Provena Covenant Med. v. Dept. of Revenue

Decision Date26 August 2008
Docket NumberNo. 4-07-0763.,4-07-0763.
Citation894 N.E.2d 452
PartiesPROVENA COVENANT MEDICAL CENTER and Provena Hospitals, Plaintiffs-Appellees, v. The DEPARTMENT OF REVENUE OF the STATE of Illinois; and Brian A. Hamer, in His Official Capacity as Director of the Illinois Department of Revenue, Defendants-Appellants.
CourtUnited States Appellate Court of Illinois

Presiding Justice APPLETON delivered the opinion of the court:

Provena Hospitals (Provena) brought an action for administrative review of a decision by the Director of the Illinois Department of Revenue (Department) that Provena's property, Provena Covenant Medical Center (Covenant) in Urbana, Illinois, did not qualify for an exemption from property taxes. The circuit court reversed the Director's decision, holding that Covenant was used primarily for charitable and religious purposes and, therefore, was exempt under sections 15-65(a) and 15-40(a)(1) of the Property Tax Code (35 ILCS 200/15-65(a), 15-40(a)(1) (West 2002)). We reverse the circuit court's judgment because we find no clear error in the Director's decision.


Covenant is a not-for-profit, full-service, general acute-care hospital. As a noncorporate subdivision of Provena, Covenant has no separate legal identity of its own. Covenant is the property, and Provena is the owner. According to an organizational chart in the record (applicant's exhibit No. 153), Provena owns five other hospitals besides Covenant, but those other hospitals are not at issue in this case.

Provena applied to the Champaign County Board of Review to exempt Covenant from property taxes for 2002 on the ground that Covenant was used primarily for charitable purposes (35 ILCS 200/15-65(a) (West 2002)). (Actually, Covenant was nominally the applicant, but because Covenant is not a legal "person," we consider Provena to be the real applicant.) The board of review recommended denying the application, and in February 2004, the Director followed that recommendation.

Provena paid $1.1 million in property taxes under protest and requested an administrative hearing. In the hearing before the Department's administrative law judge (ALJ), Provena raised an additional ground for exemption besides charitable purposes (35 ILCS 200/15-65(a) (West 2002)): it claimed that as a health-care ministry of the Roman Catholic Church, Covenant was used primarily for religious purposes (35 ILCS 200/15-40(a)(1) (West 2002)). The ALJ submitted to the Director a decision recommending an exemption on the sole grounds that Provena was a charitable institution and its property, Covenant, was used primarily for charitable purposes. The ALJ did not reach the issue of whether Covenant was used primarily for religious purposes as well.

The Director disagreed with the ALJ's recommendation and denied an exemption for charitable uses. The primary reason for his decision was that in 2002, the tax year in question, Covenant devoted only 0.7% of its total revenue to charity care. Of 110,000 admissions in 2002, Covenant gave free care to only 196 patients and discounted care to only 106 patients; and Covenant hired collection agencies to recover the remaining balances from 64 of the patients to whom it had given discounts. Without explanation, the Director also denied an exemption for religious uses.

Provena filed a complaint for administrative review. It argued to the circuit court that under the supreme court's decisions, charities were not defined by percentages and that, in any event, Covenant dispensed an ample amount of charity to the community in forms other than charity care. Covenant had a charity-care policy based on federal poverty guidelines, and it advertised the availability of "financial assistance." According to Provena, Covenant gave this financial assistance to every patient who needed and requested it, and the number of indigent people who walked in through the door and availed themselves of the charity-care policy simply was beyond Covenant's control. Also, Provena argued, considering the meager rates of reimbursement the government paid, treating Medicare and Medicaid patients was itself an act of charity. Provena further argued—indeed, the parties had stipulated—that Covenant was a faith-based institution founded, organized, owned, and operated as an apostolic mission and health-care ministry of the Catholic Church. The circuit court concluded that Covenant was entitled to both a charitable and religious exemption, and it reversed the Director's decision.

This appeal followed.

A. Standard of Review

We review the Department's decision, not the circuit court's decision. Calvary Baptist Church of Tilton v. Department of Revenue, 349 Ill.App.3d 325, 330, 285 Ill.Dec. 412, 812 N.E.2d 1, 4 (2004). The parties disagree on our standard of review. The Department argues we should review its decision for clear error. Provena argues we should review the Department's decision de novo. It is crucial, at the outset, to identify the applicable standards of review, for they often determine the results on appeal—indeed, a reviewing court does not even have the means of deciding an issue until it first identifies the standard of review.

Formerly, the rule was that "[if] facts [were] undisputed, * * * a determination of whether property [was] 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, 56 (1996); see also City of Chicago v. Illinois Department of Revenue, 147 Ill.2d 484, 491, 168 Ill.Dec. 841, 590 N.E.2d 478, 481 (1992); Harrisburg-Raleigh Airport Authority v. Department of Revenue, 126 Ill.2d 326, 331, 127 Ill.Dec. 944, 533 N.E.2d 1072, 1073 (1989). To the extent the facts were disputed, courts decided whether the Department's factual findings were against the manifest weight of the evidence. Branson v. Department of Revenue, 168 Ill.2d 247, 264, 213 Ill.Dec. 615, 659 N.E.2d 961, 969-70 (1995). Thus, on administrative review of the Department's decision to grant or deny an exemption, any given issue fell into either the category of fact or the category of law.

In City of Belvidere v. Illinois State Labor Relations Board, 181 Ill.2d 191, 205, 229 Ill.Dec. 522, 692 N.E.2d 295, 302 (1998), the supreme court identified, for the first time, a third type of question a court could ask on administrative review: a question that was neither purely factual nor purely legal but one of fact and law mixed together. The supreme court decided that because the case required "an examination of the legal effect of a given set of facts, it [presented] a mixed question of fact and law" and the supreme court would review the agency's decision for clear error (City of Belvidere, 181 Ill.2d at 205, 229 Ill.Dec. 522, 692 N.E.2d at 302)—not de novo, as the supreme court previously had held.

Later, in Eden Retirement Center, Inc. v. Department of Revenue, 213 Ill.2d 273, 284, 290 Ill.Dec. 189, 821 N.E.2d 240, 246 (2004), the supreme court seemed to revert to the former rule: it prescribed a de novo standard of review when the facts were undisputed and the only issue was whether the property was exempt. The supreme court stated: "[T]he Department's decision as to whether [the] plaintiff's property is exempt from taxation depends solely on the application of the appropriate legal standard to the undisputed facts, which is a question of law." Accordingly, in a recent property-tax exemption case, we dutifully echoed the supreme court: "`[T]he Department's decision as to whether [the] plaintiff's property is exempt from taxation depends solely on the application of the appropriate legal standard to the undisputed facts, which is a question of law.'" Faith Builders Church, Inc. v. Department of Revenue, 378 Ill.App.3d 1037, 1043, 318 Ill.Dec. 133, 882 N.E.2d 1256 1261 (2008), appeal denied, 228 Ill.2d 531, 321 Ill.Dec. 555, 889 N.E.2d 1115 (2008), quoting Eden Retirement Center, 213 Ill.2d at 284, 290 Ill.Dec. 189, 821 N.E.2d at 246.

Soon after our decision in Faith Builders, the supreme court issued a decision in which it reaffirmed the three different standards of review in administrative-review cases: manifest weight of the evidence for questions of fact, de novo for questions of law, and clear error for questions of fact and law mixed together. Cinkus v. Village of Stickney Municipal Officers Electoral Board, 228 Ill.2d 200, 210-11, 319 Ill.Dec. 887, 886 N.E.2d 1011, 1018 (2008). In the third type of question—a question that was simultaneously legal and factual — "`"the historical facts [were] admitted or established, the rule of law [was] undisputed, and the issue [was] whether the facts satisf[ied] the statutory standard, or[,] to put it another way, whether the rule of law as applied to the established facts [was] or [was] not violated."'" Cinkus, 228 Ill.2d at 211, 319 Ill.Dec. 887, 886 N.E.2d at 1018, quoting American Federation of State, County & Municipal Employees, Council 31 v. State Labor Relations Board, 216 Ill.2d 569, 577, 298 Ill. Dec. 156, 839 N.E.2d 479, 485 (2005), quoting Pullman-Standard v. Swint, 456 U.S. 273, 289 n. 19, 102 S.Ct. 1781, 1790 n. 19, 72 L.Ed.2d 66, 80 n. 19 (1982). Manifest weight of the evidence would be an insufficient concept to bring to such a hybrid question, for evidence relates only to facts and the question is one of law as much as fact. Also, the legal aspect of the question calls for somewhat less deference than if the question were purely factual. Carpetland U.S.A., Inc. v. Illinois Department of Employment Security, 201 Ill.2d 351, 369, 267 Ill.Dec. 29, 776 N.E.2d 166, 177 (2002). On a continuum of deference, clear error is located between manifest weight and de novo. Carpetland U.S.A., 201 Ill.2d at 369, 267 Ill.Dec. 29, 776 N.E.2d at 177; see also Du Page County Board of Review v. Department of Revenue, 339 Ill.App.3d 230, 234, 274 Ill.Dec. 145, 790 N.E.2d 918, 922 (2003) (remarking that, in practice, the...

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