Armenian Church of Lake Bluff v. the Dep't of Revenue of State

• Court: Appellate Court of Illinois
• Writing for the Court: OPINION
• Citation: Armenian Church of Lake Bluff v. the Dep't of Revenue of State , 2011 IL App (1st) 102249, 956 N.E.2d 479, 353 Ill.Dec. 617 (Ill. App. 2011)
• Decision Date: 22 July 2011
• Docket Number: No. 1–10–2249.,1–10–2249.
• Parties: ARMENIAN CHURCH OF LAKE BLUFF, Plaintiff–Appellant,v.The DEPARTMENT OF REVENUE of the State of Illinois; Brian A. Hamer, Director, The Department of Revenue; Kenneth J. Galvin, Administrative Law Judge; The Village of Lake Bluff; Lake Bluff Elementary School District 65; and The Lake County Board of Review, Defendants–Appellees.

2011 IL App (1st) 102,249

956 N.E.2d 479

353 Ill.Dec. 617

ARMENIAN CHURCH OF LAKE BLUFF, Plaintiff–Appellant,

v.The DEPARTMENT OF REVENUE of the State of Illinois; Brian A. Hamer, Director, The Department of Revenue; Kenneth J. Galvin, Administrative Law Judge; The Village of Lake Bluff; Lake Bluff Elementary School District 65; and The Lake County Board of Review, Defendants–Appellees.

No. 1–10–2249.

Appellate Court of Illinois, First District, Sixth Division.

July 22, 2011.

Wayne B. Giampietro, Stitt, Klein, Daday, Aretos & Giampietro, LLC, Rolling Meadows, for Plaintiff–Appellant.Lisa Madigan, Attorney General of Illinois, Michael A. Scodro, Solicitor General, Brian F. Barov, Assistant Attorney General.

OPINION

Justice McBRIDE delivered the judgment of the court, with opinion.

¶ 1 The Department of Revenue of the State of Illinois granted the plaintiff property owner's application for a religious-use real estate tax exemption for the 2007 tax year, despite Lake County's recommendation that the application be denied. The Village of Lake Bluff and Lake Bluff Elementary School District 65 objected to the decision by seeking administrative review; however, while the review was pending, the Department issued a superseded, contrary decision. The administrative hearing officer subsequently also ruled against the exemption. The circuit court affirmed. In this appeal, the property owner contends the Department's superseded decision was an arbitrary denial of due process, the hearing officer's decision was improperly based on religious criteria, and the tax exemption should be granted either because the property was primarily used to conduct public religious worship services or because it was the site of a parsonage. See 35 ILCS 200/15–40(a), (b) (West 2006).

¶ 2 Our role is to review the administrative decision rather than the circuit court's decision. Grace Community Church Assemblies of God v. Department of Revenue, 409 Ill.App.3d 480, 485, 351 Ill.Dec. 323, 950 N.E.2d 1151, 1156–57 (2011). Here, where the historical facts are admitted or established and the rule of law is undisputed, we are resolving whether the facts satisfy a statutory standard for tax exemption. Grace Community Church, 409 Ill.App.3d at 486, 351 Ill.Dec. 323, 950 N.E.2d at 1157. This is considered a mixed question of law and fact. Grace Community Church, 409 Ill.App.3d at 486, 351 Ill.Dec. 323, 950 N.E.2d 1151. Decisions on mixed questions of fact and law are reversible only if they are clearly erroneous, which is a “ ‘significantly deferential’ ” standard of review. Grace Community Church, 409 Ill.App.3d at 486, 351 Ill.Dec. 323, 950 N.E.2d at 1157 (quoting Provena Covenant Medical Center v. Department of Revenue, 236 Ill.2d 368, 387, 339 Ill.Dec. 10, 925 N.E.2d 1131, 1143 (2010)). We will set aside an administrative decision as clearly erroneous only when we are left with the definite and firm conviction that a mistake was made. Grace Community Church, 409 Ill.App.3d at 486, 351 Ill.Dec. 323, 950 N.E.2d at 1157.

¶ 3 Taxation is the rule and tax exemption is the exception. Provena Covenant, 236 Ill.2d at 388, 339 Ill.Dec. 10, 925 N.E.2d at 1143. Every presumption is against the intention of the state to exempt property from taxation. Provena Covenant, 236 Ill.2d at 388, 339 Ill.Dec. 10, 925 N.E.2d at 1144. Accordingly, statutes granting exemption are strictly construed in favor of taxation and questions of fact or “debatable” questions are similarly resolved in favor of taxation. Provena Covenant, 236 Ill.2d at 388, 339 Ill.Dec. 10, 925 N.E.2d at 1144. Section 15–40(a) of the Illinois Property Tax Code exempts from taxation property which is “used exclusively” for “religious purposes.” 35 ILCS 200/15–40(a) (West 2006). Section 15–40(b) exempts from taxation:

“Property that is owned by

(1) churches or

(2) religious institutions or

(3) religious denominations

and that is used in conjunction therewith as housing facilities provided for ministers * * *, their spouses, children and domestic workers, performing the duties of their vocation as ministers at such churches or religious institutions or for such religious denominations * * *.

A parsonage, convent or monastery or other housing facility shall be considered under this Section to be exclusively used for religious purposes when the persons who perform religious related activities shall, as a condition of their employment or association, reside in the facility.” 35 ILCS 200/15–40(b) (West 2006).

¶ 4 See, e.g., Our Savior Lutheran Church v. Department of Revenue, 204 Ill.App.3d 1055, 150 Ill.Dec. 395, 562 N.E.2d 1198 (1990) (parsonage and carport which were temporarily vacant after 40 years due to church pastor's retirement were still exempt from taxation); Ada County Assessor v. Roman Catholic Diocese, 123 Idaho 425, 849 P.2d 98 (1993) (property occupied by semi-retired priest without a designated congregation and church officials who worked mainly as administrators without regular ministries did not qualify for parsonage exemption). Courts have interpreted the term “exclusively” in the context of religious exemptions to mean primarily, and will not deem incidental or secondary use which is not for profit as grounds for denying exemption. Grace Community Church, 409 Ill.App.3d at 488, 351 Ill.Dec. 323, 950 N.E.2d at 1158–59 (citing Faith Builders Church, Inc. v. Department of Revenue, 378 Ill.App.3d 1037, 1043, 318 Ill.Dec. 133, 882 N.E.2d 1256, 1262 (2008) (finding church preschool was a daycare center instead of a facility used primarily for religious purposes)). There is no all-inclusive definition of religious purpose for tax cases and relevant considerations include facts and circumstances indicating how in actuality or practice the property is used. Provena Covenant, 236 Ill.2d at 409, 339 Ill.Dec. 10, 925 N.E.2d at 1155.

¶ 5 The subject five-acre property at 1955 Shore Acres Road, Lake Bluff, Illinois, 60044 (Lake County PIN 12–09–401–002), was sold to Susan Michael for $3 million in October 2004, as a residence for herself, her husband George Michael, and their three daughters. George Michael has described Lake Bluff as a small community of about 7,500 people located north of Chicago, and the property itself as a heavily wooded, private and tranquil site which abuts the shores of Lake Michigan. At a deposition in 2008, Susan Michael stated she “really [did not] know” about the purchase, because her husband “handle[d] all” the family's property matters, including deeds, construction, mortgages, and taxes, and would obtain her signature on documents as needed. George Michael is a real estate broker and the president of Michael Realty L.L.C., a Chicago real estate brokerage that is devoted to selling, leasing, and managing residential and commercial property. He is also the founder of Citizens Bank and Trust, which was chartered in January 2000, and is vice chair of its board of directors and chair of its audit committee. Although the Lake Bluff property was improved with a single-family dwelling, between 2004 and 2006, the Michaels performed significant demolition and construction which included remodeling the residence, building an addition with an indoor swimming pool and a two-story racquetball court, and installing an electric tram which facilitated access from the bluff at the edge of their property to the shore of Lake Michigan. Without the exemption at issue, their 2007 tax bill was $38,911.11.

¶ 6 The Michaels are second-generation Americans, their religious background is Armenian Orthodox, a Christian faith, and they are long-term parishioners of St. Gregory the Illuminator Armenian Church, which is situated at 6700 West Diversey Avenue in Chicago. However, Susan Michael found it daunting to continue traveling to St. Gregory after she moved from 1340 Longvalley Road in Glenview, Illinois, to the subject property in Lake Bluff in 2004, because she is physically limited by secondary progressive multiple sclerosis and advanced osteoarthritis.

¶ 7 On or about November 11, 2006, George Michael visited the Internet address spiritualhumanism.org, which is the website of a Pennsylvania nonprofit “humanist church” which does not have a physical location or “endorse christian theology” and offers instant, online ordination to those who “simply click [ ] the button” which reads “Ordain Me.” Clicking “the button” is free, but those who remit $75 may “upgrade” their “official title” from “Ordained Clergy Person” to “a different title [of their choice] such as Reverend or Pastor.” George Michael paid the upgrade fee and chose the title “Reverend.”

¶ 8 On March 22, 2007, Susan Michael signed a quitclaim document conveying the entire subject property to a new corporation called Armenian Church of Lake Bluff. There was no consideration for the transfer in ownership. At a deposition in 2008, George Michael testified that his accountant, Marc Geissler, decided the property should be quitclaimed “to accomplish setting up and starting a church” “[f]or tax exemption purposes.” Geissler became the treasurer of this new entity.

¶ 9 On November 20, 2007, Geissler completed an Illinois PTAX–300–R “Religious Application for Non-homestead Property Tax Exemption” form in the name of Armenian Church of Lake Bluff. Part 3 of the form asks the exemption applicant to: “Describe the specific activities that take place on this property ( i.e., housing facilities for minister or other similar official of a religious institution or religious denomination, public religious worship services or related functions, religious education and instruction, administrative support services.) Write the exact date each activity began, how frequently it takes place, and the hours during which the activity is held.” Geissler completed this section with the statement: “Housing for a religious officer, administrative offices of the Church, M–F 9:00 a.m.–5:00 p.m., Religious Education Institution and...