Friends of Israel Defense Forces v. Dept. of Rev.

• Decision Date: 30 June 2000
• Docket Number: No. 1-98-4362.,1-98-4362.
• Citation: 248 Ill.Dec. 114,315 Ill. App.3d 298,733 N.E.2d 789
• Parties: FRIENDS OF ISRAEL DEFENSE FORCES, Plaintiff-Appellee, v. The DEPARTMENT OF REVENUE OF the STATE OF ILLINOIS and Raymond T. Wagner, Jr., Defendants-Appellants.
• Court: United States Appellate Court of Illinois

733 N.E.2d 789

315 Ill. App.3d 298

248 Ill.Dec. 114

FRIENDS OF ISRAEL DEFENSE FORCES, Plaintiff-Appellee, v. The DEPARTMENT OF REVENUE OF the STATE OF ILLINOIS and Raymond T. Wagner, Jr., Defendants-Appellants.

No. 1-98-4362.

Appellate Court of Illinois, First District, Fifth Division.

June 30, 2000.

James E. Ryan, Attorney General, Chicago (Joel D. Bertocchi, Solicitor General, and Darryl B. Simko, Assistant Attorney General, of counsel), for Appellant.

Weissberg & Associates, Ltd., Chicago (Ariel Weissberg and Richard N. Steiner, of counsel), for Appellee.

Justice QUINN delivered the opinion of the court:

Raymond Wagner and the Department of Revenue of the State of Illinois (collectively the Department) appeal an order of the circuit court declaring that plaintiff, Friends of Israel Defense Forces, is entitled to a charitable exemption from the Illinois Use Tax Act (35 ILCS 105/3-5 (West 1996)).

Plaintiff applied for charitable and educational exemptions from taxation under the Use Tax Act. The Department ruled that plaintiff was not entitled to the exemptions. Plaintiff filed a complaint for administrative review in the Cook County circuit court, claiming that as an entity organized and operated exclusively for charitable purposes it was entitled to a charitable exemption from the tax. The circuit court reversed the Department's ruling, finding that plaintiff was a charitable organization entitled to exemption as such under the Use Tax Act. The Department now appeals.

For the following reasons, the order of the circuit court granting the charitable exemption and reversing the ruling of the Department is affirmed.

Plaintiff is the American fund-raising branch of the Association for the Well-Being of the Israeli Soldiers (the Association), an organization operating in Israel. Plaintiff's certificate of incorporation states the first purpose of the organization as follows:

"To advance the affairs of soldiers in Israel in the spheres of culture, welfare and social life by means of assisting in the management of institutions, including soldiers' homes, holiday villages and camps, recreation homes, hostels, clubs, restaurants, places of entertainment, cultural centres [sic] and other institutions in Israel as are presently and may in the future be so assisted by The Association for Welfare of Soldiers in Israel, a non-profit association, and tax exempt under the Laws of the State of Israel."

The Association uses money raised by plaintiff in several ways, one of which is to finance accommodations and recreational facilities used primarily by Israeli soldiers on leave of duty in Israel. The facilities include dining rooms, lounges, swimming pools, saunas, and gyms. The Association also sponsors events on military bases and builds on-base synagogues. None of plaintiff's funds are used for military weaponry or such equipment.

The record indicates that soldiers in a military unit take leaves together, and those leaves, granted every four or five months, last four days. Approximately 3,000 soldiers per week are accommodated at the rest and recreation centers underwritten by plaintiff's funds. Though the centers were built primarily for the use and comfort of Israeli soldiers, they have also been used as temporary housing for Russian and Ethiopian immigrants and for American soldiers during the Gulf War.

In addition to the rest and recreation centers, plaintiff provides funding for numerous other projects. Plaintiff contributes to summer camps for soldiers' widows and orphans and to soldier hostels. Money is also provided for remedial education of young Israelis and immigrants, scholarships for soldiers' orphans and for soldiers leaving army service, and programs for wounded and disabled soldiers and war veterans. Plaintiff also participates in special projects, such as the housing of civilians made homeless by Iraqi missile attacks during the Gulf War.

Plaintiff applied to the Department for charitable and educational exemptions from taxation under section 3-5 of the Illinois Use Tax Act. 35 ILCS 105/3-5 (West 1996). Section 3-5 of the Act exempts the following from taxation:

"Personal property purchased by a governmental body, by a corporation, society, association, foundation, or institution organized and operated exclusively for charitable, religious, or educational purposes * * *." 35 ILCS 105/3-5(4) (West 1996).

At the administrative hearing, the six exhibits submitted by the Department were admitted into evidence, including plaintiff's articles of incorporation, with amendments thereto, plaintiff's by-laws, plaintiff's audited financial statement for 1991 and correspondence concerning plaintiff's application for tax-exempt status.

Plaintiff offered affidavits, all of which were excluded, verifying that five other organizations have received tax exemptions in Illinois despite the fact that all of their donations fund organizations and activities in Israel. A lengthy program pamphlet identifying contributors to the 1993 Friends of Israel Defense Fund dinner was also excluded from evidence. The only exhibits offered by plaintiff that were admitted into evidence were the following: 86 Illinois Administrative Code sections 130.2005 through 130.2010 and 200.155 (1996), and three pamphlets describing plaintiff-funded facilities and activities in Israel.

The Department rejected plaintiff's contention that it was entitled to an educational exemption. Plaintiff did not ask the circuit court to review that decision, and this court will not address it here. In addition, the Department concluded that plaintiff did not meet the statutory requirement that a charitable organization seeking exemption must benefit an indefinite number of persons or in some way reduce the burdens on government. Plaintiff sought judicial review of the Department's decision to deny plaintiff's application for charitable exemption from the use tax in the circuit court.

The circuit court reversed the Department's decision, concluding that plaintiff's operations do benefit an indefinite number of persons. The court stated that the Department erred in requiring plaintiff to additionally show that its operations reduced the burdens of the government of the State of Illinois. The circuit court ruled that an applicant for a charitable exemption under the Use Tax Act may show that its operations either benefit an indefinite number of persons or that its operations in some way reduce the burdens of government. Thus, the circuit court deemed plaintiff to be exempt from taxation under the Use Tax Act as an entity organized exclusively for charitable purposes.

The Department now appeals the ruling of the circuit court. The Department argues that plaintiff is not entitled to a charitable exemption because it does not benefit an indefinite number of persons or reduce the burdens of Illinois government. The Department argues further that plaintiff does not dispense benefits to all who need or apply for it and that plaintiff does not use its property exclusively for charity. We affirm the order of the circuit court reversing the Department's ruling and granting a charitable exemption to plaintiff.

In reviewing a final decision under the Administrative Review Law (735 ILCS 5/3-101 et seq. (West 1998)), we review the administrative agency's decision and not the circuit court's determination. XL Disposal Corp. v. Zehnder, 304 Ill. App.3d 202, 207, 237 Ill.Dec. 307, 709 N.E.2d 293 (1999). An administrative agency's decisions on questions of fact are entitled to deference and are reversed only if against the manifest weight of the evidence. XL Disposal, 304 Ill.App.3d at 207,237 Ill.Dec. 307,709 N.E.2d 293. Questions of law decided by such an agency are not entitled to deference, however, and are reviewed de novo. XL Disposal, 304 Ill. App.3d at 207,

237 Ill.Dec. 307,

709 N.E.2d 293.

There is a conflict in recent appellate decisions as to which standard of review applies in cases where the only question is the legal conclusion to be drawn from the facts. In Richard's Tire Co. v. Zehnder, 295 Ill.App.3d 48, 57, 229 Ill.Dec. 587, 692 N.E.2d 360 (1998), the Second District held that a de novo standard of review is appropriate in such cases. In XL Disposal, 304 Ill.App.3d at 207, 237 Ill.Dec. 307, 709 N.E.2d 293, the Fourth District held that the clearly erroneous standard of review is applicable in such cases. We agree with the Fourth District's holding and with its analysis of our supreme court's holding in City of Belvidere v. Illinois State Labor Relations Board, 181 Ill.2d 191, 229 Ill.Dec. 522, 692 N.E.2d 295 (1998).

As here, the facts in Belvidere were not in dispute. Our supreme court held that "because this case involves an examination of the legal effect of a given set of facts, it involves a mixed question of fact and law." City of Belvidere, 181 Ill.2d at 205, 229 Ill.Dec. 522, 692 N.E.2d 295. The court then held that a clearly erroneous standard of review is appropriate when mixed questions of law and fact are involved. Prior to its holding in Belvidere, our supreme court had held that, where facts were undisputed, a determination of whether property is exempt from taxation was a question of law. Chicago Patrolmen's Ass'n v. Department of Revenue, 171 Ill.2d 263, 271, 215 Ill.Dec. 655, 664 N.E.2d 52 (1996). We will apply the clearly erroneous standard as enunciated in Belvidere.

The clearly erroneous standard of review is between a manifest weight of the evidence standard and a de novo standard so as to provide some deference to the administrative agency's experience and expertise. City of Belvidere, 181 Ill.2d at 205, 229 Ill.Dec. 522, 692 N.E.2d 295. Under this standard, we must accept the administrative agency's findings unless we are "`left with the definite and firm conviction that a mistake has been committed.'" Concrete Pipe & Products of California, Inc. v. Construction Laborers Pension Trust, 508 U.S. 602, 622, 113 S.Ct. 2264,...