Northwestern Memorial Foundation v. Johnson

• Decision Date: 27 February 1986
• Docket Number: No. 85-0050,85-0050
• Citation: 141 Ill.App.3d 309,95 Ill.Dec. 688,490 N.E.2d 161
• Court: United States Appellate Court of Illinois
• Parties: , 95 Ill.Dec. 688 NORTHWESTERN MEMORIAL FOUNDATION, Plaintiff-Appellee, v. J. Thomas JOHNSON, Director of Revenue, and Illinois Department of Revenue, Defendants-Appellants.

Page 161

490 N.E.2d 161

141 Ill.App.3d 309, 95 Ill.Dec. 688

NORTHWESTERN MEMORIAL FOUNDATION, Plaintiff-Appellee, v. J. Thomas JOHNSON, Director of Revenue, and Illinois Department of Revenue, Defendants-Appellants.

No. 85-0050.

Appellate Court of Illinois First District, Fourth Division.

Feb. 27, 1986.

Neil Hartigan, Atty. Gen., Jill Wine-Banks, Sol. Gen., Chicago (Candida Miranda, Asst. Atty. Gen., of counsel), for defendants-appellants.

Flanagan, Bilton & Brannigan, Chicago (Thomas E. Brannigan, of counsel), for plaintiff-appellee.

JIGANTI, Justice:

This is an appeal by the defendants, J. Thomas Johnson and the Illinois Department of Revenue (Department), from a judgment of the circuit court of Cook County reversing the Department's decision that the plaintiff, Northwestern Memorial Foundation (Northwestern), was ineligible to receive a property tax exemption for a parcel of land which Northwestern had developed into an employee parking lot.

Northwestern is a not-for-profit Illinois corporation founded in part to promote the interests and purposes of Northwestern Memorial Hospital, a tax-exempt affiliate. On April 5, 1982, Northwestern purchased a parcel of property located at 441 East Ontario Street in Chicago, Illinois, and immediately began developing it into a parking lot for use by its employees. An existing structure on the premises was demolished and the site was improved and developed into a parking lot located approximately four to six blocks from the hospital complex. In January of 1983 the lot was opened. At that time it provided 64 spaces, with 10 more to be added the following June. Employees are charged $45 per month to use the facility. Northwestern states that these revenues are used to offset the expenses of operating the lot.

Northwestern filed a petition with the Board of Appeals of Cook County requesting that this property be found exempt from taxation as of April 5, 1982. The claim was made under section 19.16 of the Revenue Act (Act). (Ill.Rev.Stat.1983, ch. 120, par. 500.16.) The Board of Appeals approved the exemption in June of 1983, and pursuant to section 119 of the Act (Ill.Rev.Stat.1983, ch. 120, par. 600), the matter was transmitted to the Department for review. On October 13, 1983, the Department denied Northwestern's application for an exemption finding that the property was not in actual use in 1982 for an exempted purpose.

Northwestern requested a further review of this decision by the Department and provided information from the vice-president and general counsel of Northwestern regarding the development and current use of the property, along with a copy of the certification showing tax exemptions on two of the major hospital buildings in the complex. However, the Department again denied the exemption, this time finding that the primary use of the property was not charitable. Northwestern then filed a complaint for administrative review of the Department's decision in the circuit court of Cook County. The trial court reversed the decision of the Department and found that Northwestern was entitled to an exemption from April 30, 1982, to the end of the year. Specifically the court reversed the Department's first decision that the property was not actually used for an exempted purpose in 1982 and the Department's second decision that the use of the property was not charitable. The Department now appeals.

On appeal the Department does not contest the trial court's decision that the preparation and development of the property as a parking lot constitutes actual use for an exempted purpose within the meaning of the Act. The Department does contend however that Northwestern is not entitled to a tax exemption because Northwestern has failed to show that the parking lot was reasonably necessary to fulfill the charitable purposes of Northwestern. In response Northwestern argues that the issue of whether the parking lot was reasonably necessary to fulfill the charitable purposes is waived and should not be considered by this court because the Department did not raise this issue in the proceedings below. We believe, however, that the issue is not waived. The manner in which the Department now characterizes the issue on appeal is merely a variant of the question of whether the primary use of the property is charitable. (See MacMurray College v. Wright (1967), 38 Ill.2d 272, 230 N.E.2d 846.) Accordingly, this court's role is to determine whether the trial court properly found that the property in question was entitled to tax-exempt status.

Northwestern's claim of exemption is governed by sections 19.7 and 19.16 of the Act. (Ill.Rev.Stat.1983, ch. 120, pars. 500.7, 500.16.) Section 19.7 exempts from taxation "[a]ll property of institutions of public charity, or property of beneficent and charitable organizations * * * when such property is actually and exclusively used for such charitable or beneficent purposes, and not leased or otherwise used with a view to profit * * *." Section 19.16 extends the exemption to "[p]arking areas, not leased or used for profit, when used as a part of a use for which an exemption is provided hereinbefore owned by any * * *, non-profit hospital or * * * charitable institution which meets the qualifications for exemption."

Statutes allowing tax exemptions are to be strictly construed and the burden is on the party claiming the exemption to show that the property falls within the statutory exemption. (Rotary International v. Paschen (1958), 14 Ill.2d 480, 486-87, 153 N.E.2d 4.) In order to qualify for the tax exemption on charitable grounds, it must be shown that the property is owned by a charitable organization and exclusively used for charitable purposes. (Mason District Hospital v. Tuttle (1978), 61 Ill.App.3d 1034, 1037, 19 Ill.Dec. 138, 378 N.E.2d 753.) The phrase "exclusively used" refers to the primary purpose for which the property is used and not a secondary or incidental purpose. Methodist Old Peoples Home v. Korzen (1968), 39 Ill.2d 149, 157, 233 N.E.2d 537.

The Department contends that the...