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Friends of Israel Defense Forces v. The Department of Revenue of the state of Illinois

June 30, 2000

FRIENDS OF ISRAEL DEFENSE FORCES, PLAINTIFF-APPELLEE,
V.
THE DEPARTMENT OF REVENUE OF THE STATE OF ILLINOIS AND RAYMOND T. WAGNER, JR., DEFENDANTS-APPELLANTS



The opinion of the court was delivered by: Justice Quinn

Appeal from the Circuit Court of Cook County, Chancery Division Honorable Alexander P. White, Judge Presiding.

Raymond Wagner and the Department of Revenue of the State of Illinois (collectively the Department) appeal an order of the circuit court declaring that plaintiff, Friends of Israel Defense Forces, is entitled to a charitable exemption from the Illinois Use Tax Act (35 ILCS 105/3-5 (West 1996)).

Plaintiff applied for charitable and educational exemptions from taxation under the Use Tax Act. The Department ruled that plaintiff was not entitled to the exemptions. Plaintiff filed a complaint for administrative review in the Cook County circuit court, claiming that as an entity organized and operated exclusively for charitable purposes it was entitled to a charitable exemption from the tax. The circuit court reversed the Department's ruling, finding that plaintiff was a charitable organization entitled to exemption as such under the Use Tax Act. The Department now appeals.

For the following reasons, the order of the circuit court granting the charitable exemption and reversing the ruling of the Department is affirmed.

Plaintiff is the American fund-raising branch of the Association for the Well-Being of the Israeli Soldiers (the Association), an organization operating in Israel. Plaintiff's certificate of incorporation states the first purpose of the organization as follows:

"To advance the affairs of soldiers in Israel in the spheres of culture, welfare and social life by means of assisting in the management of institutions, including soldiers' homes, holiday villages and camps, recreation homes, hostels, clubs, restaurants, places of entertainment, cultural centres [sic] and other institutions in Israel as are presently and may in the future be so assisted by The Association for Welfare of Soldiers in Israel, a non-profit association, and tax exempt under the Laws of the State of Israel."

The Association uses money raised by plaintiff in several ways, one of which is to finance accommodations and recreational facilities used primarily by Israeli soldiers on leave of duty in Israel. The facilities include dining rooms, lounges, swimming pools, saunas, and gyms. The Association also sponsors events on military bases and builds on-base synagogues. None of plaintiff's funds are used for military weaponry or such equipment.

The record indicates that soldiers in a military unit take leaves together, and those leaves, granted every four or five months, last four days. Approximately 3,000 soldiers per week are accommodated at the rest and recreation centers underwritten by plaintiff's funds. Though the centers were built primarily for the use and comfort of Israeli soldiers, they have also been used as temporary housing for Russian and Ethiopian immigrants and for American soldiers during the Gulf War.

In addition to the rest and recreation centers, plaintiff provides funding for numerous other projects. Plaintiff contributes to summer camps for soldiers' widows and orphans and to soldier hostels. Money is also provided for remedial education of young Israelis and immigrants, scholarships for soldiers' orphans and for soldiers leaving army service, and programs for wounded and disabled soldiers and war veterans. Plaintiff also participates in special projects, such as the housing of civilians made homeless by Iraqi missile attacks during the Gulf War.

Plaintiff applied to the Department for charitable and educational exemptions from taxation under section 3-5 of the Illinois Use Tax Act. 35 ILCS 105/3-5 (West 1996). Section 3-5 of the Act exempts the following from taxation:

"Personal property purchased by a governmental body, by a corporation, society, association, foundation, or institution organized and operated exclusively for charitable, religious, or educational purposes ***." 35 ILCS 105/3-5(4) (West 1996).

At the administrative hearing, the six exhibits submitted by the Department were admitted into evidence, including plaintiff's articles of incorporation, with amendments thereto, plaintiff's by-laws, plaintiff's audited financial statement for 1991 and correspondence concerning plaintiff's application for tax-exempt status.

Plaintiff offered affidavits, all of which were excluded, verifying that five other organizations have received tax exemptions in Illinois despite the fact that all of their donations fund organizations and activities in Israel. A lengthy program pamphlet identifying contributors to the 1993 Friends of Israel Defense Fund dinner was also excluded from evidence. The only exhibits offered by plaintiff that were admitted into evidence were the following: 86 Illinois Administrative Code sections 130.2005 through 130.2010 and 200.155 (1996), and three pamphlets describing plaintiff-funded facilities and activities in Israel.

The Department rejected plaintiff's contention that it was entitled to an educational exemption. Plaintiff did not ask the circuit court to review that decision, and this court will not address it here. In addition, the Department concluded that plaintiff did not meet the statutory requirement that a charitable organization seeking exemption must benefit an indefinite number of persons or in some way reduce the burdens on government. Plaintiff sought judicial review of ...


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