The opinion
Illinois Official Reports
Appellate Court
Meridian Village Ass’n v. Hamer, 2014 IL App (5th) 130078
Appellate Court MERIDIAN VILLAGE ASSOCIATION and MERIDIAN VILLAGE
Caption ASSOCIATION II, Plaintiffs-Appellants, v. BRIAN A. HAMER,
Director of Revenue, THE DEPARTMENT OF REVENUE,
MADISON COUNTY BOARD OF REVIEW, EDWARDSVILLE
COMMUNITY UNIT SCHOOL DISTRICT NO. 7, and THE
VILLAGE OF GLEN CARBON, Defendants-Appellees.
District & No. Fifth District
Docket No. 5-13-0078
Filed March 28, 2014
Held The Department of Revenue’s denial of plaintiffs’ application for
(Note: This syllabus property tax exemptions based on the charitable and religious uses of
constitutes no part of the their senior housing facility was affirmed, since plaintiffs failed to
opinion of the court but meet the guidelines set out in Methodist Old Peoples Home, they did
has been prepared by the not establish that their funds came from public and private charity,
Reporter of Decisions obstacles were placed in the way of those seeking charity from
for the convenience of plaintiffs, and plaintiffs did not show that the primary use of the
the reader.) property was for charity.
Decision Under Appeal from the Circuit Court of Madison County, No. 09-MR-340;
Review the Hon. Barbara L. Crowder, Judge, presiding.
Judgment Affirmed.
Counsel on Edward T. McCarthy, of McCarthy & Allen, of Edwardsville, for
Appeal appellants.
Lisa Madigan, Attorney General, of Chicago (Michael A. Scodro,
Solicitor General, and Timothy K. McPike, Assistant Attorney
General, of counsel), for appellees Brian A. Hamer and Department of
Revenue.
Ellen M. Edmonds, of Edmonds Law Office, P.C., and Jack H.
Humes, Jr., of Sivia Business & Legal Services, P.C., both of
Edwardsville, for appellee Edwardsville Community Unit School
District No. 7.
Terry I. Bruckert, of Bruckert, Gruenke & Long, P.C., of O’Fallon, for
appellee Village of Glen Carbon.
Panel PRESIDING JUSTICE WELCH delivered the judgment of the court,
with opinion.
Justices Goldenhersh and Cates concurred in the judgment and
opinion.
OPINION
¶1 This is an appeal from administrative review by the circuit court of Madison County of a
decision of the Illinois Department of Revenue (the Department) denying the application of
Meridian Village Association and Meridian Village Association II (the appellants) for property
tax exemptions based on charitable and religious uses of the property for tax years 2003
through 2006. Edwardsville Community Unit School District No. 7 and the Village of Glen
Carbon intervened to oppose the appellants’ application for an exemption. On January 24,
2013, the circuit court entered an order affirming the decision of the Department. It now comes
before us on further review pursuant to the Administrative Review Law (735 ILCS 5/3-101 to
3-113 (West 2012)).
¶2 As always in matters of administrative review, we review the decision of the Department
rather than the decision of the circuit court. See Three Angels Broadcasting Network, Inc. v.
Department of Revenue, 381 Ill. App. 3d 679, 692 (2008). The amount of deference given to
the agency on review depends on whether the issue presented is a question of fact, a question of
law, or a mixed question of law and fact. Three Angels Broadcasting Network, Inc., 381 Ill.
App. 3d at 693. Where the resolution of the case requires determining the legal effect of a
given set of facts, the agency’s determination should be affirmed unless clearly erroneous.
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Three Angels Broadcasting Network, Inc., 381 Ill. App. 3d at 693. As was the case in Three
Angels Broadcasting Network, Inc., the determinative facts in the case at bar–that is, the actual
uses to which the subject property was put–are not in dispute. See Three Angels Broadcasting
Network, Inc., 381 Ill. App. 3d at 693. The issue is whether, given the undisputed facts
presented, the appellants are entitled to a charitable-use or religious-use property tax
exemption. Three Angels Broadcasting Network, Inc., 381 Ill. App. 3d at 693. We will reverse
the decision of the Department only if that decision was clearly erroneous. See Three Angels
Broadcasting Network, Inc., 381 Ill. App. 3d at 693.
¶3 When reviewing an agency’s decision for clear error, we give significant deference to the
agency’s experience in construing and applying the statutes that it administers. Three Angels
Broadcasting Network, Inc., 381 Ill. App. 3d at 693. An agency’s decision will be deemed
clearly erroneous only where the reviewing court, on the entire record, is left with the definite
and firm conviction that a mistake has been committed. Three Angels Broadcasting Network,
Inc., 381 Ill. App. 3d at 693. The burden of proving the right to an exemption is on the party
seeking it, and in determining whether property is included within the scope of an exemption,
all the facts are to be construed and all the debatable questions resolved in favor of taxation.
Methodist Old Peoples Home v. Korzen, 39 Ill. 2d 149, 155 (1968).
¶4 The appellants operate a senior housing facility comprising 133 independent-living units,
66 assisted-living units, and 32 skilled-nursing units located in Glen Carbon. They applied for
charitable-use and religious-use property tax exemptions for tax years 2003 through 2006.
These applications were denied by the Department on April 30, 2009. We turn first to the
question of the appellants’ entitlement to a property tax exemption on the basis of their
“charitable use” of the property.
¶5 Section 6 of article IX of the Illinois Constitution permits the legislature to exempt certain
property from taxation only if it is “used exclusively for *** charitable purposes.” Ill. Const.
1970, art. IX, § 6. The legislature has seen fit to so exempt property “when actually and
exclusively used for charitable or beneficent purposes, and not leased or otherwise used with a
view to profit.” 35 ILCS 200/15-65 (West 2012). The legislature has specifically included
“[o]ld people’s homes” if the home is exempt from federal income tax and if its bylaws provide
for a waiver or reduction, based on an individual’s ability to pay, of any entrance fee,
assignment of assets, or fee for services. 35 ILCS 200/15-65(c) (West 2012).
¶6 Even if an “old people’s home” meets the statutory requirements for exemption, it must
also meet the constitutional requirements for charitable use. Eden Retirement Center, Inc. v.
Department of Revenue, 213 Ill. 2d 273, 287 (2004). In Methodist Old Peoples Home v.
Korzen, 39 Ill. 2d 149, 156-57 (1968), the supreme court articulated six guidelines or criteria
that must be met in order to satisfy the constitutional requirements for a charitable use. Unless
these six criteria are met, the property may be found not to be used exclusively for charitable
purposes within the meaning of our constitution and therefore not entitled to an exemption
from taxation. Eden Retirement Center, Inc., 213 Ill. 2d at 287.
¶7 The six criteria articulated in Methodist Old Peoples Home, 39 Ill. 2d at 156-57, as restated
by the supreme court in Eden Retirement Center, Inc., 213 Ill. 2d at 287, for determining
whether a property meets the constitutional requirement for a charitable use are as follows: (1)
the benefits derived are for an indefinite number of persons for their general welfare or in some
way reducing the burdens on government; (2) the organization has no capital stock or
shareholders and does not profit from the enterprise; (3) funds are derived mainly from private
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and public charity, and the funds are held in trust for the objects and purposes expressed in the
organization’s charter; (4) charity is dispensed to all who need and apply for it; (5) no obstacles
are placed in the way of those seeking the benefits; and (6) the exclusive, i.e., primary, use of
the property is for charitable purposes. The supreme court further stated that the statements of
the agents of an institution and the wording of its governing legal documents evidencing an
intention to use the property exclusively for charitable purposes do not relieve the institution of
the burden of proving that its property actually and factually is so used. Methodist Old Peoples
Home, 39 Ill. 2d at 157. The court further clarified that the term “exclusively used” means the
primary purpose for which the property is used and not any secondary or incidental purpose.
Methodist Old Peoples Home, 39 Ill. 2d at 157.
¶8 In its order denying the exemption, the Department found that the evidence presented at the
hearing before the Department failed to establish that the appellants met the guidelines set
forth in Methodist Old Peoples Home. The evidence did not indicate that the appellants’
charity benefits an indefinite number of people, because the appellants place limits on the
amount of charity given. The appellants’ bylaws provide that they may deny benevolent care to
any resident if that care would jeopardize the appellants’ ability to meet their obligations and to
continue to operate in a financially stable manner. Furthermore, any benevolent care is limited
to existing residents and does not extend to those who wish to become residents. Accordingly,
the appellants do not dispense charity to all who need it. Providing charitable care only to its
residents, placing limits on the amount of charitable care, and giving it only to the extent the
appellants speculate they have the financial ability to provide it warrants a finding that the
appellants’ policy does not benefit an indefinite number of people. See Wyndemere Retirement
Community v. Department of Revenue, 274 Ill. App. 3d 455, 460-61 (1995) (charity provided
in relation to financial circumstances is not provided to an indefinite number of people and not
dispensed to all who need it). Nor, the Department found, did the appellants’ operation lessen
the burden on government any more than does a for-profit retirement facility.
¶9 Additionally, the appellants failed to establish that their funds are derived mainly from
private and public charity. To the contrary, the primary source of the appellants’ income is
from fees paid for services rendered. The Department rejected the appellants’ argument that
their funds came largely as donations from Lutheran Senior Services, which derives its funds
mainly from private and public charity. The appellants’ audited financial statements indicate
that these funds received from Lutheran Senior Services were loans and not donations.
Furthermore, Lutheran Senior Services is a separate entity from the appellants, and the
appellants cannot acquire charitable status through the acts of a separate entity. The charitable
acts of Lutheran Senior Services cannot be attributed to the appellants.
¶ 10 The Department found that the appellants place obstacles in the way of people seeking
charity from it. The rental fees it charges are substantial and the evidence did not establish that
the appellants charge less than similar for-profit entities operating in the area. The appellants
require large security deposits from all of their residents and any fees that are not timely paid
accrue a finance charge of 10% per annum. Neither the late fee nor the security deposit has
ever been waived for any resident. Renters are also required to maintain renters insurance
including Lutheran Senior Services as an additional insured.
¶ 11 Finally, the Department found that the appellants had failed to establish that the primary
use of the property was charitable. In order to live in the units, residents must pay substantial
monthly fees that vary depending on the size and desirability of the unit. Residents must
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complete an application that shows they have the physical ability to live in the units. The
security deposit and late fee have never been waived. The appellants’ primary source of
income is from fees rather than donations. Similar facts were found in Methodist Old Peoples
Home to be suggestive of a noncharitable use of the property. Accordingly, the Department
determined that the appellants had not met their burden of showing clearly and convincingly
that they are entitled to the charitable-use property tax exemption.
¶ 12 We have carefully reviewed the record of the proceedings before the Department and
conclude that its decision is not clearly erroneous. The Department’s findings of fact are well
supported by the evidence and, after reviewing constitutional, statutory, and case law, we are
not left with the definite and firm conviction that the Department has made a mistake in its
application of that law to the facts. The appellants’ use of the property does not satisfy even a
majority of the criteria set forth in Methodist Old Peoples Home, and the appellants have not
established that their property is used exclusively for charitable purposes and therefore entitled
to the exemption.
¶ 13 The appellants argue that the Department had previously determined that one of the
appellants is exempt from retailers’ occupation and use taxes on the basis that it is organized
and operated exclusively for charitable purposes and that the Department cannot, therefore,
deny the appellants a property tax exemption for charitable use. The appellants correctly point
out that the same criteria set forth in Methodist Old Peoples Home for determining charitable
exemptions apply equally to exemptions from both property taxes and retailers’ occupation
and use taxes. See Wyndemere Retirement Community v. Department of Revenue, 274 Ill. App.
3d 455, 459 (1995). Nevertheless, the Department held that having a charitable exemption
from income taxes or from retailers’ occupation and use taxes is not determinative of whether
an applicant is entitled to a charitable exemption from property taxes and that, in any event, the
Department may review the tax-exempt status of a corporation at any time.
¶ 14 Our supreme court has held that the fact that an applicant has been granted a charitable
exemption from state retailers’ occupation, service occupation, use, and service use taxes does
not mean that the applicant must likewise be granted an exemption from paying tax on real
property it owns. Provena Covenant Medical Center v. Department of Revenue, 236 Ill. 2d
368, 389 (2010). The appellants argue that this opinion has no precedential value because it
was not a majority opinion of the supreme court. The appellants are mistaken. Five justices
concurred in that section of the opinion which made the above statement of law. Two of those
justices dissented from other specific holdings of the court while concurring in its judgment.
We find Provena to be not only persuasive, but precedential. Accordingly, we reject the
appellants’ argument that it is necessarily entitled to a charitable-use property tax exemption
based on its charitable-use exemption from retailers’ occupation and use taxes. The
Department did not err in similarly rejecting this argument.
¶ 15 We turn now to the question of the appellants’ entitlement to a property tax exemption
based on their “religious use” of the property. Section 15-40 of the Property Tax Code provides
that property used exclusively for religious purposes qualifies for an exemption as long as it is
not used with a view to profit. 35 ILCS 200/15-40 (West 2006). Again, in this context, the term
“exclusively” means the primary purpose for which the property is used. McKenzie v. Johnson,
98 Ill. 2d 87, 98 (1983). For purposes of this section, a religious purpose means a use of
property by a religious society or body of persons as a stated place for public worship, Sunday
schools, and religious instruction. Three Angels Broadcasting Network, Inc. v. Department of
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Revenue, 381 Ill. App. 3d 679, 694 (2008). While this is not inclusive of everything that might
be regarded as a religious use, it is illustrative of the nature of a religious use in the context of
property tax exemptions. Three Angels Broadcasting Network, Inc., 381 Ill. App. 3d at 695.
¶ 16 The Department held that the primary purpose of the appellants’ property is to care for the
elderly. While the retirement community allows members of the Lutheran Church an
opportunity to act out and evangelize their religion in the context of caring for seniors, the
operation of the facility is not necessary to promote their religion, because that can be
accomplished through other means. Other than caring for the elderly in a faith-inspired
manner, there was little evidence of actual religious activity on the property.
¶ 17 The Department’s conclusion that the appellants’ property is not used as a stated place for
public worship, Sunday schools, or religious instruction, or anything of that nature is not
clearly erroneous. To the contrary, the primary or exclusive use to which the appellants’
property is put is housing for the elderly. We are reminded that when determining whether
property is within the scope of an exemption, all facts are to be construed and all the debatable
questions resolved in favor of taxation. Three Angels Broadcasting Network, Inc., 381 Ill. App.
3d at 697. The Department’s decision that the subject property is not used exclusively for
religious purposes and that the appellants are not entitled to a religious-use exemption from
property tax is not clearly erroneous.
¶ 18 Nevertheless, the appellants argue that the Department and this court must defer to the
religious beliefs and characterization of the appellants’ activities by the Lutheran Church and
the appellants as exclusively for religious purposes, in accordance with the Illinois and United
States Constitutions’ protection of the free exercise of religion. We believe this argument is
best answered by simply quoting from Provena Covenant Medical Center v. Department of
Revenue, 384 Ill. App. 3d 734, 766-67 (2008):
“If ‘religious purpose’ meant whatever one did in the name of religion, it would be
an unlimited and amorphous concept. Exemption would be the rule, and taxation the
exception. ‘In a sense, everything a deeply devout person does has a religious purpose.’
Faith Builders, 378 Ill. App. 3d at 1046, 882 N.E.2d at 1264. In Fairview Haven v.
Department of Revenue, 153 Ill. App. 3d 763, 768-69, 506 N.E.2d 341, 345 (1987), we
were unpersuaded by the reasoning that a nursing home had a religious purpose
because taking care of the elderly was a way of ‘tying preaching to action.’ ‘Religious
purpose’ within the meaning of section 15-40(a)(1) (35 ILCS ILCS 200/15-40(a)(1)
(West 2002)) has to be narrower than ‘Christian service,’ or else ‘religious purpose’
would mean everything (and, therefore, nothing). In People ex rel. McCullough v.
Deutsche Gemeinde, 249 Ill. 132, 136-37, 94 N.E. 162, 164 (1911), the supreme court
stated: ‘[A] religious purpose means a use of such property by a religious society or
body of persons as a stated place for public worship, Sunday schools[,] and religious
instruction.’ In People ex rel. Carson v. Muldoon, 306 Ill. 234, 238, 137 N.E. 863, 864
(1922), overruled in part on other grounds by McKenzie v. Johnson, 98 Ill. 2d 87, 100,
456 N.E.2d 73, 79 (1983), the supreme court said, with reference to the quoted passage
from Deutsche Gemeinde: ‘This was not stated as inclusive of everything that might in
the future be regarded as a use for religious purposes but as illustrative of the nature of
such use.’ If, as Muldoon said, public worship, Sunday schools, and religious
instruction are ‘illustrative of the nature of [religious] use,’ it must follow that
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‘religious use’ has a determinable nature and that to be a religious use, the activity must
somehow resemble the activities listed in Deutsche Gemeinde.”
¶ 19 Clearly, the primary activities conducted by the appellants on their property of housing the
elderly do not resemble the activities listed in Deutsche Gemeinde. They are not of the type
intended to be exempted by the statute. While the appellants and the Lutheran Church remain
free to characterize their activities on the subject property as of a religious nature, neither the
Department nor this court is bound by that characterization. The Department’s denial of the
appellants’ application for a religious-use property tax exemption is not clearly erroneous.
¶ 20 For the foregoing reasons we affirm the decision of the circuit court of Madison County
and the decision of the Department of Revenue which denied the appellants’ application for
property tax exemptions.
¶ 21 Affirmed.
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