Northern Illinois University Foundation v. Sweet
| Decision Date | 23 October 1992 |
| Docket Number | No. 2-91-1286,2-91-1286 |
| Parties | , 177 Ill.Dec. 303, 78 Ed. Law Rep. 930 NORTHERN ILLINOIS UNIVERSITY FOUNDATION, Plaintiff-Appellee, v. Roger D. SWEET, Director of Revenue et al., Defendants-Appellants. |
| Court | United States Appellate Court of Illinois |
John L. Swartz, Giffin, Winning, Cohen & Bodewes, P.C., Springfield, Brian L. Wolfberg, Schain, Firsel & Burney, Ltd., Chicago, for Northern Ill. University.
The defendants, Roger D. Sweet and the Department of Revenue (Department), appeal from an order of the circuit court of McHenry County dated October 9, 1991, which reversed the Department's denial of tax-exempt status for the 1988 calendar year for certain parcels of land located in McHenry County and collectively known as Woodstock Center. We reverse.
The property in question was used for conferences and retreats. The plaintiff, Northern Illinois University Foundation (Foundation), acquired the real estate by quitclaim deed from the Sylvia and Aaron Scheinfeld Foundation (Scheinfeld). The deed contained covenants and restrictions enforceable by the grantor and included the possibility of a reverter to the grantor under certain conditions. The plaintiff, in turn, leased most of the approximately 74 acres to Northern Illinois University (NIU), a public institution governed by an appointed board of regents (see Ill.Rev.Stat.1987, ch. 144, pars. 301, 302).
When the plaintiff Foundation originally sought a certification of exemption from real estate taxes in 1988, it argued that its property qualified for a tax exemption based on its use for charitable or educational purposes. When this exemption was denied on December 26, 1988, the plaintiff proceeded to an evidentiary hearing before the Department's administrative law judge (ALJ). The Foundation then argued that the property should be considered the property of Northern Illinois University and thus property of the State of Illinois and as such entitled to an exemption (Ill.Rev.Stat.1987, ch. 120, par. 500.5). In the alternative, the Foundation argued that the property was exempt because it was used for educational purposes and not leased or otherwise used with a view to profit (Ill.Rev.Stat.1987, ch. 120, par. 500.1).
The ALJ made detailed findings of fact and conclusions of law and denied the exemption. The ALJ determined that the Foundation's property was not property of the State exempt from taxation and that the Foundation failed to establish that the property was used primarily for school or educational purposes and not leased or otherwise used with a view to profit during 1988. The Foundation sought administrative review, and, without specific findings, the circuit court reversed the decision of the Department, stating that it was against the manifest weight of the evidence. This timely appeal followed.
On appeal, the defendants contend that (1) the property is not entitled to an exemption as property belonging to the State of Illinois (Ill.Rev.Stat.1987, ch. 120, par. 500.5); and (2) the property does not qualify under the educational use exemption (Ill.Rev.Stat.1987, ch. 120, par. 500.1). The defendants further argue that, to qualify for the educational property exemption, the property must be both "property of" the school and also used "exclusively" for school purposes.
The plaintiff Foundation responds that property may be exempt if it is owned by the State (or other governmental entity) or if it is used for educational purposes and not leased or otherwise used with a view to profit. However, the plaintiff argues only that it is entitled to the educational purpose exemption and makes no specific argument that it is entitled to an exemption on the basis of (State) ownership. As such, the plaintiff appears to have abandoned its theories regarding the State ownership exemption We consider the charitable use theory waived on appeal because it was abandoned in the trial court as it has been here. The State ownership theory has been properly raised on appeal by the defendants. After a careful review of the record and the law, we conclude that the plaintiff has failed to establish that it is entitled to either a State ownership or an educational use exemption. We therefore reverse the judgment of the circuit court and find that the Department's decision was not against the manifest weight of the evidence and should be reinstated.
[177 Ill.Dec. 306] as well as the charitable use exemption.
The record discloses the following relevant facts. In 1949, the Foundation was incorporated as a not-for-profit corporation with these purposes:
"For educational and charitable purposes; to do all things necessary or convenient to carry out such purposes.
To assist in developing and increasing the facilities of Northern Illinois State Teachers College for broader educational opportunities for, and service to, its students, alumni, citizens of the State of Illinois, and nation by encouraging gifts of money, property, works of art, historical papers and documents, museum specimens, and other material having educational, artistic, or historical value, and by such other proper means as may seem advisable.
In carrying out the aforesaid purposes, the corporation shall have * * * the power to purchase, take, receive, lease as lessee, take by gift, devise or bequest, or otherwise acquire, and to own, hold, use and otherwise deal in and with any real or personal property or any interest therein."
On April 27, 1987, Scheinfeld donated the parcels in question by quitclaim deed to the Foundation. The deed contained numerous covenants and restrictions running with the land and inuring to the benefit of and enforceable by the grantor and its successors for a 25-year period. Among the provisions was the possibility of a reverter to the grantor if the grantee attempted to sell the property within 10 years of the grant, that is, by April 27, 1997. Additionally, any sale by the grantee of the property after 10 years but before 25 years would have to be at not less than the fair-market value or at a price approved by Scheinfeld; any proceeds of such sale, less any capital improvements and any cumulative operating deficit, would have to be used to create an unspecified, permanent, college scholarship endowment fund.
In addition to the restrictions on the Foundation's ability to sell the property, the deed contained a number of restrictions on the use of the property during the first 10 years of the Foundation's ownership. Among these was the requirement that the Foundation make a positive effort to continue to operate the center as a conference center serving a wide spectrum of groups, including groups interested in problem solving and social change and having a special focus on problem solving for low-income and minority communities.
The grantee Foundation was required to continue to serve, among others, higher education and interinstitutional groups, community organizations, professional association advisory boards, policy boards and boards of directors, business and industrial firms, volunteer agencies and organizations and leaderships of statewide professional organizations, including those related to health care and economic education and development. The Foundation was required to take certain steps to maintain a good image in the local community, including conducting an annual meeting with local community leaders, offering a variety of continuing education courses, employing local residents and using local vendors where feasible.
For a 10-year period, the Foundation was not permitted to change the name of the center or any of its main buildings. Any new buildings had to be named for trees and had to be designed to complement the architectural style of the existing buildings. To ensure compatibility, a committee was created whose membership included a member of the Scheinfeld Foundation. Even the center's signage and stationery During 1988, the Foundation rented 11 acres of the property to a local farmer for $575 per year. It also leased a caretaker's residence on the property and the use of a shed for $200 per month to a private couple who were not employed or associated with the Foundation during 1988. At the request of the donor, approximately 300 square feet of the barn were also used free of charge by Sylvia Scheinfeld's brother-in-law, a sculptor who lives on adjacent property.
[177 Ill.Dec. 307] had certain restrictions. Although the grantee Foundation could convey the property to NIU after April 27, 1992, the university would also have to agree to comply with the restrictions and covenants as they pertained to the Foundation.
The Foundation leased the remainder of the property to the board of regents on behalf of NIU. The lease incorporated the use requirements established by Scheinfeld. The lease payment was $1 per year, and the lessee was required to pay the costs of acquiring the property. NIU, the lessee, was required to assume the expense of maintaining the property and paying the cost of insurance and utilities; no improvements over $25,000 could be made without the written consent of the lessor Foundation.
The university, in turn, booked the property for use as a conference center by various organizations, initially taking the clients previously served by Scheinfeld. According to the evidence adduced at the Department's hearing, during 1988 the rates for overnight accommodations were $72 per day for nonprofit groups, $82 per day for nonprofit deluxe, and $100 per day for for-profit organizations. During that year, some 87 organizations used the facilities. The ALJ found that 15 of these organizations were for-profit and one was a labor union. A sampling of the list of clients...
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