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June 30, 1997


Appeal from the Circuit Court of Cook County. Honorable George Smith, Judge Presiding.

Released for Publication August 5, 1997.

The Honorable Justice Rakowski delivered the opinion of the court. DiVITO, P.j., and Tully, J., concur.

The opinion of the court was delivered by: Rakowski

JUSTICE RAKOWSKI delivered the opinion of the court:

Plaintiff, Institute of Gas Technology (IGT), appeals from an order confirming the decision of the Department of Revenue (the Department) that denied IGT's 1993 application for a charitable real estate tax exemption. We affirm.


IGT is a not-for-profit Illinois corporation that conducts research and education in the energy and environmental fields. It has no shareholders or capital stock, pays no dividends, and its directors are not compensated. It generally shows no profit at year end. IGT has been granted a section 501(c)(3) federal tax exemption (26 U.S.C. ยง 501(c)(3) (1994)), and exemptions under Illinois law for retailers occupation tax (35 ILCS 120/1 et seq. (West 1994)), use tax (35 ILCS 105/1 et seq. (West 1994)), service occupation tax (35 ILCS 115/1 et seq. (West 1994)), and service use tax (35 ILCS 110/1 et seq. (West 1994)), because it is organized and operated exclusively for educational purposes.

IGT conducts research in the natural gas industry and seeks to develop alterative energy sources to compete with natural gas to provide the public with a broader base of energy choice. Two examples of its research are the fuel cell energy system and processes to turn Illinois' abundant coal into a form of useable energy. The fuel cell method is an advanced form of electricity generation. It is highly efficient, has almost zero emission, and makes almost no noise. Additionally, it is employable in small incremental units so there is no need for a central power station. IGT also developed a strain of bacteria that converts coal into a vaporous form of fuel. The resulting vaporous form is a clean gas that can be used to generate electricity.

Bernard S. Lee, president of IGT, testified that IGT does not respond to bids for projects but instead develops concepts and then solicits funding. According to Lee, IGT's scientists and engineers generate a concept. They then utilize limited, in-house funding to perform preliminary research to ascertain whether the concept is viable. If the concept is found viable, IGT then seeks funding to further develop the project. Lee stated that 95% to 98% of IGT's funding comes from solicited sponsorship. He also testified that IGT conducts 85% of its research for nonmembers.

IGT derives revenue from two sources: (1) sponsored research and (2) "other" sources, including membership dues, course fees, royalty income, and miscellaneous income. Total revenue in 1993 was $22,077,800; $14,953,900 (68%) in sponsored research and $7,123,900 (32%) in "other" revenue. In 1993, IGT showed a net loss of $240,000.

IGT does grant licenses and patents for some of its research. Lee testified that IGT first exhausts all nonexclusive avenues to disseminate a concept before granting a license or patent. Only when there is no alternative method to ensure development for an ultimate public use does IGT grant an exclusive license. Lee also testified that patents are sometimes granted to protect the concept itself. In some instances, if a patent is not granted, the concept could fall into the hands of other entities and its benefit might not ultimately fall upon the public. Additionally, Lee stated that patents are a means to fund research necessary to carry a project forward.

Lee testified that all of its research results are published and made available to the public. Government research projects are submitted to the National Technical Information Service for publication. This organization makes the publications available to the public for the cost of handling. IGT's staff publishes other research results in journals, magazines, and public forums. Additionally, the results are available at IGT's library, open to the public, and on its database. Finally, IGT responds to public requests for information at no charge.



Exemption statutes are to be strictly construed in favor of taxation. Chicago Patrolmen's Ass'n v. Department of Revenue, 171 Ill. 2d 263, 271, 664 N.E.2d 52, 215 Ill. Dec. 655 (1996). All facts and debatable questions are to be resolved in favor of taxation. City of Chicago v. Illinois Department of Revenue, 147 Ill. 2d 484, 491-92, 590 N.E.2d 478, 168 Ill. Dec. 841 (1992). The party seeking the exemption has the burden of proving by clear and convincing evidence that it is entitled to the exemption. Chicago Patrolmen's Ass'n, 171 Ill. 2d at 271. Each claim for exemption is to be evaluated from the facts present in the case. Chicago Patrolmen's Ass'n, 171 Ill. 2d at 271. "Whether an institution has been organized and is operating exclusively for a purpose exempt from real estate tax is to be determined from its charter and bylaws and the actual facts relating to its method of operation." Du Page County Board of Review v. Joint Comm'n on Accreditation of Healthcare Organizations, 274 Ill. App. 3d 461, 466, 210 Ill. Dec. 941, 654 N.E.2d 240 (1995).

"The findings and conclusions of the administrative agency on questions of fact shall be held to be prima facie true and correct." 735 ILCS 5/3-110 (West 1994). Accordingly, the reviewing court's function is limited to determining whether the Department's decision is against the manifest weight of the evidence. Wyndemere Retirement Community v. Department of Revenue, 274 Ill. App. 3d 455, 459, 654 N.E.2d 608, 211 Ill. Dec. 146 (1995). However, when the facts are undisputed, the question of whether property is exempt is a question of law. Chicago Patrolmen's Ass'n, 171 Ill. 2d at 271. Then, "the decision as to whether property is exempt depends solely upon the application of the appropriate legal standard to the undisputed facts." Du Page County Board of Review, 274 Ill. App. 3d at 467. in other words, the question is whether the circuit court properly found that the property in question was not entitled to tax-exempt status. Lutheran General Health Care System v. Department of Revenue, 231 Ill. App. 3d 652, 660, 595 N.E.2d 1214, 172 Ill. Dec. 544 (1992).

The only disputed question in the instant case is whether IGT's research confers a direct benefit to an indefinite number of people or whether the benefit falls primarily on the sponsors and only indirectly on the public. Because this is a disputed inference to be drawn from ...

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