Northwestern Surburban Fellowship v. Dept. of Revenue
Annotate this Case
SIXTH DIVISION
APRIL 10, 1998
No. 1-96-2195
NORTHWEST SUBURBAN FELLOWSHIP, INC., ) APPEAL FROM THE
a Not-for-Profit Corporation, ) CIRCUIT COURT
) OF COOK COUNTY.
Plaintiff-Appellant, )
)
v. )
)
THE DEPARTMENT OF REVENUE, )
State of Illinois, ) HONORABLE
) ALEXANDER P. WHITE,
Defendant-Appellant. ) JUDGE PRESIDING.
PRESIDING JUSTICE CAMPBELL delivered the opinion of the court:
Plaintiff Northwest Suburban Fellowship, Inc. (Northwest)
appeals an order of the circuit court of Cook County affirming a
decision of defendant Department of Revenue (Department) denying
Northwest a real estate tax exemption.
The record on appeal indicates the following facts. Northwest
is a not-for-profit corporation existing under Illinois law.
Northwest's sole purpose is to maintain space, facilities and
supplies for meetings of Alcoholics Anonymous and its family service
groups, such as Alanon and Alateen.
On September 24, 1979, Northwest entered into a five year lease
with the Village of Palatine (Village) for space on the second floor
of the Palatine Community Center, located in Palatine, Illinois.
The 1979 lease gave Northwest the option to extend the lease for two
additional five year periods, beginning in 1984 and 1989. On
November 9, 1984, the circuit court of Cook County enjoined the Cook
County Collector from instituting any action to enforce collection
of taxes or interest charges against Northwest for the years 1979-
83. The order finds in part that the Department had denied North-
west's complaint for tax exemption on the ground that Northwest did
not own the property. The permanent injunction was based on North-
west's status as a tax-exempt charitable institution.
The record contains documents indicating that the Cook County
Collector continued to assess property tax with regard to Northwest
for the years 1984-91. Northwest opted to extend the lease from
December 1, 1989, through November 30, 1994. A rider to the 1989
lease provided that:
"Any real estate taxes payable with re-
spect to the premises or the leasehold or other
interest therein for any portion of the lease
term shall be paid by Lessee. Any such tax
shall be paid when due and prior to any penalty
date, and Lessee shall submit to Lessor a re-
ceipted bill for any such tax promptly after
such tax has been paid."
The original lease did not contain this provision.
On May 4, 1992, Northwest filed a complaint and application for
a real estate exemption with the Cook County Board of Appeals
(Board). Northwest's application noted that there was a prior tax
exemption application and attached the prior court order finding
that the property was entitled to an exemption. On July 10, 1992,
the Board forwarded the complaint and application to the Department
without recommendation. The Department received the complaint and
application on July 24, 1992.
On August 20, 1992, the Department denied the application for
exemption on the ground that the property was not in exempt use. On
August 31, 1992, the Department received a letter and petition from
Northwest seeking a formal hearing on the matter. On September 13,
1993, the Department held a hearing.
On October 26, 1993, an Administrative Law Judge (ALJ) for the
Department issued a recommended decision that the parcel in question
did not qualify for exemption during 1991. The ALJ ruled that
property leased by a Village is not exempt where the terms of the
lease require the lessee to pay real estate taxes. On December 6,
1993, the Director of the Department approved the recommended
decision as a hearing disposition. Both the recommended decision
and a hearing disposition refer to the parcel at issue as a lease-
hold parcel. However, the recommended decision states that the
value of the fee interest of the area leased to Northwest, including
the proportionate value of the land and building, should be assessed
to the Village and that it was improper to assign a leasehold parcel
number to the leased area and assess it as a leasehold.[fn1]
On January 7, 1994, Northwest filed a complaint for adminis-
trative review in the circuit court of Cook County. On May 15,
1996, the trial court affirmed the decision of the Department. The
trial court concluded that the parcel qualified for an exemption
under the "charitable purposes" provision of the Illinois Property
Tax Code (Code). See 35 ILCS 200/15-65 (West 1996). Nevertheless,
the trial court held that the parcel was taxable under the Code
because the Village had included a provision in the rider to the
lease requiring Northwest to pay real estate taxes. See 35 ILCS
200/15-60(c) (West 1996). Northwest filed a timely notice of
appeal. The parties have submitted supplemental memoranda comment-
ing on the recommended decision of the ALJ, pursuant to an order of
this court.
The question on appeal is whether the Department erred in
denying a property tax exemption in this case. Statutes exempting
property from taxation are to be strictly construed in favor of
taxation; the taxpayer must prove that he or she is entitled to the
exemption. Harrisburg-Raleigh Airport Authority v. Department of
Revenue, 126 Ill. 2d 326, 331, 533 N.E.2d 1072, 1074 (1989). Each
claim for exemption must be determined from the facts presented.
Chicago Patrolmen's Association v. Department of Revenue, 171 Ill. 2d 263, 270-71, 664 N.E.2d 52, 56 (1996). In cases involving the
Department's interpretation of a tax statute, the Department's
interpretation is relevant, but not binding on a reviewing court.
Branson v. Department of Revenue, 168 Ill. 2d 247, 254, 659 N.E.2d 961, 965 (1995). Where the facts are undisputed, a determination of
whether property is exempt from taxation is a question of law.
Harrisburg-Raleigh Airport Authority, 126 Ill. 2d at 331, 533 N.E.2d
at 1074.
The tax exemption statute at issue in this case is section 15-
60 of the Code, which provides in part as follows:
"All property belonging to any county or
municipality used exclusively for the mainte-
nance of the poor is exempt, as is all property
owned by a taxing district that is being held
for future expansion or development, except if
leased by the taxing district to lessees for
use for other than public purposes.
Also exempt are:
* * *
(b) all public buildings belonging to any
county, township, or municipality, with the
ground on which the buildings are erected;
(c) all property owned by any municipality
located within its incorporated limits. Any
such property leased by a municipality shall
remain exempt, and the leasehold interest of
the lessee shall be assessed under Section
9-195 of this Act,[fn2] (i) for a lease entered
into on or after January 1, 1994, unless the
lease expressly provides that this exemption
shall not apply; (ii) for a lease entered into
on or after the effective date of Public Act
87-1280[fn3] and before January 1, 1994, unless
the lease expressly provides that this exemp-
tion shall not apply or unless evidence other
than the lease itself substantiates the intent
of the parties to the lease that this exemption
shall not apply; and (iii) for a lease entered
into before the effective date of Public Act
87-1280, if the terms of the lease do not bind
the lessee to pay the taxes on the leased prop-
erty or if, notwithstanding the terms of the
lease, the municipality has filed or hereafter
files a timely exemption petition or complaint
with respect to property consisting of or in-
cluding the leased property for an assessment
year which includes part or all of the first 12
months of the lease period. The foregoing
clause (iii) added by Public Act 87-1280 shall
not operate to exempt property for any assess-
ment year as to which no timely exemption peti-
tion or complaint has been filed by the munici-
pality or as to which an administrative or
court decision denying exemption has become
final and nonappealable. For each assessment
year or portion thereof that property is made
exempt by operation of the foregoing clause
(iii), whether such year or portion is before
or after the effective date of Public Act
87-1280, the leasehold interest of the lessee
shall, if necessary, be considered omitted
property for purposes of this Act;
* * *
For purposes of this Section, "municipal-
ity" means a municipality, as defined in Sec-
tion 1-1-2 of the Illinois Municipal Code."
Pub. Act 90--176, eff. January 1, 1998 (amend-
ing 35 ILCS 200/15-60 (West 1996)).
Both the Department and the circuit court denied tax-exempt status
on the ground that the terms of the lease bound Northwest to pay the
taxes on the leased property. Indeed, the circuit court ruled that
the property at issue in this case fell within the scope of section
15-60(b), but was not exempt because of the language in the
lease.[fn4] Thus, we first consider whether the terms of the lease
bound Northwest to pay the taxes on the leased property and to waive
any other claim to a tax exemption.
The interpretation of a lease is a question of law to be
determined by the reviewing court. NutraSweet Co. v. American
National Bank and Trust Co. of Chicago, 262 Ill. App. 3d 688, 694,
635 N.E.2d 440, 444 (1994). The primary function of the court in
construing a lease is to give effect to the intention of the parties
as expressed in the document. Midland Management Co. v. Helgason,
158 Ill. 2d 98, 104, 630 N.E.2d 836, 839 (1994). Where the language
used is definite and precise, the lease speaks for itself and there
is no need for interpretation. NutraSweet Co., 262 Ill. App. 3d at
694, 635 N.E.2d at 444. However, in contrast to the interpretation
of a tax statute, where there is any doubt as to the meaning of a
lease, it should be construed most strongly against the lessor and
in favor of the lessee. NutraSweet Co., 262 Ill. App. 3d at 695,
635 N.E.2d at 445.
The rider to the lease obligates Northwest to pay "real estate
taxes payable." The term "payable" means "[c]apable of being paid;
suitable to be paid; admitting or demanding payment; justly due;
[or] legally enforceable." Black's Law Dictionary at 1016 (5th ed.
1979). It would be absurd to conclude that Northwest must pay taxes
that are not legally due.
Northwest claims that no taxes are payable, arguing that the
execution of the lease did not destroy all of the tax exemptions
Northwest could legally assert. Conversely, taxes may be legally
due if the lease operates as a waiver of all claims to tax exemp-
tion. The Department did not assert this argument in its brief, but
raised it during oral argument. Indeed, the Department's brief
addresses each of Northwest's claims to various exemptions. Never-
theless, we shall consider the Department's argument here.
A waiver is an intentional relinquishment of a known right.
Bolingbrook Equity I Ltd. Partnership v. Zayre of Illinois, Inc.,
252 Ill. App. 3d 753, 766, 624 N.E.2d 1287, 1295 (1993). For
example, an annexation agreement in which a tax-exempt religious
organization agreed that it was "the intention of the Owner that all
of the Subject Realty, and all improvements thereon, shall become as
fully taxable as privately owned real estate within the State of
Illinois" was held to waive a claim to tax-exemption. See Clark v.
Marian Park, Inc., 80 Ill. App. 3d 1010, 1012-14, 400 N.E.2d 661,
663-65 (1980). Given the record in this case, we conclude that the
language of the lease rider here is more ambiguous than the language
at issue in Clark. Indeed, as noted above, requiring a lessee to
pay "taxes payable" does not mean that taxes are automatically
payable.
In sum, the lease rider in this case is ambiguous. It must be
construed strongly in favor of the lessee Northwest and against the
lessor Village of Palatine. Thus, we conclude that this lease did
not operate as an intentional waiver of all claims to tax exemption.
It is useful to examine this point not only in terms of the law
of waiver, but in terms of general tax law. All property, including
that of municipal corporations, is subject to taxation unless
specifically exempted. Marshall County Airport Board v. Department
of Revenue, 163 Ill. App. 3d 874, 875, 516 N.E.2d 318, 319 (1987).
It is well settled that it is the duty of the landowner to pay all
taxes and special assessments; in order for a lessor to shift the
obligation to pay taxes from itself to the lessee, the lease must
express this shift in clear, concise terms. 601 West 81st Street
Corp. v. City of Chicago, 129 Ill. App. 3d 410, 415, 472 N.E.2d 827,
831 (1984).
This court has already concluded that the lease here does not
clearly shift tax liability, given the circumstances of this case.
The general rules of Illinois tax law demonstrate that the execution
of a lease that binds the lessee to pay taxes does not create a tax.
Rather, such a lease shifts a liability the municipality would be
obligated to pay, but for exemptions such as those listed in section
15-60. As property tax exemptions are statutory creations, we next
turn to consider whether Northwest may claim a property tax exemp-
tion under the relevant statute.
The Department argues that the property is taxable because
Northwest's application for tax exemption was untimely. The Depart-
ment relies on the part of section 15-50(c)(iii) that provides that
leased municipal property may be exempt where:
"notwithstanding the terms of the lease, the
municipality has filed or hereafter files a
timely exemption petition or complaint with
respect to property consisting of or including
the leased property for an assessment year
which includes part or all of the first 12
months of the lease period." 35 ILCS 200/15-
60(c)(iii) (West 1996)(emphasis added).
We note that even where the lessee agrees to pay taxes on the leased
property, the statute contemplates that the property may be held
exempt by the Department or the judiciary. Moreover, the question
of a timely petition is determinative only if a failure to satisfy
subsection (c) results in a denial of all claims to a tax exemption.
Had the legislature intended that the execution of a particular
lease or the untimely filing of an application regarding property
under such a lease would destroy all claims to a tax exemption, it
could have easily done so with express language or by placing the
condition in a separate section or subsection of the Code.
The plain language and structure of section 15-60 as a whole
also undermine the premise that subsection (c) is determinative.
The first portion of section 15-60 sets forth two types of property
as exempt from taxation. One of these exemptions is destroyed if
the property is leased for use other than public purposes. It
follows that property leased for public purposes remains exempt from
taxation.
The statute then states in five subsections types of property
which are "[a]lso exempt." The word "also" ordinarily means
"[b]esides; in addition; likewise; too[;] *** [a]nd in addition."
American Heritage Dictionary at 97 (2d College Ed. 1982). The
exemptions listed in section 15-60 are extended to various entities
-- municipalities, counties, townships, taxing districts -- owning
various types of property. This language and structure indicates
that the exemptions listed in section 15-60 are mutually exclusive.
Indeed, parts of a subsection of the predecessor to section 15-
60 have been construed as separate. In City of Chicago v. Illinois
Department of Revenue, 147 Ill. 2d 484, 590 N.E.2d 478 (1992), the
City held title to buildings on property subleased from private
commercial entities. The issue on review was whether the buildings
and the land were exempt from property taxes under the predecessor
to section 15-60(b), which exempted "all public buildings belonging
to any *** city ***, with the ground on which such buildings are
erected." See Ill. Rev. Stat. 1987, ch. 120, par. 500.6.
The supreme court held that the buildings were exempt and that
the land was taxable. The court rejected the Department's argument
that the statute required both the building and the ground be owned
by the City, stating that "given [the] express statement that public
buildings belonging to a city be exempt from taxation, the legisla-
ture could not have intended that this exemption turn on the mere
fortuity that underlying land also be in exempt ownership." City of
Chicago, 147 Ill. 2d at 495, 590 N.E.2d at 483. It follows from the
supreme court's separate treatment of two parts of one subsection of
the exemption statute at issue here that separate subsections of
this statute should also be treated separately.
In sum, the language and structure of section 15-60 are such
that whether the property at issue qualifies for the exemption set
forth in subsection (c) is not determinative of this appeal.
Accordingly, this court turns to consider whether the property is
otherwise exempt.
Northwest claims that the property falls within the exemption
for property owned by a taxing district that is being held for
future expansion or development. The Department argues that the
property is taxable because it was leased to Northwest for use for
other than public purposes. The Department's brief, citing People
ex rel. Lloyd v. University of Illinois, 328 Ill. 377, 159 N.E. 811
(1928), states that Northwest's use of the property "is not a public
function, as [Northwest] does not perform a function that the
Village of Palatine performs." Lloyd involved an exemption for
educational or religious use of property. Neither Lloyd nor section
15-60 refers to the concept of a "public function." Rather, section
15-60 refers to "public purposes."
In Forest Preserve District of Du Page County v. Department of
Revenue, 266 Ill. App. 3d 264, 639 N.E.2d 1385 (1994), which is
cited in Northwest's brief, this court addressed the "public purpos-
es" exemption. The district had contended that the operation of a
sanitary landfill on its property was a public purpose. This court
characterized "the pivotal question [as] whether the primary use of
the subject property was for a tax-exempt purpose." Forest Preserve
District, 266 Ill. App. 3d at 270, 639 N.E.2d at 1390. This court
held that the operation of a landfill by a for-profit business, with
royalties flowing to the district, showed that the primary use of
the property was for a non-public purpose. Forest Preserve Dis-
trict, 266 Ill. App. 3d at 270-71, 639 N.E.2d at 1390.
Northwest also cites Childrens Development Center, Inc. v.
Olson, 52 Ill. 2d 332, 288 N.E.2d 388 (1972), where the leasing of
tax-exempt property by a religious corporation to a non-profit
corporation, whose use of the property was tax-exempt, did not
destroy the tax-exempt status of the property. The supreme court
stated that:
"It is not questioned that the activities con-
ducted by Center are charitable and that if the
property were owned by Center and these activi-
ties conducted thereon, it would be tax exempt.
Also if Sisters were to conduct a similar oper-
ation on the property instead of Center, it
appears that the property would be tax exempt."
Childrens Development Center, 52 Ill. 2d at
334-35, 288 N.E.2d at 390.
The court determined that it was the primary use to which the
property was devoted after the leasing which determined whether the
tax-exempt status continued. Childrens Development Center, 52 Ill. 2d at 335-36, 288 N.E.2d at 390-91.
Childrens Development Center is not controlling, as it involved
the exemption for property of a charitable organization "exclusively
used for charitable or beneficent purposes, and not leased or
otherwise used with a view to profit." See 35 ILCS 200/15-65(b)
(West 1996). However, as the dissent noted, the statute could have
been more narrowly construed to deny the exemption. See Childrens
Development Center, 52 Ill. 2d at 337-39, 288 N.E.2d at 391-92
(Davis, J., dissenting). The majority opinion reflects the long-
standing view that the construction of tax exemptions should be
narrow, but not unreasonably narrow. People ex rel. Goodman v.
University of Illinois Foundation, 388 Ill. 363, 370, 58 N.E.2d 33,
37 (1944); People ex rel. Pearsall v. Catholic Bishop, 311 Ill. 11,
16, 142 N.E. 520, 522 (1924). Moreover, the focus on the primary
use of the property after it is leased is the approach taken by this
court in the Forest Preserve District opinion.
We note that the Department chose to ignore Forest Preserve
District and Childrens Development Center in its brief. We further
note that the supreme court has recognized that the funds and
property of charitable organizations may be devoted to public
purposes. See, e.g., American College of Surgeons v. Korzen, 36 Ill. 2d 340, 348, 224 N.E.2d 7, 11 (1967), overruled on other
grounds, Christian Action Ministry v. Department of Local Government
Affairs, 74 Ill. 2d 51, 383 N.E.2d 958 (1978).
The record shows that Northwest is a non-profit corporation
that maintained space, facilities and supplies for meetings of
Alcoholics Anonymous and its family service groups. Our legislature
has declared that alcohol abuse is a serious public health problem
and that it is imperative to implement a comprehensive, coordinated
strategy for attacking this problem. 20 ILCS 301/1-5 (West 1996).
This strategy is to be devised by the executive branch, but imple-
mented through various entities, including private volunteer agen-
cies. See 20 ILCS 301/1-5 (1996). Although the record does not
show whether Northwest is working with the State, we take the
statute as a recognition that private groups may be well-suited to
attack this public problem.
Our judiciary also recognizes the importance of groups such as
Alcoholics Anonymous and relies on them in the course of exercising
judicial power. It is not uncommon for Illinois courts to make
attendance of Alcoholics Anonymous a condition of probation in
criminal cases, when that condition may be useful in rehabilitating
an offender. E.g., People v. Graham, 229 Ill. App. 3d 733, 593 N.E.2d 1163 (1992); see also People v. White, 165 Ill. App. 3d 249,
518 N.E.2d 1262 (1988) (condition of release of insanity acquitee).
Our supreme court has also required entry into continuing treatment
for alcoholism as a condition of probation in attorney disciplinary
matters. See, e.g., In re Kunz, 122 Ill. 2d 847, 524 N.E.2d 544
(1988).
We note that the supreme court has addressed the concept of
"public purposes" in a slightly different tax context. In People ex
rel. Lawless v. City of Quincy, 395 Ill. 190, 69 N.E.2d 892 (1946),
the court affirmed a tax exemption for a municipal airport, pursuant
to a statute exempting public grounds owned by a municipality and
used exclusively for public purposes[fn5] (now embodied in 35 ILCS
200/15-75 (1996)). The Lawless court indicated that property is
used for public purposes when it is open on equal terms to use by
the public. See Lawless, 395 Ill. at 200, 69 N.E.2d at 897. Thus,
the access of the public to property claimed to be devoted to public
purposes may be significant in determining whether the exemption
applies.
In this case, it is undisputed that Northwest offered approxi-
mately 50 meetings per week in 1991. These meetings served approxi-
mately 4,000 people monthly. The only requirements for membership
in Northwest are a desire for sobriety and regular attendance of
meetings. The record shows that Northwest would ask members for
donations at the beginning of meetings, but no person was excluded
for failing to make a donation. Similarly, Northwest made litera-
ture available for purchase at meetings, but would give the litera-
ture to those who could not afford it. Article IV of Northwest's
by-laws provide that "[n]o dues or fees shall ever be assessed for
membership ***." This is not a case where membership dues were held
for the benefit of the membership instead of in trust for the
public. See American College of Surgeons, 36 Ill. 2d at 348, 224 N.E.2d at 11.
In sum, it is undisputed that Northwest is a non-profit group.
Our state government recognizes that the activities of groups such
as Northwest are not merely charitable, but also attack a serious
public health problem. The record shows that Northwest opened the
leased property to the general public for this public purpose. If
Northwest had owned the property, or the Village of Palatine had
used it for attacking alcoholism, the property would have been tax-
exempt. Accordingly, we conclude that the fee interest in the prop-
erty attributed to Northwest is exempt from property taxation, pur-
suant to the first portion of section 15-60. We also agree with the
circuit court that the property at issue falls within the scope of
section 15-60(b).
For all of the aforementioned reasons, the judgment of the
circuit court is reversed and remanded for further proceedings
consistent with this opinion.
Reversed and remanded.
ZWICK, J., and QUINN, J., concur.
[fn1] The Department seems to admit error in the assessment in
this case. Real estate taxes can only be levied, assessed and
collected in the manner expressly required by statute. In re County
Collector, 229 Ill. App. 3d 641, 643, 593 N.E.2d 1134, 1135 (1992).
We note that the Department lacks "any power, jurisdiction or
authority to review, revise, correct or change any individual
assessment made by any local assessment officer." 35 ILCS 200/16-
205 (West 1996). We also note that after the Department makes a
tax exemption decision, "the board of appeals shall correct the
assessment accordingly, if necessary." 35 ILCS 200/16-130 (West
1996). Northwest has not challenged the Department's authority to
change the taxpayer and parcel to be assessed when deciding a tax
exemption petition. As a resolution of the issue is not necessary
to the disposition of this appeal, we do not consider the question
here.
[fn2] Section 9-195 provides in relevant part as follows:
"Except as provided in Section 15-55, when
property which is exempt from taxation is
leased to another whose property is not exempt,
and the leasing of which does not make the
property taxable, the leasehold estate and the
appurtenances shall be listed as the property
of the lessee thereof, or his or her assignee.
Taxes on that property shall be collected in
the same manner as on property that is not ex-
empt, and the lessee shall be liable for those
taxes. However, no tax lien shall attach to
the exempt real estate." 35 ILCS 200/9-195
(West 1996).
Section 15-55 exempts State property from taxation, but allows for
taxation of State property leased to others, with such taxes to be
paid by the lessee. 35 ILCS 200/15-55 (West 1996). Section 9-195
is not applicable in this case because the Department concedes that
Northwest's property is exempt under the statute applicable to
property used for charitable purposes by charitable corporations.
See 35 ILCS 200/15-65(b) (West 1996). We note that where property
is leased from a municipality, the premises are owned by the lessor
municipality, but the leasehold estate is the property of the
lessee. People ex rel. Korzen v. American Airlines, Inc., 39 Ill. 2d 11, 14, 233 N.E.2d 568, 570 (1967).
[fn3] The effective date of Public Act 87-1280 was January 1,
1994.
[fn4] We note, however, that the circuit court's opinion on
this point states that "the Department assessed the real property in
fee to the Village of Palatine ***." As noted earlier in this
opinion, the record shows that the Department did not assess the
real property in fee to the Village of Palatine. Instead, the
record shows that the Cook County Collector assessed the parcel as a
leasehold to Northwest.
[fn5] The Lawless court's treatment of the tax exemption stat-
ute is of interest. As in this case, there was more than one
subsection of the statute that arguably could have applied to the
airport land. The Lawless court stated that if the property was
being used for "public purposes" under one subsection of the stat-
ute, then the question whether it was exempt for being used for
"municipal purposes" under another subsection of the statute would
be wholly immaterial. Lawless, 395 Ill. at 195-96, 69 N.E.2d at
894-95. Lawless thus provides further support for the proposition
that property need only qualify for tax exemption under one subsec-
tion of a statute.
APRIL 10, 1998
No. 1-96-2195
NORTHWEST SUBURBAN FELLOWSHIP, INC., ) APPEAL FROM THE
a Not-for-Profit Corporation, ) CIRCUIT COURT
) OF COOK COUNTY.
Plaintiff-Appellant, )
)
v. )
)
THE DEPARTMENT OF REVENUE, )
State of Illinois, ) HONORABLE
) ALEXANDER P. WHITE,
Defendant-Appellant. ) JUDGE PRESIDING.
PRESIDING JUSTICE CAMPBELL delivered the opinion of the court:
Plaintiff Northwest Suburban Fellowship, Inc. (Northwest)
appeals an order of the circuit court of Cook County affirming a
decision of defendant Department of Revenue (Department) denying
Northwest a real estate tax exemption.
The record on appeal indicates the following facts. Northwest
is a not-for-profit corporation existing under Illinois law.
Northwest's sole purpose is to maintain space, facilities and
supplies for meetings of Alcoholics Anonymous and its family service
groups, such as Alanon and Alateen.
On September 24, 1979, Northwest entered into a five year lease
with the Village of Palatine (Village) for space on the second floor
of the Palatine Community Center, located in Palatine, Illinois.
The 1979 lease gave Northwest the option to extend the lease for two
additional five year periods, beginning in 1984 and 1989. On
November 9, 1984, the circuit court of Cook County enjoined the Cook
County Collector from instituting any action to enforce collection
of taxes or interest charges against Northwest for the years 1979-
83. The order finds in part that the Department had denied North-
west's complaint for tax exemption on the ground that Northwest did
not own the property. The permanent injunction was based on North-
west's status as a tax-exempt charitable institution.
The record contains documents indicating that the Cook County
Collector continued to assess property tax with regard to Northwest
for the years 1984-91. Northwest opted to extend the lease from
December 1, 1989, through November 30, 1994. A rider to the 1989
lease provided that:
"Any real estate taxes payable with re-
spect to the premises or the leasehold or other
interest therein for any portion of the lease
term shall be paid by Lessee. Any such tax
shall be paid when due and prior to any penalty
date, and Lessee shall submit to Lessor a re-
ceipted bill for any such tax promptly after
such tax has been paid."
The original lease did not contain this provision.
On May 4, 1992, Northwest filed a complaint and application for
a real estate exemption with the Cook County Board of Appeals
(Board). Northwest's application noted that there was a prior tax
exemption application and attached the prior court order finding
that the property was entitled to an exemption. On July 10, 1992,
the Board forwarded the complaint and application to the Department
without recommendation. The Department received the complaint and
application on July 24, 1992.
On August 20, 1992, the Department denied the application for
exemption on the ground that the property was not in exempt use. On
August 31, 1992, the Department received a letter and petition from
Northwest seeking a formal hearing on the matter. On September 13,
1993, the Department held a hearing.
On October 26, 1993, an Administrative Law Judge (ALJ) for the
Department issued a recommended decision that the parcel in question
did not qualify for exemption during 1991. The ALJ ruled that
property leased by a Village is not exempt where the terms of the
lease require the lessee to pay real estate taxes. On December 6,
1993, the Director of the Department approved the recommended
decision as a hearing disposition. Both the recommended decision
and a hearing disposition refer to the parcel at issue as a lease-
hold parcel. However, the recommended decision states that the
value of the fee interest of the area leased to Northwest, including
the proportionate value of the land and building, should be assessed
to the Village and that it was improper to assign a leasehold parcel
number to the leased area and assess it as a leasehold.[fn1]
On January 7, 1994, Northwest filed a complaint for adminis-
trative review in the circuit court of Cook County. On May 15,
1996, the trial court affirmed the decision of the Department. The
trial court concluded that the parcel qualified for an exemption
under the "charitable purposes" provision of the Illinois Property
Tax Code (Code). See 35 ILCS 200/15-65 (West 1996). Nevertheless,
the trial court held that the parcel was taxable under the Code
because the Village had included a provision in the rider to the
lease requiring Northwest to pay real estate taxes. See 35 ILCS
200/15-60(c) (West 1996). Northwest filed a timely notice of
appeal. The parties have submitted supplemental memoranda comment-
ing on the recommended decision of the ALJ, pursuant to an order of
this court.
The question on appeal is whether the Department erred in
denying a property tax exemption in this case. Statutes exempting
property from taxation are to be strictly construed in favor of
taxation; the taxpayer must prove that he or she is entitled to the
exemption. Harrisburg-Raleigh Airport Authority v. Department of
Revenue, 126 Ill. 2d 326, 331, 533 N.E.2d 1072, 1074 (1989). Each
claim for exemption must be determined from the facts presented.
Chicago Patrolmen's Association v. Department of Revenue, 171 Ill. 2d 263, 270-71, 664 N.E.2d 52, 56 (1996). In cases involving the
Department's interpretation of a tax statute, the Department's
interpretation is relevant, but not binding on a reviewing court.
Branson v. Department of Revenue, 168 Ill. 2d 247, 254, 659 N.E.2d 961, 965 (1995). Where the facts are undisputed, a determination of
whether property is exempt from taxation is a question of law.
Harrisburg-Raleigh Airport Authority, 126 Ill. 2d at 331, 533 N.E.2d
at 1074.
The tax exemption statute at issue in this case is section 15-
60 of the Code, which provides in part as follows:
"All property belonging to any county or
municipality used exclusively for the mainte-
nance of the poor is exempt, as is all property
owned by a taxing district that is being held
for future expansion or development, except if
leased by the taxing district to lessees for
use for other than public purposes.
Also exempt are:
* * *
(b) all public buildings belonging to any
county, township, or municipality, with the
ground on which the buildings are erected;
(c) all property owned by any municipality
located within its incorporated limits. Any
such property leased by a municipality shall
remain exempt, and the leasehold interest of
the lessee shall be assessed under Section
9-195 of this Act,[fn2] (i) for a lease entered
into on or after January 1, 1994, unless the
lease expressly provides that this exemption
shall not apply; (ii) for a lease entered into
on or after the effective date of Public Act
87-1280[fn3] and before January 1, 1994, unless
the lease expressly provides that this exemp-
tion shall not apply or unless evidence other
than the lease itself substantiates the intent
of the parties to the lease that this exemption
shall not apply; and (iii) for a lease entered
into before the effective date of Public Act
87-1280, if the terms of the lease do not bind
the lessee to pay the taxes on the leased prop-
erty or if, notwithstanding the terms of the
lease, the municipality has filed or hereafter
files a timely exemption petition or complaint
with respect to property consisting of or in-
cluding the leased property for an assessment
year which includes part or all of the first 12
months of the lease period. The foregoing
clause (iii) added by Public Act 87-1280 shall
not operate to exempt property for any assess-
ment year as to which no timely exemption peti-
tion or complaint has been filed by the munici-
pality or as to which an administrative or
court decision denying exemption has become
final and nonappealable. For each assessment
year or portion thereof that property is made
exempt by operation of the foregoing clause
(iii), whether such year or portion is before
or after the effective date of Public Act
87-1280, the leasehold interest of the lessee
shall, if necessary, be considered omitted
property for purposes of this Act;
* * *
For purposes of this Section, "municipal-
ity" means a municipality, as defined in Sec-
tion 1-1-2 of the Illinois Municipal Code."
Pub. Act 90--176, eff. January 1, 1998 (amend-
ing 35 ILCS 200/15-60 (West 1996)).
Both the Department and the circuit court denied tax-exempt status
on the ground that the terms of the lease bound Northwest to pay the
taxes on the leased property. Indeed, the circuit court ruled that
the property at issue in this case fell within the scope of section
15-60(b), but was not exempt because of the language in the
lease.[fn4] Thus, we first consider whether the terms of the lease
bound Northwest to pay the taxes on the leased property and to waive
any other claim to a tax exemption.
The interpretation of a lease is a question of law to be
determined by the reviewing court. NutraSweet Co. v. American
National Bank and Trust Co. of Chicago, 262 Ill. App. 3d 688, 694,
635 N.E.2d 440, 444 (1994). The primary function of the court in
construing a lease is to give effect to the intention of the parties
as expressed in the document. Midland Management Co. v. Helgason,
158 Ill. 2d 98, 104, 630 N.E.2d 836, 839 (1994). Where the language
used is definite and precise, the lease speaks for itself and there
is no need for interpretation. NutraSweet Co., 262 Ill. App. 3d at
694, 635 N.E.2d at 444. However, in contrast to the interpretation
of a tax statute, where there is any doubt as to the meaning of a
lease, it should be construed most strongly against the lessor and
in favor of the lessee. NutraSweet Co., 262 Ill. App. 3d at 695,
635 N.E.2d at 445.
The rider to the lease obligates Northwest to pay "real estate
taxes payable." The term "payable" means "[c]apable of being paid;
suitable to be paid; admitting or demanding payment; justly due;
[or] legally enforceable." Black's Law Dictionary at 1016 (5th ed.
1979). It would be absurd to conclude that Northwest must pay taxes
that are not legally due.
Northwest claims that no taxes are payable, arguing that the
execution of the lease did not destroy all of the tax exemptions
Northwest could legally assert. Conversely, taxes may be legally
due if the lease operates as a waiver of all claims to tax exemp-
tion. The Department did not assert this argument in its brief, but
raised it during oral argument. Indeed, the Department's brief
addresses each of Northwest's claims to various exemptions. Never-
theless, we shall consider the Department's argument here.
A waiver is an intentional relinquishment of a known right.
Bolingbrook Equity I Ltd. Partnership v. Zayre of Illinois, Inc.,
252 Ill. App. 3d 753, 766, 624 N.E.2d 1287, 1295 (1993). For
example, an annexation agreement in which a tax-exempt religious
organization agreed that it was "the intention of the Owner that all
of the Subject Realty, and all improvements thereon, shall become as
fully taxable as privately owned real estate within the State of
Illinois" was held to waive a claim to tax-exemption. See Clark v.
Marian Park, Inc., 80 Ill. App. 3d 1010, 1012-14, 400 N.E.2d 661,
663-65 (1980). Given the record in this case, we conclude that the
language of the lease rider here is more ambiguous than the language
at issue in Clark. Indeed, as noted above, requiring a lessee to
pay "taxes payable" does not mean that taxes are automatically
payable.
In sum, the lease rider in this case is ambiguous. It must be
construed strongly in favor of the lessee Northwest and against the
lessor Village of Palatine. Thus, we conclude that this lease did
not operate as an intentional waiver of all claims to tax exemption.
It is useful to examine this point not only in terms of the law
of waiver, but in terms of general tax law. All property, including
that of municipal corporations, is subject to taxation unless
specifically exempted. Marshall County Airport Board v. Department
of Revenue, 163 Ill. App. 3d 874, 875, 516 N.E.2d 318, 319 (1987).
It is well settled that it is the duty of the landowner to pay all
taxes and special assessments; in order for a lessor to shift the
obligation to pay taxes from itself to the lessee, the lease must
express this shift in clear, concise terms. 601 West 81st Street
Corp. v. City of Chicago, 129 Ill. App. 3d 410, 415, 472 N.E.2d 827,
831 (1984).
This court has already concluded that the lease here does not
clearly shift tax liability, given the circumstances of this case.
The general rules of Illinois tax law demonstrate that the execution
of a lease that binds the lessee to pay taxes does not create a tax.
Rather, such a lease shifts a liability the municipality would be
obligated to pay, but for exemptions such as those listed in section
15-60. As property tax exemptions are statutory creations, we next
turn to consider whether Northwest may claim a property tax exemp-
tion under the relevant statute.
The Department argues that the property is taxable because
Northwest's application for tax exemption was untimely. The Depart-
ment relies on the part of section 15-50(c)(iii) that provides that
leased municipal property may be exempt where:
"notwithstanding the terms of the lease, the
municipality has filed or hereafter files a
timely exemption petition or complaint with
respect to property consisting of or including
the leased property for an assessment year
which includes part or all of the first 12
months of the lease period." 35 ILCS 200/15-
60(c)(iii) (West 1996)(emphasis added).
We note that even where the lessee agrees to pay taxes on the leased
property, the statute contemplates that the property may be held
exempt by the Department or the judiciary. Moreover, the question
of a timely petition is determinative only if a failure to satisfy
subsection (c) results in a denial of all claims to a tax exemption.
Had the legislature intended that the execution of a particular
lease or the untimely filing of an application regarding property
under such a lease would destroy all claims to a tax exemption, it
could have easily done so with express language or by placing the
condition in a separate section or subsection of the Code.
The plain language and structure of section 15-60 as a whole
also undermine the premise that subsection (c) is determinative.
The first portion of section 15-60 sets forth two types of property
as exempt from taxation. One of these exemptions is destroyed if
the property is leased for use other than public purposes. It
follows that property leased for public purposes remains exempt from
taxation.
The statute then states in five subsections types of property
which are "[a]lso exempt." The word "also" ordinarily means
"[b]esides; in addition; likewise; too[;] *** [a]nd in addition."
American Heritage Dictionary at 97 (2d College Ed. 1982). The
exemptions listed in section 15-60 are extended to various entities
-- municipalities, counties, townships, taxing districts -- owning
various types of property. This language and structure indicates
that the exemptions listed in section 15-60 are mutually exclusive.
Indeed, parts of a subsection of the predecessor to section 15-
60 have been construed as separate. In City of Chicago v. Illinois
Department of Revenue, 147 Ill. 2d 484, 590 N.E.2d 478 (1992), the
City held title to buildings on property subleased from private
commercial entities. The issue on review was whether the buildings
and the land were exempt from property taxes under the predecessor
to section 15-60(b), which exempted "all public buildings belonging
to any *** city ***, with the ground on which such buildings are
erected." See Ill. Rev. Stat. 1987, ch. 120, par. 500.6.
The supreme court held that the buildings were exempt and that
the land was taxable. The court rejected the Department's argument
that the statute required both the building and the ground be owned
by the City, stating that "given [the] express statement that public
buildings belonging to a city be exempt from taxation, the legisla-
ture could not have intended that this exemption turn on the mere
fortuity that underlying land also be in exempt ownership." City of
Chicago, 147 Ill. 2d at 495, 590 N.E.2d at 483. It follows from the
supreme court's separate treatment of two parts of one subsection of
the exemption statute at issue here that separate subsections of
this statute should also be treated separately.
In sum, the language and structure of section 15-60 are such
that whether the property at issue qualifies for the exemption set
forth in subsection (c) is not determinative of this appeal.
Accordingly, this court turns to consider whether the property is
otherwise exempt.
Northwest claims that the property falls within the exemption
for property owned by a taxing district that is being held for
future expansion or development. The Department argues that the
property is taxable because it was leased to Northwest for use for
other than public purposes. The Department's brief, citing People
ex rel. Lloyd v. University of Illinois, 328 Ill. 377, 159 N.E. 811
(1928), states that Northwest's use of the property "is not a public
function, as [Northwest] does not perform a function that the
Village of Palatine performs." Lloyd involved an exemption for
educational or religious use of property. Neither Lloyd nor section
15-60 refers to the concept of a "public function." Rather, section
15-60 refers to "public purposes."
In Forest Preserve District of Du Page County v. Department of
Revenue, 266 Ill. App. 3d 264, 639 N.E.2d 1385 (1994), which is
cited in Northwest's brief, this court addressed the "public purpos-
es" exemption. The district had contended that the operation of a
sanitary landfill on its property was a public purpose. This court
characterized "the pivotal question [as] whether the primary use of
the subject property was for a tax-exempt purpose." Forest Preserve
District, 266 Ill. App. 3d at 270, 639 N.E.2d at 1390. This court
held that the operation of a landfill by a for-profit business, with
royalties flowing to the district, showed that the primary use of
the property was for a non-public purpose. Forest Preserve Dis-
trict, 266 Ill. App. 3d at 270-71, 639 N.E.2d at 1390.
Northwest also cites Childrens Development Center, Inc. v.
Olson, 52 Ill. 2d 332, 288 N.E.2d 388 (1972), where the leasing of
tax-exempt property by a religious corporation to a non-profit
corporation, whose use of the property was tax-exempt, did not
destroy the tax-exempt status of the property. The supreme court
stated that:
"It is not questioned that the activities con-
ducted by Center are charitable and that if the
property were owned by Center and these activi-
ties conducted thereon, it would be tax exempt.
Also if Sisters were to conduct a similar oper-
ation on the property instead of Center, it
appears that the property would be tax exempt."
Childrens Development Center, 52 Ill. 2d at
334-35, 288 N.E.2d at 390.
The court determined that it was the primary use to which the
property was devoted after the leasing which determined whether the
tax-exempt status continued. Childrens Development Center, 52 Ill. 2d at 335-36, 288 N.E.2d at 390-91.
Childrens Development Center is not controlling, as it involved
the exemption for property of a charitable organization "exclusively
used for charitable or beneficent purposes, and not leased or
otherwise used with a view to profit." See 35 ILCS 200/15-65(b)
(West 1996). However, as the dissent noted, the statute could have
been more narrowly construed to deny the exemption. See Childrens
Development Center, 52 Ill. 2d at 337-39, 288 N.E.2d at 391-92
(Davis, J., dissenting). The majority opinion reflects the long-
standing view that the construction of tax exemptions should be
narrow, but not unreasonably narrow. People ex rel. Goodman v.
University of Illinois Foundation, 388 Ill. 363, 370, 58 N.E.2d 33,
37 (1944); People ex rel. Pearsall v. Catholic Bishop, 311 Ill. 11,
16, 142 N.E. 520, 522 (1924). Moreover, the focus on the primary
use of the property after it is leased is the approach taken by this
court in the Forest Preserve District opinion.
We note that the Department chose to ignore Forest Preserve
District and Childrens Development Center in its brief. We further
note that the supreme court has recognized that the funds and
property of charitable organizations may be devoted to public
purposes. See, e.g., American College of Surgeons v. Korzen, 36 Ill. 2d 340, 348, 224 N.E.2d 7, 11 (1967), overruled on other
grounds, Christian Action Ministry v. Department of Local Government
Affairs, 74 Ill. 2d 51, 383 N.E.2d 958 (1978).
The record shows that Northwest is a non-profit corporation
that maintained space, facilities and supplies for meetings of
Alcoholics Anonymous and its family service groups. Our legislature
has declared that alcohol abuse is a serious public health problem
and that it is imperative to implement a comprehensive, coordinated
strategy for attacking this problem. 20 ILCS 301/1-5 (West 1996).
This strategy is to be devised by the executive branch, but imple-
mented through various entities, including private volunteer agen-
cies. See 20 ILCS 301/1-5 (1996). Although the record does not
show whether Northwest is working with the State, we take the
statute as a recognition that private groups may be well-suited to
attack this public problem.
Our judiciary also recognizes the importance of groups such as
Alcoholics Anonymous and relies on them in the course of exercising
judicial power. It is not uncommon for Illinois courts to make
attendance of Alcoholics Anonymous a condition of probation in
criminal cases, when that condition may be useful in rehabilitating
an offender. E.g., People v. Graham, 229 Ill. App. 3d 733, 593 N.E.2d 1163 (1992); see also People v. White, 165 Ill. App. 3d 249,
518 N.E.2d 1262 (1988) (condition of release of insanity acquitee).
Our supreme court has also required entry into continuing treatment
for alcoholism as a condition of probation in attorney disciplinary
matters. See, e.g., In re Kunz, 122 Ill. 2d 847, 524 N.E.2d 544
(1988).
We note that the supreme court has addressed the concept of
"public purposes" in a slightly different tax context. In People ex
rel. Lawless v. City of Quincy, 395 Ill. 190, 69 N.E.2d 892 (1946),
the court affirmed a tax exemption for a municipal airport, pursuant
to a statute exempting public grounds owned by a municipality and
used exclusively for public purposes[fn5] (now embodied in 35 ILCS
200/15-75 (1996)). The Lawless court indicated that property is
used for public purposes when it is open on equal terms to use by
the public. See Lawless, 395 Ill. at 200, 69 N.E.2d at 897. Thus,
the access of the public to property claimed to be devoted to public
purposes may be significant in determining whether the exemption
applies.
In this case, it is undisputed that Northwest offered approxi-
mately 50 meetings per week in 1991. These meetings served approxi-
mately 4,000 people monthly. The only requirements for membership
in Northwest are a desire for sobriety and regular attendance of
meetings. The record shows that Northwest would ask members for
donations at the beginning of meetings, but no person was excluded
for failing to make a donation. Similarly, Northwest made litera-
ture available for purchase at meetings, but would give the litera-
ture to those who could not afford it. Article IV of Northwest's
by-laws provide that "[n]o dues or fees shall ever be assessed for
membership ***." This is not a case where membership dues were held
for the benefit of the membership instead of in trust for the
public. See American College of Surgeons, 36 Ill. 2d at 348, 224 N.E.2d at 11.
In sum, it is undisputed that Northwest is a non-profit group.
Our state government recognizes that the activities of groups such
as Northwest are not merely charitable, but also attack a serious
public health problem. The record shows that Northwest opened the
leased property to the general public for this public purpose. If
Northwest had owned the property, or the Village of Palatine had
used it for attacking alcoholism, the property would have been tax-
exempt. Accordingly, we conclude that the fee interest in the prop-
erty attributed to Northwest is exempt from property taxation, pur-
suant to the first portion of section 15-60. We also agree with the
circuit court that the property at issue falls within the scope of
section 15-60(b).
For all of the aforementioned reasons, the judgment of the
circuit court is reversed and remanded for further proceedings
consistent with this opinion.
Reversed and remanded.
ZWICK, J., and QUINN, J., concur.
[fn1] The Department seems to admit error in the assessment in
this case. Real estate taxes can only be levied, assessed and
collected in the manner expressly required by statute. In re County
Collector, 229 Ill. App. 3d 641, 643, 593 N.E.2d 1134, 1135 (1992).
We note that the Department lacks "any power, jurisdiction or
authority to review, revise, correct or change any individual
assessment made by any local assessment officer." 35 ILCS 200/16-
205 (West 1996). We also note that after the Department makes a
tax exemption decision, "the board of appeals shall correct the
assessment accordingly, if necessary." 35 ILCS 200/16-130 (West
1996). Northwest has not challenged the Department's authority to
change the taxpayer and parcel to be assessed when deciding a tax
exemption petition. As a resolution of the issue is not necessary
to the disposition of this appeal, we do not consider the question
here.
[fn2] Section 9-195 provides in relevant part as follows:
"Except as provided in Section 15-55, when
property which is exempt from taxation is
leased to another whose property is not exempt,
and the leasing of which does not make the
property taxable, the leasehold estate and the
appurtenances shall be listed as the property
of the lessee thereof, or his or her assignee.
Taxes on that property shall be collected in
the same manner as on property that is not ex-
empt, and the lessee shall be liable for those
taxes. However, no tax lien shall attach to
the exempt real estate." 35 ILCS 200/9-195
(West 1996).
Section 15-55 exempts State property from taxation, but allows for
taxation of State property leased to others, with such taxes to be
paid by the lessee. 35 ILCS 200/15-55 (West 1996). Section 9-195
is not applicable in this case because the Department concedes that
Northwest's property is exempt under the statute applicable to
property used for charitable purposes by charitable corporations.
See 35 ILCS 200/15-65(b) (West 1996). We note that where property
is leased from a municipality, the premises are owned by the lessor
municipality, but the leasehold estate is the property of the
lessee. People ex rel. Korzen v. American Airlines, Inc., 39 Ill. 2d 11, 14, 233 N.E.2d 568, 570 (1967).
[fn3] The effective date of Public Act 87-1280 was January 1,
1994.
[fn4] We note, however, that the circuit court's opinion on
this point states that "the Department assessed the real property in
fee to the Village of Palatine ***." As noted earlier in this
opinion, the record shows that the Department did not assess the
real property in fee to the Village of Palatine. Instead, the
record shows that the Cook County Collector assessed the parcel as a
leasehold to Northwest.
[fn5] The Lawless court's treatment of the tax exemption stat-
ute is of interest. As in this case, there was more than one
subsection of the statute that arguably could have applied to the
airport land. The Lawless court stated that if the property was
being used for "public purposes" under one subsection of the stat-
ute, then the question whether it was exempt for being used for
"municipal purposes" under another subsection of the statute would
be wholly immaterial. Lawless, 395 Ill. at 195-96, 69 N.E.2d at
894-95. Lawless thus provides further support for the proposition
that property need only qualify for tax exemption under one subsec-
tion of a statute.
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