No. 2--07--0686 Filed: 9-19-08
______________________________________________________________________________
IN THE
APPELLATE COURT OF ILLINOIS
SECOND DISTRICT
______________________________________________________________________________
LEADERTREKS, INC., ) Appeal from the Circuit Court
) of Du Page County.
Plaintiff-Appellee, )
)
v. ) No. 06--TX--5
)
THE DEPARTMENT OF REVENUE, ) Honorable
) Edward R. Duncan, Jr.,
Defendant-Appellant. ) Judge, Presiding.
______________________________________________________________________________
JUSTICE BURKE delivered the opinion of the court:
Plaintiff, LeaderTreks, Inc., applied for a real property tax exemption for 2005. Defendant,
the Department of Revenue (Department), denied the application, ruling that plaintiff's property was
not used exclusively for religious purposes pursuant to section 15--40 of the Property Tax Code
(Code) (35 ILCS 200/15--40 (West 2006)). An administrative law judge (ALJ) affirmed the
Department's decision, and LeaderTreks sought administrative review. The circuit court reversed
the Department. The Department appeals, arguing that the Department's decision was not clearly
erroneous. We agree and reverse the circuit court.
BACKGROUND
LeaderTreks owns a condominium office space in a one-story, brick building in Carol
Stream, Illinois. After the Department denied LeaderTreks' application for a tax exemption,
LeaderTreks appealed and presented evidence at a hearing before the ALJ.
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The sole witness at the hearing was Douglas Franklin, LeaderTreks' president. He testified
as follows. LeaderTreks is an Illinois nonprofit corporation that was previously named Adventures
in Student Missions, Inc. LeaderTreks is not a church and is not incorporated by a church or
ecclesiastical organization. Franklin is not an ordained minister, pastor, or respondent representative
of any religious group, but he has a background as a youth pastor and has served in that position at
three different churches. LeaderTreks employs about 25 other full-time employees.
According to the articles of incorporation, LeaderTreks' purposes are to (1) administer the
gospel of Jesus Christ within the state of Illinois, throughout the United States, and around the world
by providing high school and college-age students with "Gospel Missions" training and hands-on
ministry experience through planning, organizing, and leading short-term mission trips within the
United States and abroad; (2) promote freedom of worship and liberty of expression, within the
limits of its own statement of faith and doctrine, among its own ministers and participants; and (3)
provide for the needy.
LeaderTreks' operations are directed toward providing services to Christian churches and
church members that have an interest in fulfilling the "Great Commission," which is a biblical
injunction found in Acts 1:8, to go forth and present the good news of Jesus Christ. LeaderTreks'
mission is to develop leaders to fulfill the Great Commission by partnering with churches to provide
expertise in the development of student leaders. To that end, LeaderTreks offers churches
educational resources, training materials, trips that focus on leadership development, Bible-study
curricula, spiritual-gift tests, character assessments, and other materials related to the development
of students.
LeaderTreks also conducts seminars, offering mentoring and practices to help students grow
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as leaders. Franklin described LeaderTreks "as [a] student leadership development ministry using
trips, innovative training and curriculum to help students identify and develop their personal
leadership skills. We partner with youth leaders who are passionate about helping develop the next
generation of leaders in church and culture. Our experiences challenge and change participants.
Students return confident and motivated, with a broadened world-view and a new vision of how they
can lead and serve others."
Franklin testified that LeaderTreks works with roughly 70 churches. Franklin explained that
many churches are looking for ways to develop their students as Christ followers and for new things
to do with their youth, and he noted that leadership development is very popular as such. Franklin
depicted one type of leadership training that utilized power-point presentations with interactive
games based on biblical stories.
LeaderTreks utilizes the property as its administrative office. The office is organized around
different departments, which include curriculum, marketing, booking, training, operations, and
human resources. Franklin testified that LeaderTreks is not a travel agency. Of the 75 trips
scheduled for the 2006 summer, only two were individual trips. LeaderTreks did not set up the
transportation for the group trips. LeaderTreks' staff meets groups at the sites of the service projects.
The cost for training events ranges from $59 to $79 per person. There is also a cost for the
mission, wilderness, and adventure trips. LeaderTreks staff members who attend the trips raise their
own support through donations. Donations come through the organization for each staff person, as
well as for the ministry, along with fees paid by the participants. In some cases the church involved
provides a stipend or a fee. Sometimes, the church pays for all of its students' costs. Leadertreks
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realizes no profits in these endeavors.
LeaderTreks provides support to two missionaries, one in Capetown, South Africa, and one
in San Jose, Costa Rica. LeaderTreks provides training, sends donations, and acts as an intermediary
between the two missionaries and their supporters. LeaderTreks also directs some leadership trips
to these missions.
LeaderTreks offered no documentary evidence regarding its financial activities for 2005. It
did submit evidence of financial activities for the year that ended in September 2004. This evidence
revealed that LeaderTreks received over $868,000 in program service fees and slightly less than
$60,000 in contributions. Its five greatest functional expenditures for that same period included:
$421,141 for mission trips; $323,518 for salaries and wages; $92,917 for wilderness/adventure trips;
$91,187 for marketing expenses; and $50,456 for professional fees.
The ALJ concluded that LeaderTreks did not satisfy its burden to prove that it was organized
and operated exclusively for religious purposes, and the ALJ recommended denial of the tax
exemption. In sum, the ALJ characterized LeaderTreks as providing "primarily *** tour guides and
trail leaders" for those on trips, along with "the booklets for attendees to review on their own," and
the ALJ found that LeaderTreks had not engaged in practices other than those in furtherance of
religious education for the benefit of churches.
LeaderTreks filed a complaint for administrative review in the circuit court on September 26,
2006. The circuit court reversed the decision of the Department, finding that the ALJ had reached
"some erroneous conclusions."
The circuit court found that the ALJ erroneously concluded that LeaderTreks acted as a
bookseller and travel agency for religious-minded customers and that the staff actually acted as tour
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guides or trail leaders and provided booklets to trip attendees to review on their own. The circuit
court relied upon Evangelical Teacher Training Ass'n v. Novak, 118 Ill. App. 3d 21 (1983) (ETTA),
which considered the plaintiff's charter and bylaws as well as the actual facts relating to the plaintiff's
method of operation in determining whether it was organized and operated exclusively for an exempt
purpose. The circuit court found that LeaderTreks' bylaws show an exclusively religious function
in its training of youth, in a fashion that an individual church may be unable to perform, and that
Franklin's testimony "shows that's what [LeaderTreks] did and is doing." The Department timely
appealed. On appeal, the Department argues that its decision to deny the property tax exemption
was not clearly erroneous. For the reasons that follow, we agree.
ANALYSIS
A. Standards of Review
We review the decision of the Department, not that of the circuit court. Central Illinois Light
Co. v. Department of Revenue, 336 Ill. App. 3d 908, 911 (2003). The Department was confronted
with a "mixed question of law and fact," and therefore we must accept the Department's answer
unless it is clearly erroneous. Comprehensive Community Solutions, Inc. v. Rockford School
District No. 205, 216 Ill. 2d 455, 472 (2005). Such review is significantly deferential, and we will
reverse only where, on reviewing the entire record, we are left with the definite and firm conviction
that a mistake has been committed. Elementary School District 159 v. Schiller, 221 Ill. 2d 130, 143
(2006).
In reviewing the Department's decision, we must keep in mind that it has a duty to resolve
all debatable questions in favor of taxation, as we do. See Rogers Park Post No. 108, The American
Legion, Department of Illinois v. Brenza, 8 Ill. 2d 286, 290 (1956). " 'Taxation is the rule[;] tax
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exemption is the exception.' " City of Chicago v. Illinois Department of Revenue, 147 Ill. 2d 484,
491 (1992), quoting Rogers Park Post No. 108, 8 Ill. 2d at 289-90. The party claiming the exemption
has the burden of proving the entitlement thereto, and because any factual ambiguities will be
resolved in favor of taxation, the proof necessarily must be clear and conclusive. Swank v.
Department of Revenue, 336 Ill. App. 3d 851, 855-56 (2003).
B. The Scope of the Term "Religious Purposes"
LeaderTreks claims a real property tax exemption for 2005 under section 15--40(a) of the
Code, which provides as follows:
"(a) Property used exclusively for:
(1) religious purposes, or
(2) school and religious purposes, or
(3) orphanages
qualifies for an exemption as long as it is not used with a view to profit." 35 ILCS
200/15--40(a) (West 2006).
The issue before the Department was whether, during 2005, LeaderTreks' property was "used
exclusively for *** religious purposes"and "not used with a view to profit." 35 ILCS 200/15--40
(West 2006). "Exclusively" refers to the primary purpose for which the property is used.
Evangelical Hospitals Corp. v. Department of Revenue, 223 Ill. App. 3d 225, 230 (1991).
C. The Extent to Which LeaderTreks Used the Property for "Religious Purposes"
The Department contends that LeaderTreks fell short of meeting its burden on virtually every
factor by which it must demonstrate a primarily religious purpose. Adopting the ALJ's conclusions,
the Department asserts that the ALJ correctly found, inter alia, that LeaderTreks' staff acted primarily
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as tour guides or trail leaders for those on trips and provided booklets for attendees to review on their
own. We agree with the Department and the ALJ that, throughout 2005, plaintiff's property was
ineligible for the requested tax exemption because it was not used exclusively for religious purposes.
An examination of the case law will help to explain why we find that the Department's
decision is not clearly erroneous. In Congregational Sunday School & Publishing Society v. Board
of Review, 290 Ill. 108 (1919), the plaintiff operated a missionary department that organized Sunday
schools and maintained missionaries to assist these schools, published and circulated several
religious periodicals, published and sold religious books, and published educational materials that
it sold specifically to Sunday schools. The plaintiff's Chicago store sold religious books and
supplies. The plaintiff relied on donations for its funds. The Chicago store did not make substantial
profits, and the profits it made in a given year were devoted to maintaining the missionary
department. Congregational Sunday School, 290 Ill. at 111.
The plaintiff sought a personal property tax exemption for its materials, claiming that they
were used exclusively for a religious purpose and that the plaintiff was an institution of public
charity. Because these grounds were so "closely associated," the supreme court considered them
together. Congregational Sunday School, 290 Ill. at 112. The court allowed the exemption,
reasoning that the plaintiff's dominant purpose was to spread the gospel and that the plaintiff did this
directly by distributing its religious books and Sunday school supplies. The court observed also that
the plaintiff's work was "to send its workers and missionaries into those parts of our land where
religious teaching among the young has been neglected, and there to take the young into Sunday
schools for moral and religious instruction and provide for them wholesome literature."
Congregational Sunday School, 290 Ill. at 117.
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In Scripture Press Foundation v. Annunzio, 414 Ill. 339 (1953), the plaintiff was a nonprofit
corporation that published and distributed Christian literature, and it sought an exemption from
unemployment compensation contributions on the ground that it was organized and operated
exclusively for religious purposes. The supreme court relied on the corresponding property tax
exemption provisions in finding that the plaintiff was not exempt. However, the court appeared to
partially abrogate its holding in Congregational Sunday School by ruling that the mere publication
and distribution of religious literature is not a religious purpose. The court explained:
"[Plaintiff] was incorporated and organized by [people], who although Christian persons with
a long record of religious service, were neither ordained ministers, pastors, nor
representatives of any ecclesiastical or church organization. No church or ecclesiastical
organization was an incorporator or a member of the corporation. A study of its charter
powers in the light of its actual operation indicates that [plaintiff] was organized for the
primary purpose of producing, distributing and selling religious literature and supplies to
religious organizations. It is true that the language of its charter powers indicates a purpose
for 'The dissemination of the Gospel, the distribution of the Scriptures, of extracts therefrom,
of devotional and other literature relating thereto, and of helps and supplies for use in
Christian activities.' Such purpose is accomplished only by the distribution and sale of such
literature and supplies to religious organizations, which organizations in turn use them in
conducting their religious activity. We are of the opinion that *** such activities are secular
in nature and not exclusively religious, *** the same as any other commercial service
organization furnishing to a religious institution necessary services such as fuel, lights,
building material or any other item necessary to its ordinary and customary functioning."
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(Emphasis added.) Scripture Press Foundation, 414 Ill. at 355-56.
The court further noted the following: (1) the evidence did not indicate that the plaintiff itself
engaged directly in religious activities, such as maintaining missionaries in the field; (2) the plaintiff
did not conduct Bible or Sunday schools; and (3) the plaintiff's profits were reinvested in production
and sales for a profit and, upon a dissolution, the plaintiff's assets could go to secular organizations
or private individuals, including its officers. Scripture Press Foundation, 414 Ill. at 356-58. Since
Scripture Press Foundation, courts have adhered to its distinction between nonprofit organizations
that engage directly in religious activities, such as worship, missionary work, and religious
education, and secular organizations that merely supply religious entities with materials to conduct
such activities. Cook Communications Ministries v. Department of Revenue, 345 Ill. App. 3d 753,
760-61 (2004).
LeaderTreks finds ETTA applicable here. In that case, the plaintiff, a nonprofit association
of religious educational institutions, promoted Christian education by sending its officers to lecture
at religious colleges, advising religious educators on training seminary students, preparing materials
for Bible courses that were written by faculty at member schools, and distributing its publications,
which were often free, to libraries and schools. ETTA, 118 Ill. App. 3d at 23. We affirmed the
plaintiff's property tax exemption and in doing so distinguished Scripture Press Foundation in several
ways. Unlike in Scripture Press Foundation, ETTA's constituents were religious organizations and
its officers were ministers. ETTA, 118 Ill. App. 3d at 22-23. Also, upon its dissolution, ETTA's
assets would go to a charitable purpose. ETTA, 118 Ill. App. 3d at 25. More importantly, ETTA
did more than merely distribute religious materials to others; its officers were actively involved in
religious teaching. This served "to directly accomplish ETTA's corporate purpose, the promotion
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of Christian education, in a manner that could not be achieved through the mere sale or distribution
of its books and religious materials." ETTA, 118 Ill. App. 3d at 26.
The Department relies on Cook Communications. There, the majority of the plaintiff's
income was earned by publishing Christian educational materials and selling them to churches,
teachers, and Christian bookstores. The plaintiff also acquired a Christian greeting card company,
which was later sold at a huge profit. We determined that the plaintiff was not entitled to a religious
property tax exemption under section 15--40 of the Code. No evidence established that the plaintiff
was affiliated with any particular religious organization or that its officers were members of the
clergy. Cook Communications, 345 Ill. App. 3d at 761-62. More importantly, the evidence showed
that the plaintiff directly engaged in little or no specifically religious activity and did not use its
property for any such purpose. Rather, the plaintiff achieved its corporate purpose, advancing
Christian education, almost entirely by selling Christian educational materials to organizations that
then did the actual teaching; the plaintiff itself did no religious teaching. Cook Communications,
345 Ill. App. 3d at 762. Additionally, the plaintiff received the bulk of its revenues either from such
sales or from selling items produced by its for-profit greeting card company. Only a tiny portion of
the plaintiff's revenues came from contributions, and the plaintiff made a profit in one of the two
fiscal years that included part of the relevant calendar year. Cook Communications, 345 Ill. App.
3d at 762. Moreover, until the plaintiff divested itself of the for-profit card company, its property
was being used in large part "with a view to profit" and was therefore ineligible for the requested
exemption. Cook Communications, 345 Ill. App. 3d at 763.
The opinions depicted above do not formulate a completely clear or fixed formula for
deciding whether property is being used primarily for a religious purpose. Moreover, each case in
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which a tax exemption is sought must be determined upon the facts presented. Inter-Varsity
Christian Fellowship v. Hoffman, 62 Ill. App. 3d 798, 801 (1978). In our view, the facts presented
in this case fall short of meriting a tax exemption.
At first blush, the facts in this case appear to be similar to those in ETTA in that LeaderTreks
sends staff members to train and advise church youth to develop into student leaders of the church
either at church sites or on religious trips. The materials distributed were written and produced by
LeaderTreks. However, unlike in ETTA, LeaderTreks submitted no evidence establishing the
background of its employees, how they were formally associated with their clientele, or the
qualifications of those who developed its curriculum. No evidence indicated that ministers, seminary
graduates, or people with any religious training led the trips or taught in the churches. In ETTA, the
materials were written by faculty at member schools, edited by committee and by ETTA, and then
sold by ETTA. The chief officers of ETTA were both ministers and doctors of education, and their
activities were primarily directed toward teaching and demonstrating teacher training techniques.
Moreover, ETTA's activities served to directly accomplish ETTA's corporate purpose. Here,
LeaderTreks' stated purpose is "to plan, organize, and lead short-term mission trips, within the
United States and abroad, for high school and college age students." LeaderTreks' focus is on
domestic and international trips, with a religious component, not on the education of individuals who
either are in the process of becoming or have already become teachers, instructors, or professors of
religious studies. The "purposes" section of LeaderTreks' articles of incorporation and bylaws states
nothing about religious educational studies or teaching youth about religious education as a career.
In fact, the record shows that the main focus of "every [LeaderTreks] trip" or "leadership training
event" is teaching and learning "leadership so that students can become the future leaders of the
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church." This is the central purpose of Leadertreks' mission trips and wilderness trips. However,
we agree that leadership training does not necessarily mean that it cultivates future pastors or
ministers any more than it seeks the generic development of young people; leadership development
is not per se a religiously imbued undertaking.
D. The Failure to Establish That the Property Was Not Used Primarily With a View to Profit
The Department asserts that LeaderTreks did not establish that its property was not used
primarily with a view to profit, because it failed to provide relevant, updated financial data about the
tax year in question. Under the plain language of section 15--40, Leadertreks needed to introduce
evidence that its primary activities on the property, in addition to being "religious," were not
conducted "with a view to profit." 35 ILCS 200/15--40 (2006); Three Angels Broadcasting Network,
Inc. v. Department of Revenue, 381 Ill. App. 3d 679, 696 (2008). The Department contends that the
failure to provide up-to-date figures about LeaderTreks' finances for 2005, rather than the 2004
auditor's report it did submit, made it impossible to determine whether LeaderTreks' property was
not used with a view to profit.
LeaderTreks argues that the Department waived this argument by failing to assert it before
the circuit court. However, the Department correctly points out that, not only are the parties in
administrative review not required to make arguments in the circuit court to preserve them for review
in the appellate court, but also the circuit court cannot hear any new evidence or arguments. See
Ikpoh v. Zollar, 321 Ill. App. 3d 41, 47 (2001) (circuit court in administrative review is "analogous
to" appellate court). Accordingly, we reject LeaderTreks' waiver argument.
We further point out that, while LeaderTreks had a 2.7% loss in 2004, and Franklin stated
that no profits are realized in its endeavors, this does not permit an inference that in 2005
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LeaderTreks did not use its property with a view to profit, especially given that it relied primarily
on fees and not on contributions. At the very least, LeaderTreks needed to introduce some specific
evidence regarding how the property was not used with a view to profit in 2005. For example,
ETTA provided evidence that it did not charge fees for speaking services, that faculty members at
member schools received a token honorarium for the courses they wrote, and that ETTA often
donated its course and text materials to libraries and to "mission schools." ETTA, 118 Ill. App. 3d
at 23.
LeaderTreks did present evidence of missionary activities that is conducts. However, this
evidence is irrelevant to the determination of whether its primary activities on the subject property
were conducted with a view to profit. We must evaluate the primary use of the subject property, and
not LeaderTreks' activities in other locations, to determine whether the activities were conducted
with a view to profit. See Three Angels Broadcasting, 381 Ill. App. 3d at 697. Moreover, the fact
that profits are not distributed to any individual should not factor into the analysis. Three Angels
Broadcasting, 381 Ill. App. 3d at 697.
The party seeking an exemption bears the burden of proving by clear and convincing
evidence that it has the right to the exemption. Methodist Old Peoples Home v. Korzen, 39 Ill. 2d
149, 155 (1968). Further, we reiterate that, when determining whether property is within the scope
of an exemption, all facts are to be construed and all debatable questions resolved in favor of
taxation. Methodist Old Peoples Home, 39 Ill. 2d at 155. LeaderTreks failed to prove by clear and
convincing evidence that it did not operate the subject property with a view to profit in 2005. Thus,
the decision of the Department was not clearly erroneous.
Based on the foregoing, the judgment of the circuit court of Du Page County is reversed.
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Reversed.
McLAREN and BOWMAN, JJ., concur.
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