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Swank v. Department of Revenue

February 13, 2003

DAVID SWANK AND SUSAN SWANK, PLAINTIFFS-APPELLEES,
v.
THE DEPARTMENT OF REVENUE, DEFENDANT-APPELLANT.
LEONARD WILDE AND SHIRLEY WILDE, PLAINTIFFS-APPELLEES,
v.
THE DEPARTMENT OF REVENUE DEFENDANT-APPELLANT.



Appeal from the Circuit Court of Winnebago County. No. 00--MR-223, No. 00--MR--222 Honorable Gerald F. Grubb Judge, Presiding.

The opinion of the court was delivered by: Justice Bowman

David and Susan Swank (Swanks) and Leonard and Shirley Wilde (Wildes) applied for property tax exemptions pursuant to section 15--35 of the Property Tax Code (Code) on the grounds that their respective properties were used for educational purposes. 35 ILCS 200/15--35 (West 2000). The Department of Revenue of the State of Illinois (Department) denied these applications, and both parties sought judicial review.

The circuit court reversed the Department's decision and held the properties to be tax exempt. The Department appeals, arguing that the subject properties were "used with a view to profit" (35 ILCS 200/15--35 (West 2000)) and therefore not entitled to property tax exemptions. For the following reasons, we reverse the circuit court's decision and reinstate the Department's finding that the properties were not entitled to property tax exemptions.

I. Background

On November 2, 1998, the Swanks applied for a property tax exemption pursuant to section 15--35 of the Code on the grounds that the property was used for educational purposes. 35 ILCS 200/15--35 (West 2000). On November 3, 1998, the Wildes applied for a property tax exemption based on the same grounds. The administrative law judge (ALJ) reviewed the applications submitted by the Swanks and Wildes and recommended to the Department that the requested exemptions be denied. On March 11, 1999, the Department issued a determination finding that the subject properties were in neither exempt ownership nor exempt use. Subsequently, the Swanks and the Wildes filed a timely notice of appeal of this denial and presented evidence at a formal administrative hearing. On August 15, 2001, the Department adopted the hearing officer's recommendation and denied the applications for property tax exemptions submitted by the Swanks and the Wildes.

The findings of the ALJ, adopted by the Department, are not in dispute. The Swanks were the sole beneficiaries of a land trust that holds title to the property identified as Winnebago County parcel index 203B-395. The Swanks were also the sole shareholders and directors of Swank Educational Enterprises, an Illinois for-profit corporation, incorporated under the Business Corporation Act of 1983 (805 ILCS 5/1.01 (West 2000)). Swank Educational Enterprises did business as Rockford Business College (RBC) throughout 1998. RBC provided a number of scholastic programs and courses of study and was authorized to grant associate degrees to enrolled students. RBC was accredited by the Accredited Council of Independent Colleges and Schools and certified by and registered with the Illinois State Board of Higher Education and the Illinois State Board of Education. The Swanks were the directors of RBC and approved all expenditures made in the ordinary course of RBC's business. These expenses, including necessary equipment repairs and property taxes, were paid out of an account funded by RBC's tuition revenues. RBC was organized and operated exclusively for educational purposes, and the subject property was used for no purpose other than as a venue for RBC.

The Department similarly found that the Wildes were the sole beneficiaries of a land trust that holds title to the property identified as Winnebago County parcel index 149C-031. The Wildes were also the sole shareholders and directors of Christian Learn `N Care, Ltd., an Illinois for-profit corporation, incorporated under the Business Corporation Act of 1983. In 1998, Christian Learn `N Care did business as Rainbow Academy and Learning Center (Rainbow Academy). Rainbow Academy was a private elementary school certified by and registered with the Illinois State Board of Education. The Wildes paid all of Rainbow Academy's operating expenses, including property taxes, from an account funded by the tuition revenue. Rainbow Academy was organized and operated exclusively for educational purposes, and the subject property was used for no purpose other than as a venue for Rainbow Academy.

The Swanks and the Wildes filed their applications for property tax exemptions as private individuals, not as schools or for-profit corporations. After the Department denied their applications, the Swanks and the Wildes sought judicial review on September 18, 2001. On May 31, 2001, the circuit court reversed the Department's decision and found that both properties in question qualified for exemption pursuant to section 15--35 of the Code (35 ILCS 200/15--35 (West 2000)). On August 3, 2001, the Department's timely notice of appeal from the two trial court cases followed. The cases were consolidated on September 4, 2001, for appellate review.

On appeal, the Department contends that its decision should be reinstated. Specifically, the Department argues that the subject properties were "used with a view to profit" (35 ILCS 200/15--35 (West 2000)) and therefore ineligible for property tax exemptions pursuant to section 15--35 of the Code.

II. Analysis

A Department decision that denies an application for a tax exemption is reviewable as a final administrative decision under the Administrative Review Law (735 ILCS 5/3-101 et seq. (West 2000)). 35 ILCS 200/8-40 (West 2000). It is well established by this court that our role is to review the Department's decision and not the circuit court's determination. National Data Services of Chicago, Inc. v. Director of Employment Security, 319 Ill. App. 3d 25, 29 (2001).

The first issue raised in this appeal is the proper construction of section 15--35 of the Code (35 ILCS 200/15--35 (West 2000)). Interpretation of a statute is a question of law; in cases involving an agency's interpretation of a statute that the agency is charged with administering, the agency's interpretation is considered relevant but not binding on the court. Branson v. Department of Revenue, 168 Ill. 2d 247, 254 (1995). Accordingly, our review of this issue is de novo, with some deference accorded to the Department's statutory interpretation. Our supreme court has frequently acknowledged the wisdom of judicial deference to an agency's experience and expertise. AFM Messenger Service, Inc., v. Department of Employment Security, 198 Ill. 2d 380, 394 (2001). Moreover, a significant reason for giving substantial weight and deference to an agency's interpretation of an ambiguous statute is that " 'agencies can make informed judgments upon the issues, based on their experience and expertise.' " AFM Messenger Service, 198 Ill. 2d at 394, quoting Abrahamson v. Illinois Department of Professional Regulation, 153 Ill. 2d 76, 98 (1992).

At the outset, we also note that the general rule is that all property is subject to taxation unless specifically exempted by statute. Chicago & Northeast Illinois District Council of Carpenters Apprentice & Trainee Program v. Department of Revenue, 293 Ill. App. 3d 600, 605 (1997). In applying the facts of this case to section 15--35, the court must construe the statutory tax exemption narrowly and strictly in favor of taxation. See First Presbyterian Church of Dixon v. Zehnder, 306 Ill. App. 3d 1114, 1116 (1999). In addition, the party claiming the exemption has the burden of proving clearly and conclusively that it is entitled to exemption. Rogy's New Generation, Inc. v. Department of Revenue, 318 Ill. App. 3d 765, 771 (2000). Finally, all ...


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