Appeal from the Circuit Court of Cook County. No. 97 L 50791 The Honorable Thomas P. Quinn, Presiding Judge.
The opinion of the court was delivered by: Justice Buckley
This is an appeal from a final decision of the circuit court affirming the decision of the Illinois Department of Revenue (DOR) to deny the application for tax-exempt status to Rogy's New Generation, Inc., and to revoke the tax-exempt status of Rogy's Gingerbread House, Inc., and Rogy's Child Care Center, Inc. (col-lectively Rogy). There are three issues raised in this appeal: (1) whether Rogy's facilities qualify as statutorily defined entities organized exclusively for educational purposes; (2) whether the DOR's denial and revocation of Rogy's tax-exempt status violates Rogy's due process rights; and (3) whether the DOR's procedures for reviewing exemption revocations comply with the Administrative Procedure Act )5 ILCS 100/1 et seq. (West 1998)).
Rogy's New Generation, Inc., Rogy's Gingerbread House, Inc., and Rogy's Child Care Center, Inc., are Illinois for-profit corporations that claim tax-exempt status under the Retailers' Occupation Tax Act (35 ILCS 120/1 et seq. (West 1998)), and the Use Tax Act (35 ILCS 105/1 et seq. (West 1998)) as entities "organized and operated exclusively for *** educational purposes." 35 ILCS 120/2-5(11) (West 1998); 35 ILCS 105/3-5(4) (West 1998).
The amended articles of incorporation of each Rogy facility states as its corporate purpose that it is organized:
"exclusively for educational purposes and to provide systematic instruction in useful branches of learning by methods common to public school and which compare favorably in their scope and intensity with the course of study presented in tax supported schools." Each Rogy facility is also licensed by the Department of Children and Family Services (DCFS) as a day care center.
On June 3, 1991, the DOR issued tax exemption certificates to Rogy's Gingerbread House, Inc., and Rogy's Child Care Center. In the letters of exemption, the DOR stated that "we are of the opinion that [Rogy's Gingerbread House, Inc., and Rogy's Child Care Center, Inc., are] organized and operated exclusively for educa-tional purposes." The certificates were issued for a period of five years. Prior to the expiration thereof, in April 1996, each corporation applied for a renewal of its tax-exempt status. The DOR granted the requested renewals and again issued certificates with a five-year term.
On May 8, 1996, Rogy's New Generation, Inc., applied for tax-exempt status, claiming exemption as a corporation organized exclu-sively for educational purposes. After requesting and being pro-vided with further information from Rogy's New Generation, Inc., the DOR denied the application. *fn1 In a letter dated October 8, 1996, the DOR informed Rogy that it had determined that Rogy's New Generation, Inc., did not qualify for tax-exempt status in Illinois. Further, the DOR informed Rogy that it had reviewed the tax-exempt status of three related corporations--Rogy's Gingerbread House, Inc., Rogy's Child Care Center, Inc., and Rogy's Child Care Center of Morton, Inc. *fn2 , and determined that they also do not qualify for tax-exempt status. Rogy was therefore informed that the exempt status of these organizations was revoked effective October 8, 1996. Rogy was also informed that it could request a hearing if it disagreed with the decision; Rogy did so.
An evidentiary hearing took place before an administrative law judge (ALJ) on January 8, 1997. Two witnesses testified at the hearing: Richard Ward Rogy and Norma Richards. Richard Rogy, corporate secretary and treasurer of each Rogy facility, provided testimony as to the corporate minutes of each facility. In addition, he identified numerous exhibits, such as the exemption letters from the DOR, which were admitted into evidence. Richard Rogy further testified that Cathy Raiborn is the curriculum coordi-nator for the Rogy facilities. As the curriculum coordinator, Raiborn is in charge of setting up the curriculum and training the teachers at each facility. Raiborn did not testify.
Norma Richards testified on behalf of Rogy as an expert in early childhood education. Her credentials include: an assistant professorship in the college of education at National Lewis University; a position as chairperson of the early childhood department at National Lewis University; a masters' of education degree in early childhood instructional leadership from the Univer-ity of Illinois at Chicago; and a doctoral candidacy in education psychology at National Lewis University.
Richards testified that she reviewed the written curriculum of the Rogy facilities and visited one facility, although she could not remember which. She stated her opinion that "the Rogy's school's classrooms *** are departmentally appropriate" and "educationally sound." She arrived at this conclusion by observing "infant and toddler and adult relationships, how adults supported children's language, development thinking, critical thinking, exploration and so on." She "looked for an environment in the classroom that was appropriate for the age group of the children, and *** saw educational materials and instructional materials that were very appropriate."
Richards further testified that the Rogy facilities' curricu-lum was consistent with the standards established by the National Academy of Early Childhood Programs. She stated that the infant and toddler program was "educational in scope," meaning that the children demonstrated "curiosity, initiative, [and] a sense of basic trust." In addition, she stated that the materials used sup-ported an "educational purpose." She further testified that the preprimary program was also "educational in scope," meaning that she "saw children who were able to work in small groups in a classroom with materials that were consistent with their educa-tional level." In addition, she stated that the "[c]hildren's cri-tical thinking skills were acknowledged and supported. Children's ability to construct understanding by using materials was certainly supported. Language development was clearly supported in preemer-gent activities in literacy with children." She further testified that she saw developmentally appropriate playing materials dealing with math, science, social studies, art, and literature.
Richards finally testified that, in her opinion, the early childhood educational program offered by Rogy compares favorably in its scope and intensity with the courses of study presented in public schools, and that Rogy offers systematic instruction and useful learning by methods common to schools.
Thereafter, on June 12, 1997, the ALJ issued a recommendation for disposition, which was adopted by the DOR on June 13, 1997. The DOR found that Rogy failed to demonstrate by clear and convincing evidence that its facilities fell within the statutory exemption for educational entities. The DOR stated that, first, Rogy did not show that its facilities offered a "course of study which fits into the general scheme of education offered by the State"; and second, Rogy failed to prove that its provision of services to prekindergarten children would lessen the State's ...