COUNTY OF JEFFERSON, PLAINTIFF-APPELLEE, V. THE DEPARTMENT OF REVENUE, DEFENDANT-APPELLANT.



Appeal from the Circuit Court of Hamilton County. No. 93-MR-10. Honorable Loren P. Lewis, Judge, presiding. Appeal from the Circuit Court of Jefferson County. No. 93-MR-32. Honorable Alice M. Jordan, Judge, presiding.

Rule 23 Order Redesignated Opinion and Ordered Published May 16, 1996.

Presiding Justice Hopkins delivered the opinion of the court: Welch, J., and Goldenhersh, J., concur.

The opinion of the court was delivered by: Hopkins

ORDER

This cause has been considered on plaintiffs-appellees' motion to publish; and the court being advised in the premises:

IT IS THEREFORE ORDERED that plaintiffs-appellees' motion to publish shall be, and the same hereby is, GRANTED.

PRESIDING JUSTICE HOPKINS delivered the opinion of the court:

Defendant, the Illinois Department of Revenue (Department), appeals from the circuit courts' orders in two cases on administrative review, in which the circuit court reversed the Department's decisions that underground coal rights owned by two counties, plaintiffs Hamilton and Jefferson Counties, were not tax-exempt properties under section 19.6 of the Revenue Act of 1939. 35 ILCS 205/19.6 (West 1992) (now, as amended, 35 ILCS 200/15-60 (West 1994) (section 15-60 of the Property Tax Code)). On appeal, the Department raises two issues: (1) that the circuit court erred in applying the 1994 Property Tax Code to the instant actions, instead of the 1992 Revenue Act of 1939; and (2) that the circuit court's orders that the Department's findings and rulings that the counties are not entitled to property tax exemptions for underground coal reserves are against the manifest weight of the evidence are erroneous. We affirm for the reasons set forth below.

I. FACTS

On November 11, 1992, Hamilton County became the owner of approximately 7,000 acres of underground coal reserves pursuant to a quitclaim deed executed by Exxon Coal Resources USA, Inc. (Exxon). No surface rights were involved in the transaction. Hamilton County filed an application for property tax exemption to the county board of review. In its application, Hamilton County sought a tax exemption under section 19.6 of the Revenue Code of 1939 (35 ILCS 205/19.6 (West 1992)) and stated that the county was going to hold this property for future development. Ultimately, the Department denied Hamilton County's application for property tax exemption on the basis that the property was "not in exempt use."

Hamilton County filed for a formal hearing before the Department, and on April 29, 1993, this hearing was held. At the hearing, Mark Becker, supervisor of assessments and clerk of the board of review for Hamilton County, testified that he had discussions with Steve Humphreys and John Healing of Exxon prior to the Hamilton County Board's voting to acquire Exxon's 7,000 acres of underground coal reserves in Hamilton County. From these discussions, Becker learned that Exxon wanted to divest itself of the underground coal rights in Hamilton County, and that Exxon had contacted other coal companies and had advertised that the property was for sale in an effort to do so, to no avail. Exxon next approached Hamilton County to see if the county wished to purchase the coal rights. Becker talked to Steve Lueker, his counterpart in Jefferson County, about the proposed sale, to evaluate the problems, after which he discussed the proposed sale with Hamilton County Board members. Becker recommended to the Hamilton County Board that the county purchase the undeveloped coal rights. It was Becker's opinion that although the coal reserves were not worth money at that time, perhaps in the future the coal reserves could entice a coal mine to come into the county, and "we would have seven thousand acres that we could give to that coal company." Becker also testified that the county had not leased the coal rights and that there was no prospect of leasing the coal rights in the immediate foreseeable future. Further, the county did not intend to extract coal for profit in the future.

On cross-examination, Becker stated that he was told by Exxon that the coal reserves were of diminished value since the coal has a high sulfur content and is not marketable to utility companies, the coal reserves were not a solid block, and the coal was about 1,000 feet below the surface. The tax assessment of the coal rights at that time was $151,820.

Wayne Morris, State's Attorney for Hamilton County, testified to essentially the same facts as Becker. He, too, was involved in the discussions with Exxon, and the representations made to Becker were the same as were made to him. He also testified that Hamilton County is an economically depressed county, in that it has an unemployment rate of 25%, and the overall business climate in the county is poor.

Eleven applications for property tax exemption under section 19.6 submitted by the City of Mt. Vernon in Jefferson County, Illinois, were admitted as exhibits for both Hamilton and Jefferson County. These applications were for property obtained by the city by court order for foreclosure on demolition liens. The 11 lots were small lots located randomly over primarily the south side of the city. In the city's applications for the tax exemption of these lots, the city stated that it ...


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