Appeal from the Circuit Court of the 14th Judicial Circuit, Rock Island County, Illinois. No. 00-MR-379 Honorable Lori R. Lefstein, Judge, Presiding.
Plaintiffs, Quad Cities Open, Inc. (the Open) and John Deere Classic Charitable Corporation (the Classic) sought declaratory judgment that their charitable golf tournament was exempt from a municipal amusement tax levied by the City of Silvis. On cross- motions for summary judgment, the trial court ruled in favor of the city. On appeal, plaintiffs contend that (1) the trial court erred in finding that their charitable golf tournament is an athletic contest carried on for gain, and (2) the Classic has standing to bring this suit. We reverse.
Quad Cities Open, Inc., is an Illinois not-for-profit corporation, and it has also been granted a tax exemption from federal income taxes under section 501(c)(3) of the Internal Revenue Code (26 U.S.C. §501(c)(3) (2000)). The Open's sole purpose is to benefit Quad Cities-area charitable organizations by raising funds for and distributing them to such organizations. To this end, the Open has chosen to operate a certain major golf tournament as a means for accomplishing its objective. The Open's articles of incorporation state the following:
"To sponsor a professional golf tournament and to operate same, with the specific purpose that all profits in excess of a one-year operating contingency fund (which shall not include the tournament prize) be used in promoting the common good and general welfare of the people of the Quad Cities area or be given to organizations which qualify for a tax exemption under 501 (c)(3) of the Internal Revenue Code."
During the period under consideration, the Open sponsored the John Deere Classic Golf Tournament (the Tournament).
John Deere Classic Charitable Corporation operates a charitable program in conjunction with the tournament. The "Birdies for Charity" program allows representatives from various local charities to obtain sponsors who pledge a fixed amount of money to be donated for each birdie scored by the golfers during the tournament. The Classic is also an Illinois not-for-profit corporation.
In 2000, the tournament moved to the City of Silvis, Illinois. On December 17, 2000, the city enacted an ordinance imposing a 3% tax upon gross receipts from the sale of admission tickets at for-gain professional tournaments or other for-gain professional athletic events. City of Silvis Ordinance No. 2000-26 (eff. January 1, 2001). This ordinance was enacted pursuant to an Illinois enabling statute which states:
"The corporate authorities of each municipality may license, tax, and regulate all athletic contests and exhibitions carried on for gain. This tax shall be based on the gross receipts derived from the sale of admission tickets but the tax shall not exceed 3% of the gross receipts." 65 ILCS 5/11-54-1 (West 1992).
On April 4, 2001, the Open and the Classic filed their first amended complaint for declaratory judgment against defendant. In count I of the complaint, plaintiffs alleged that defendant's tax should not be imposed upon the price of admission because the golf tournament operated by the Open is not carried on for gain. In count II, plaintiffs alleged that defendant's ordinance violated the uniformity clause of the Illinois Constitution. Ill. Const. 1970, art. IX, §2.
In its answer, defendant admitted that the cost of admission tickets to the Open would be taxable under the ordinance because plaintiffs' golf tournament was not operated exclusively for charitable purposes. Defendant denied that an actual controversy exists between plaintiffs and defendant and that the enforcement of the ordinance will have an adverse effect on the revenue of the Tournament and the Classic.
Subsequent discovery reveals that the members of the board of directors of the Open were not compensated. The Open relies on a network of hundreds of volunteers in putting on its annual golf tournament, so there is only a handful of compensated employees. No corporate stock was issued and no dividends were distributed. The Open's financial statements for years 1998, 1999 and 2000 reveal that in 1998, the Open received total unrestricted revenues of $3,933,980. It incurred expenses of $3,491,702, including a tournament purse of $1,550,000, and contributed $345,460 to charities. In 1999, the Open received total unrestricted revenues of $4,619,540, and incurred expenses of $4,323,310, including a tournament purse of $2 million. The Open's charitable contributions totaled $379,130. And in 2000, the Open received total unrestricted revenues in the amount of $6,202,091, incurring expenses of $6,618,333, including a tournament purse of $2,600,000, and making charitable contributions of $353,807. The Tournament's net revenues from each year were kept in a reserve fund. The 3% tax on the admission fees paid to the Open for the 2001 tournament is estimated to be approximately $180,000.
The record also shows that 100% of the pledges from each sponsor of the Classic's "Birdies for Charity" program is returned to the individual charity that obtained the sponsor. None of the revenue collected from the Tournament's ticket sales is allocated or distributed to the Classic or the "Birdies for Charities" program. When asked about the Classic's interest in this action, the Tournament's director, Kym Hougham, testified at his deposition as follows:
"Q: How is it the three percent tax, which is on the ticket sales, would have an adverse effect on the Birdies for Charity program?
A: Unless--I think minimally honestly. I don't know that- -except for the enthusiasm, if people don't participate because of it. I don't think there was ever a fear on our part that was going to happen. I don't know that the Birdies program will be adversely affected by it."
The parties filed cross-motions for summary judgment on count I of plaintiffs' complaint. In addition, defendant filed a second motion for summary judgment which alleges that: (1) the Classic lacks standing to pursue this lawsuit; (2) and the ordinance does not violate the uniformity clause. In support of plaintiffs' motion for summary judgment, ...