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Appellate Court Date: 2016.02.09 11:33:27
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Carle Foundation v. Cunningham Township, 2016 IL App (4th) 140795
Appellate Court THE CARLE FOUNDATION, an Illinois Not-for-Profit Corporation,
Caption Plaintiff-Appellee, v. CUNNINGHAM TOWNSHIP; DAN
STEBBINS, in His Official Capacity as Cunningham Township
Assessor; and THE CITY OF URBANA, Defendants-Appellants, and
THE CHAMPAIGN COUNTY BOARD OF REVIEW; ELIZABETH
BURGENER-PATTON; MARK WHITSITT; JOSEPH MEENTS;
DANIEL J. WELCH; and THE COUNTY OF CHAMPAIGN,
Separate Appellants, and THE DEPARTMENT OF REVENUE;
BRIAN HAMER, in His Official Capacity as Director of the
Department of Revenue; and DIANNE HAYS, Defendants.–THE
CARLE FOUNDATION, an Illinois Not-for-Profit Corporation,
Plaintiff-Appellee, v. THE DEPARTMENT OF REVENUE and
BRIAN HAMER, Its Director, Defendants-Appellants, and THE
CHAMPAIGN COUNTY BOARD OF REVIEW; MARK
WHITSITT, LAURA SANDEFUR, and ELIZABETH
BURGENER-PATTON, as Members of The Champaign County
Board of Review; JOSEPH MEENTS, Champaign County Supervisor
of Assessments; CUNNINGHAM TOWNSHIP; DAN STEBBINS,
Cunningham Township Assessor; DANIEL J. WELCH, Champaign
County Treasurer; THE CITY OF URBANA; URBANA SCHOOL
DISTRICT 116; and THE URBANA PARK DISTRICT, Defendants.
District & No. Fourth District
Docket Nos. 4-14-0795, 4-14-0845 cons.
Filed January 5, 2016
Decision Under Appeal from the Circuit Court of Champaign County, No. 8-L-202;
Review the Hon. Charles McRae Leonhard, Judge, presiding.
Judgment Reversed and remanded.
Counsel on Frederic M. Grosser (argued), of Champaign, for appellants
Appeal Cunningham Township, Dan Stebbins, and City of Urbana.
Lisa Madigan, Attorney General, of Chicago (Carolyn E. Shapiro,
Solicitor General, and Carl J. Elitz (argued), Assistant Attorney
General, of counsel), for appellants Department of Revenue and Brian
Hamer.
Julia Rosenbaum Rietz, State’s Attorney, of Champaign (Joel D.
Fletcher (argued), Assistant State’s Attorney, of counsel), for other
appellants.
Steven F. Pflaum (argued), of Neal Gerber & Eisenberg LLP and Amy
G. Doehring and Lisa Haidostian, both of McDermott Will & Emery
LLP, both of Chicago, and William J. Brinkmann, of Thomas Mamer
& Haughey, LLP, of Champaign, for appellee.
John M. Izzo, Kimberly M. Jannotta, and Eugene C. Edwards, all of
Hauser Izzo, LLC, of Flossmoor, for amicus curiae.
Panel JUSTICE APPLETON delivered the judgment of the court, with
opinion.
Justices Turner and Steigmann concurred in the judgment and
opinion.
OPINION
¶1 Plaintiff, The Carle Foundation, brought this action to establish that four of its properties
were exempt from real estate taxation. The trial court granted a partial summary judgment that
section 15-86 of the Property Tax Code (Code) (35 ILCS 200/15-86 (West 2014)) governed
that question. Defendants, the state and local taxing authorities, appeal pursuant to Illinois
Supreme Court Rule 304(a) (eff. Feb. 26, 2010).
¶2 We conclude that because section 15-86 is unconstitutional, it is inapplicable to the
question of whether the four parcels are exempt from taxation. Therefore, we reverse the trial
court’s judgment, and we remand this case for further proceedings.
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¶3 I. BACKGROUND
¶4 A. The Four Parcels
¶5 Plaintiff owns four parcels of land in Urbana: 611 West Park Street, 503 North Coler
Avenue, 607 North Orchard Street, and 809 West Park Street. Plaintiff’s affiliate, Carle
Foundation Hospital, operates a hospital on two of these parcels. On the third parcel is a day
care center, which serves the families of plaintiff’s employees (among others). On the fourth
parcel is a power plant, which services these parcels.
¶6 B. The Reclassification of the Parcels
From Exempt to Nonexempt
¶7 Before 2004, the four parcels were not taxed. They were considered to be exempt under
section 15-65(a) of the Code (35 ILCS 200/15-65(a) (West 2002)) because of charitable use.
¶8 For 2004, however, the Cunningham township assessor began assessing the four parcels at
their full value as nonexempt. She continued doing so through 2011.
¶9 C. Plaintiff Applies for the Restoration of the Exemptions
for the Years 2004 and 2005
¶ 10 Plaintiff filed applications with the county board of review, asking the board to exempt the
four parcels from taxation for the years 2004 and 2005. The board forwarded these applications
to the Department of Revenue (Department), along with a recommendation of denial.
¶ 11 On February 23, 2007, the Department denied plaintiff’s applications for 2004 and 2005,
whereupon plaintiff requested an administrative hearing.
¶ 12 D. Our Intervening Decision
in Carle Foundation v. Department of Revenue
¶ 13 On December 13, 2007, plaintiff filed an action in the circuit court against the Department
and various local governmental entities, seeking a declaratory judgment that, under section
15-65, the four parcels were exempt from taxation for the years 2004 to 2007. (Eventually,
plaintiff filed an exemption application with the board for 2008 as well.)
¶ 14 On March 3, 2009, the circuit court certified some questions for interlocutory appeal (see
Ill. S. Ct. R. 308(a) (eff. Feb. 1, 1994)), requesting guidance on the meaning of the statutory
phrase “court proceedings to establish an exemption” in section 23-25(e) of the Code (35 ILCS
200/23-25(e) (West 2008)).
¶ 15 On October 29, 2009, we held that, in cases in which the Department or a court of review
had acted favorably on a comparable exemption claim for any other year, section 23-25(e) had
effectively revived the traditional suit in equity to establish an exemption. Carle Foundation v.
Illinois Department of Revenue, 396 Ill. App. 3d 329, 341 (2009). We further held that a
taxpayer had to elect its remedy instead of simultaneously pursuing both a judicial action under
section 23-25(e) and an application before the Department. Id. at 342. Because no court,
however, had ever before interpreted section 23-25(e), we allowed plaintiff, on remand, to
elect one of those remedies. Id. at 343.
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¶ 16 E. Plaintiff Withdraws Its Applications for 2004 and 2005
and Enters Into an Anti-Preclusion Agreement With the Department
¶ 17 On August 18, 2010, when the applications for 2004 and 2005 were about to go to an
administrative hearing, plaintiff informed the administrative law judge that it was withdrawing
its applications for 2004 and 2005. Accordingly, the administrative hearing was canceled.
¶ 18 Despite plaintiff’s expressed desire to withdraw the applications for 2004 and 2005, the
Department went ahead and issued plaintiff formal letters denying these applications.
¶ 19 Plaintiff never requested a rehearing.
¶ 20 F. Plaintiff Files Applications for 2006 to 2008
and Later Withdraws Those Applications, Too
¶ 21 As we said, plaintiff likewise filed, with the county board, applications to exempt the four
parcels for the years 2006, 2007, and 2008. The board likewise recommended the denial of
those applications and forwarded them to the Department for decision.
¶ 22 In March 2012, plaintiff informed the Department it was withdrawing its applications for
2006 to 2008. As of that time, the Department had not yet made an initial decision on those
applications.
¶ 23 On March 29, 2012, despite plaintiff’s notification of withdrawal, the Department issued
formal denials of the applications for 2006 to 2008. Plaintiff never requested an administrative
hearing.
¶ 24 G. Plaintiff Filed No Applications for 2009 to 2011
¶ 25 Plaintiff filed with the board no application to exempt the four parcels from taxation for
2009, 2010, and 2011.
¶ 26 H. The Fourth Amended Complaint
¶ 27 Plaintiff claims, in its fourth amended complaint, that the four parcels should be exempt
from real estate taxes during the assessment years 2004 to 2011 on the ground of charitable
use.
¶ 28 The fourth amended complaint has 35 counts. If we were to organize them by the legal
theories they advance, these counts would fall into four categories.
¶ 29 The first category would consist of a single count, count I. In this count, plaintiff alleges
that preexisting exemptions of the four parcels never were validly discontinued. Sometime
before 2004, the Department or its predecessor agency determined the four parcels to be
exempt, and, in plaintiff’s view, the local taxing officials lacked the statutory authority to
override the Department’s determination and end the exemptions.
¶ 30 The second category would consist of counts III through XXXIV (we have not forgotten
about count II; we will come to it in a moment). In those counts, plaintiff alleges that if,
contrary to plaintiff’s position in count I, the local taxing authorities had authority to return the
four parcels to the tax rolls and “thereby force [plaintiff] to establish anew its entitlement to an
exemption on those properties, de novo consideration of the exemption issue [would lead] to
the conclusion that [plaintiff] has satisfied the legal criteria for an exemption for each of the
parcels and tax years in question,” 2004 to 2011. Those “legal criteria,” according to counts III
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through XXXIV, are to be found in the recently enacted section 15-86 (35 ILCS 200/15-86
(West 2014)), added to the Code by Public Act 97-688 (Pub. Act 97-688, § 5-55 (eff. June 14,
2012)), or, alternatively, if section 15-86 is inapplicable, the “legal criteria” are to be found in
an older provision of the Code, section 15-65 (35 ILCS 200/15-65 (West 2014)).
¶ 31 The third category would consist of count II, which seeks a declaratory judgment “that
Section 15-86 applies to any determination of [plaintiff’s] entitlement to exemptions for the
Four Parcels for tax assessment years 2004 through 2011.”
¶ 32 The fourth and final category would consist of count XXXV, in which plaintiff alleges the
breach of a settlement agreement from 2002. Allegedly, under this settlement agreement,
plaintiff paid $775,000 to various local taxing bodies, including Cunningham Township and
the City of Urbana, and, in return, the local taxing bodies promised to “refrain from taking any
action to challenge [plaintiff’s] entitlement to charitable exemptions with respect to certain
properties owned by [plaintiff], including the Four Parcels involved in this litigation.” Plaintiff
accuses Cunningham Township and City of Urbana of breaking that promise.
¶ 33 I. Summary Judgment in Plaintiff’s Favor
on Count II of the Fourth Amended Complaint
¶ 34 Plaintiff moved for a summary judgment on count II of its fourth amended complaint, the
count seeking a declaratory judgment that the newly enacted section 15-86 of the Code (35
ILCS 200/15-86 (West 2014)) applied to the claims for exemption in counts III to XXXIV,
which covered the period of 2004 to 2011.
¶ 35 The trial court granted plaintiff’s motion for summary judgment on count II. Later, on
August 28, 2014, in a modified opinion, the court held that section 15-86 applied to plaintiff’s
claims of exemption and that by enacting section 15-86, the legislature had repudiated the
supreme court’s description of “the distinctive characteristics of a charitable institution” in
Methodist Old Peoples Home v. Korzen, 39 Ill. 2d 149, 157 (1968). The modified opinion
included a Rule 304(a) finding.
¶ 36 In addition to the Department, two groups of defendants appeal. We will call the first group
“the township defendants.” They consist of Cunningham Township; Dan Stebbins, in his
official capacity as Cunningham township assessor; and the City of Urbana. We will call the
second group “the county defendants.” And on the motion of the assistant State’s Attorney, we
substitute one of these county defendants for another: Joseph Meents, the current supervisor of
assessments for Champaign County, is substituted for Stan Jenkins, who previously held that
office. The remaining county defendants are Champaign County; the Champaign County
Board of Review; Dianne Hays, Elizabeth Burgener-Patton, and Mark Whitsett, in their
official capacities as members of the Champaign County Board of Review; and Daniel J.
Welch, in his official capacity as the Champaign County treasurer.
¶ 37 II. ANALYSIS
¶ 38 A. Our Subject-Matter Jurisdiction
¶ 39 The trial court granted plaintiff’s motion for a summary judgment on count II of the fourth
amended complaint, and the court made a Rule 304(a) finding. The other counts, i.e., count I
and counts III through XXXV, remain pending. Do we have subject-matter jurisdiction under
Rule 304(a)?
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¶ 40 We have a Rule 304(a) finding, but that is not enough. We also must have a final judgment
on a separate claim or else we lack jurisdiction. Ill. S. Ct. R. 304(a) (eff. Feb. 26, 2010) (“a
final judgment as to one or more but fewer than all of the parties or claims”). “[A] final order
under Rule 304(a) must be final in the sense that it disposes of the rights of the parties, either
upon the entire controversy or upon some definite and separate part thereof.” (Emphasis added
and internal quotation marks omitted.) In re Estate of French, 166 Ill. 2d 95, 101 (1995). A
Rule 304(a) finding cannot create finality where there is none. Kellerman v. Crowe, 119 Ill. 2d
111, 115 (1987). Without a final judgment on a separate claim, a Rule 304(a) finding is
ineffectual. Id.
¶ 41 As for whether the summary judgment on count II qualifies as a final judgment on a
separate claim, In re Marriage of Best, 228 Ill. 2d 107 (2008), and In re Marriage of Leopando,
96 Ill. 2d 114 (1983), appear to be the most relevant cases–but the parties are not in unanimity
as to the conclusion to draw from those cases. On the one hand, plaintiff and the township
defendants believe we have jurisdiction under Best. On the other hand, the county defendants
and the Department regard Best as distinguishable, and they believe that, under Leopando, we
lack jurisdiction (although, for safety’s sake, the county defendants and the Department filed
their own notices of appeal).
¶ 42 Let us take a look, then, at Best and Leopando to see which of those cases the present case
most resembles.
¶ 43 In Best, Steven Best filed a petition for dissolution of marriage, and afterward he filed an
amended motion for a declaratory judgment, in which he sought a ruling on the validity and
meaning of a premarital agreement. Best, 228 Ill. 2d at 110. The trial court granted his motion
for a declaratory judgment, ruling that (1) the premarital agreement was valid and enforceable
and (2) a waiver of attorney fees, in section 19 of the premarital agreement, was inapplicable to
custody proceedings. Id. The declaratory judgment included a Rule 304(a) finding, and Steven
Best appealed, arguing that, contrary to the declaratory judgment, the waiver of attorney fees
applied to custody proceedings. Id.
¶ 44 The first thing the appellate court did, upon receiving Steven Best’s appeal, was consider
whether it had jurisdiction under Rule 304(a). As the appellate court perceived, that depended
on whether the declaratory judgment was a final judgment on a separate claim. Id. at 112-13.
The appellate court concluded it was.
¶ 45 Having decided it had jurisdiction, the appellate court reversed the declaratory judgment
because, in the appellate court’s opinion, the declaratory judgment had failed to “terminate the
controversy[,] or some part thereof, giving rise to the proceeding,” as section 2-701(a) of the
Code of Civil Procedure (735 ILCS 5/2-701(a) (West 2004)) required declaratory judgments to
do. Best, 228 Ill. 2d at 109.
¶ 46 The case then went to the supreme court, which disagreed that section 2-701(a) was
unfulfilled. By construing the premarital agreement, the supreme court observed, the
declaratory judgment had indeed terminated part of the controversy. Id. at 117.
¶ 47 For our purposes, though, the most important discussion in Best comes earlier. Before
reaching the question of whether the declaratory judgment had terminated part of the
controversy, the supreme court scrutinized the appellate court’s jurisdiction: the supreme court
considered whether the appellate court was correct in its conclusion that the declaratory
judgment was a final judgment on a separate claim–a prerequisite to jurisdiction under Rule
304(a). Id. at 113.
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¶ 48 The appellate court, in its jurisdictional analysis, had identified Leopando as the case of
potential concern. Id. In Leopando, the trial court entered an order dissolving the parties’
marriage, and then the court entered an order awarding permanent custody of the parties’ child
to the father. Leopando, 296 Ill. 2d at 116. The custody order made a Rule 304(a) finding and
reserved the issues of maintenance, property division, and attorney fees. Id. Was the custody
order in Leopando appealable under Rule 304(a)?
¶ 49 The supreme court answered no in Leopando because, instead of resolving a separate
claim, the custody order had resolved an issue within the claim for dissolution of the parties’
marriage. Id. at 119. The supreme court explained:
“A petition for dissolution advances a single claim; that is, a request for an order
dissolving the parties’ marriage. The numerous other issues involved, such as custody,
property disposition, and support are merely questions which are ancillary to the cause
of action. [Citation.] They do not represent separate, unrelated claims; rather, they are
separate issues relating to the same claim.” (Emphases in original.) Id.
¶ 50 Given the dichotomy, in Leopando, between a claim and an issue within a claim, it might
have been easy to assume, in Best, that the validity and meaning of the premarital agreement
were issues within the claim for dissolution of marriage–but the appellate court did not see it
that way, and neither did the supreme court. See Best, 228 Ill. 2d at 113. The supreme court
agreed with the appellate court that Leopando was distinguishable and that, unlike the custody
ruling in Leopando, the declaratory judgment was a final judgment on a separate claim. Id. at
115.
¶ 51 According to the supreme court, Leopando was distinguishable for two reasons.
¶ 52 First, the trial court in Leopando awarded permanent custody to the father, whereas in Best
the trial court merely issued a declaratory judgment without making any actual award. Id. at
114. In Leopando, custody was part of the claim for dissolution of marriage, and,
consequently, by granting custody, the trial court adjudicated part of the same claim instead of
entering a final judgment on a separate claim. By contrast, the validity and meaning of the
premarital agreement in Best were not part of the claim for dissolution of marriage, and by
holding the premarital agreement to be valid and by interpreting section 19 of the premarital
agreement, the trial court merely decided some threshold legal issues without actually
awarding any relief on the claim for dissolution of marriage. In its declaratory judgment, the
court did not–and could not–award custody, for instance, or divide property or dissolve the
marriage: all those things still had to be done. In fact, the trial court in Best could have issued
the requested declaratory judgment without thereafter granting any of the relief the dissolution
petition requested. Therefore, the supreme court reasoned in Best, the motion for a declaratory
judgment was a separate claim. Id. at 115.
¶ 53 Second, the petitioner in Leopando had requested no relief outside that available under the
Illinois Marriage and Dissolution of Marriage Act (Dissolution Act) (Ill. Rev. Stat. 1981, ch.
40, ¶ 101 et seq.), whereas the petitioner in Best requested relief under both the Dissolution Act
and a separate statute, the declaratory judgment statute (735 ILCS 5/2-701 (West 2004)). Best,
228 Ill. 2d at 114-15. Therefore, “[in contrast] to Leopando, the two requests for relief here had
distinctly different statutory bases,” the supreme court observed. Id. at 115.
¶ 54 For those reasons, the supreme court concluded in Best:
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“Under the facts and circumstances of this case, the request for dissolution of the
parties’ marriage and the request for declaratory judgment on the validity and
interpretation of the premarital agreement are not so closely related that they must be
deemed part of a single claim for relief, as they were in Leopando. Thus, Leopando is
distinguishable.” Id.
¶ 55 Following the lead of the supreme court in Best, we conclude that Leopando likewise is
distinguishable from the present case. It is distinguishable for essentially the same two reasons.
¶ 56 First, by issuing a declaratory judgment that section 15-86 (30 ILCS 200/15-86 (West
2014)) applied to plaintiff’s claims for a charitable exemption for the assessment years 2004 to
2011, the trial court “did not make any actual awards”: the court did not hold that any of the
four parcels actually were exempt for any assessment year. Best, 228 Ill. 2d at 114.
¶ 57 Second, in the proceedings below, plaintiff “sought nondeclaratory relief” under the Code
(35 ILCS 200/1-1 to 32-20 (West 2014)) “as well as declaratory relief under the declaratory
judgment statute” (735 ILCS 5/2-701 (West 2014)), just as Steven Best sought both
nondeclaratory and declaratory relief. Best, 228 Ill. 2d at 115. Plaintiff invoked two different
statutes. Heinrich v. Peabody International Corp., 99 Ill. 2d 344, 348 (1984); Rice v. Burnley,
230 Ill. App. 3d 987, 991 (1992).
¶ 58 For those reasons, which come straight from Best, we find Leopando to be distinguishable,
and we conclude that we have subject-matter jurisdiction over defendants’ appeals. Count II,
on the one hand, and counts III through XXXIV, on the other hand, “are not so closely related
that they must be deemed part of a single claim for relief.” Best, 228 Ill. 2d at 115. By granting
the declaratory relief requested by count II, the trial court entered a final judgment on a
separate claim. See id. In sum, all the ingredients of subject-matter jurisdiction are here: a Rule
304(a) finding, a final judgment on a separate claim, and timely notices of appeal.
¶ 59 B. An Overview of the Administrative Procedures
for Establishing and Maintaining
an Exemption from Property Taxes
¶ 60 This is an action pursuant to section 23-25(e) of the Code (35 ILCS 200/23-25(e) (West
2014)), and as we will explain a little later, the legislature intended, in section 23-25(e), to
provide an exception to the administrative procedures for obtaining an exemption from
property taxes. In order that the reader will understand what section 23-25(e) is an exception
to, we will give this brief overview of the administrative procedures for obtaining an
exemption.
¶ 61 1. Establishing an Exemption for the First Time
¶ 62 Although the General Assembly has categorically exempted certain real estate from
taxation (35 ILCS 200/15-35 to 15-185 (West 2014)), anyone wishing to establish an
exemption for a particular parcel of real estate must apply for one. “Any person wishing to
claim an exemption for the first time” must file an application with the county board of review
(in counties with less than 1 million inhabitants) or with the board of appeals (in counties with
1 million or more inhabitants, i.e., Cook County). 35 ILCS 200/15-5 (West 2014); see also 11
Eunice A. Eichelberger, Illinois Real Property Service § 59:78, at 62 (Edward W. Jessen &
Erwin S. Barbre et al. eds., 1989). (For our purposes, it is unnecessary to differentiate between
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the board of review and the board of appeals: we will refer to them, indiscriminately, as “the
board.”)
¶ 63 The board will make a decision on the application for an exemption, but its decision will
not be final (except as to homestead exemptions). 35 ILCS 200/16-70, 16-130 (West 2014).
Rather, the board will “make out and forward to the Department[ ] a full and complete
statement of all the facts in the case.” 35 ILCS 200/16-70 (West 2014). The Department then
will decide whether the property is exempt from taxation, after which it will notify the board of
its decision, and, if necessary, the board will correct the assessment. 35 ILCS 200/16-70,
16-130 (West 2014). At the same time the Department notifies the board of its exemption
decision, the Department will notify the applicant, by certified mail. 35 ILCS 200/8-35 (West
2014).
¶ 64 If the Department decides the property is exempt, “any taxes extended upon the
unauthorized assessment shall be abated or, if paid, shall be refunded.” 35 ILCS 200/16-70; see
also 35 ILCS 200/16-130 (West 2014). (Payment of taxes will not be delayed by the board’s
consideration of the application or by the Department’s review of the board’s recommendatory
decision. 35 ILCS 200/16-70, 16-130 (West 2014).) If, alternatively, the Department decides
the property should be taxed, the landowner may file, with the Department, an application for a
hearing. 35 ILCS 200/8-35(b) (West 2014).
¶ 65 When the Department makes a decision on the application for exemption forwarded by the
board, “any party to the proceeding who feels aggrieved by the decision may file an application
for hearing.” Id. The application for hearing has to be filed with the Department within 60 days
after the Department gave notice, by certified mail, of its initial decision, and the application
has to state the mistakes allegedly made and the new evidence to be presented. Id.
¶ 66 Upon receiving an application for hearing, the Department will reconsider its exemption
decision and will grant any party to the proceeding a hearing. Id. After the hearing, the
Department will issue a notice of decision, again by certified mail. Id. The notice of decision
will set forth the findings of fact and the bases of the Department’s decision. Id.
¶ 67 Within 30 days after the Department mails its notice of decision, any party to the
proceeding may file with the Department a request for rehearing. Id. The Department does not
have to grant the request. If the Department allows a rehearing, it will issue a revised decision
as a result of the rehearing. Id.
¶ 68 The action of the Department on an application for hearing will become final the later of
(1) 30 days after the issuance of a notice of decision, if no request for rehearing is made or, (2)
if a timely request for rehearing is made, upon the issuance of the denial of the request for
rehearing or upon the issuance of a notice of final decision. Id.
¶ 69 No action for judicial review of an exemption decision by the Department (see 35 ILCS
200/8-40 (West 2014)) is allowed unless the party commencing the action has filed with the
Department an application for a hearing and the Department has acted upon the application. 35
ILCS 200/8-35(b) (West 2014).
¶ 70 The judicial review will be in accordance with the Administrative Review Law (735 ILCS
5/3-101 to 3-113 (West 2014)). 35 ILCS 200/8-40 (West 2014).
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¶ 71 2. Maintaining an Exemption After It Is Granted
¶ 72 After an exemption has been granted, all property owners, except the United States and
those with certain types of homestead exemptions, must file a certificate of status with the
county assessor or the supervisor of assessments on or before January 31 of each year. 35 ILCS
200/15-10 (West 2014). The certificate of status must state, under oath, whether there has been
any change in the ownership or use of the property, and, if there has been a change, the
certificate must state the nature of the change. Id. The assessment officer has the discretion to
terminate an exemption in the event of a failure to file this sworn certificate. Id.
¶ 73 C. An Introduction to Section 15-86
¶ 74 In its declaratory judgment, which defendants have appealed, the trial court held that
section 15-86 applied to this judicial proceeding pursuant to section 23-25(e) (35 ILCS
200/23-25(e) (West 2014)). Consequently, this appeal requires an understanding of section
15-86. To that end, we provide this introduction.
¶ 75 Public Act 97-688 (Pub. Act 97-688, § 5-55 (eff. June 14, 2012)) added section 15-86 (35
ILCS 200/15-86 (West 2012)) to the Code.
¶ 76 The preamble to section 15-86 says: “It is the intent of the General Assembly to establish a
new category of ownership for charitable property tax exemption to be applied to not-for-profit
hospitals and hospital affiliates in lieu of the existing ownership category of ‘institutions of
public charity.’ ” 35 ILCS 200/15-86(a)(5) (West 2014). “Institutions of public charity” is a
phrase from a preexisting section of the Code, section 15-65(a) (35 ILCS 200/15-65(a) (West
2012)), which provides as follows:
Ҥ 15-65. Charitable purposes. All property of the following is exempt when
actually and exclusively used for charitable or beneficent purposes, and not leased or
otherwise used with a view to profit:
(a) Institutions of public charity.” (Emphasis added.)
¶ 77 Previously, under section 15-65(a), a hospital had to be owned by an “[i]nstitution[ ] of
public charity” to qualify for a charitable exemption. Id. In section 15-86, the legislature
intended to eliminate that requirement as to hospitals and to require, instead, that the owner of
the hospital be a “not-for-profit corporation.” 35 ILCS 200/15-86(b)(2), (b)(6), (c) (West
2014). (Article IX, section 6, of the Illinois Constitution (Ill. Const. 1970, art. IX, § 6) does not
require, as a condition of a charitable exemption, that the property be owned by a charitable
institution or by any particular type of owner. It requires merely that the property be “used
exclusively for *** charitable purposes.” Id. Charitable ownership is an additional, statutory
prerequisite to the exemption, which the legislature imposed (35 ILCS 200/15-65(a) (West
2014))–as the legislature was free to do, given that, in the first place, it did not have to create
any exemption at all. Provena Covenant Medical Center v. Department of Revenue, 384 Ill.
App. 3d 734, 741 (2008).)
¶ 78 In addition to establishing this “new category of ownership for [the] charitable property tax
exemption,” the legislature intended, in section 15-86, to “establish quantifiable standards for
the issuance of charitable exemptions for such property.” 35 ILCS 200/15-86(a)(5) (West
2014). The legislature wanted to dispel the “considerable uncertainty surrounding the test for
charitable property tax exemption, especially regarding the application of a quantitative or
monetary threshold.” 35 ILCS 200/15-86(a)(1) (West 2014). For a long time, it had been
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unclear what quantity of charity a hospital had to provide to qualify for the charitable
exemption. In section 15-86, the legislature meant to clear up that ambiguity, right down to the
dollar amount.
¶ 79 Nothing could be clearer than subsection (c) (35 ILCS 200/15-86(c) (West 2014)), which
provides as follows: “A hospital applicant satisfies the conditions for an exemption under this
Section with respect to the subject property, and shall be issued a charitable exemption for that
property, if the value of services or activities listed in subsection (e) [(35 ILCS 200/15-86(e)
(West 2014))] for the hospital year equals or exceeds the relevant hospital entity’s estimated
property tax liability, as determined under subsection (g) [(35 ILCS 200/15-86(g) (West
2014))], for the year for which exemption is sought.”
¶ 80 Thus, subsection (c) contemplates the comparison of two numbers. The first number is the
total dollar amount of “[s]ervices that address the health care needs of low-income or
underserved individuals or relieve the burden of government with regard to health care
services.” 35 ILCS 200/15-86(e) (West 2014). The hospital had to provide these services
during the “hospital year,” defined as the hospital’s fiscal year ending in the year for which the
exemption is sought (35 ILCS 200/15-86(b)(9) (West 2014)). The second number is the
estimated property tax liability for the year for which an exemption is sought. 35 ILCS
200/15-86(c) (West 2014). If the first number equals or exceeds the second number, the
hospital is to be given an exemption for the subject property. Id.
¶ 81 What “services and activities” count as charity, to be measured against the estimated
property tax liability? Id. Subsection (e) (35 ILCS 200/15-86(e) (West 2014)) lists them under
the heading of “Services that address the health care needs of low-income or underserved
individuals or relieve the burden of government.” Such services include “[c]harity care,”
defined as “[f]ree or discounted services provided pursuant to the relevant hospital entity’s
financial assistance policy, measured at cost, including discounts provided under the Hospital
Uninsured Patient Discount Act [(210 ILCS 89/1 to 30 (West 2014))].” 35 ILCS
200/15-86(e)(1) (West 2014). Off-site subsidies also count, including financial support to
unaffiliated hospitals (35 ILCS 200/15-86(e)(2) (West 2014)), financial or in-kind support to
community clinics (id.), and direct subsidies to the state government or to local governments to
pay for activities or programs related to health care for low-income or underserved individuals
(35 ILCS 200/15-86(e)(3) (West 2014)).
¶ 82 The “hospital applicant” will list all these services and activities, along with their
respective dollar values, on an application form provided by the Department, and the “hospital
applicant” will attach all the necessary, supporting records to its application. 35 ILCS
200/15-86(d), (h) (West 2014). Because a “hospital applicant” is, by definition, “a hospital
owner or hospital affiliate that files an application for a property tax exemption pursuant to
Section 15-5 [(35 ILCS 200/15-5 (West 2014))] and this Section” (35 ILCS 200/15-86(b)(6)
(West 2014)), the “hospital applicant” will file its application “with the county board of review
or board of appeals” (35 ILCS 200/15-5 (West 2014)). Then, like any other application for an
exemption, the application will go through the process of administrative adjudication we
already have described.
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¶ 83 D. Whether Section 15-86 Applies
to an Action Pursuant to Section 23-25(e)
¶ 84 It is pretty clear that whenever a hospital owner seeks, “for the first time,” an exemption
pursuant to section 15-86 for a particular parcel of real estate, the legislature intends the
hospital owner to go through the administrative process we have described. 35 ILCS 200/15-5
(West 2014). We know that because, under the terms of section 15-86, the hospital owner has
to fill out an application, using a form provided by the Department, and the hospital owner has
to file this application with the county board of review or the board of appeals, pursuant to
section 15-5. 35 ILCS 200/15-86(b)(6), (b)(8), (h) (West 2014).
¶ 85 So, the legislature envisions that, in the first instance, the board and then the Department
will apply section 15-86 to the question of whether a given parcel is exempt from taxation. In a
subsequent action for administrative review, the trial court may have occasion to scrutinize the
Department’s application of section 15-86, but the court will be deferential toward the
Department’s factual findings. See 735 ILCS 5/3-110 (West 2014) (“The findings and
conclusions of the administrative agency on questions of fact shall be held to be prima facie
true and correct.”).
¶ 86 Because section 15-86, by its terms, contemplates an administrative determination of the
application for exemption, we have to ask whether it makes sense to say, as the trial court did,
that section 15-86 applies to this judicial proceeding pursuant to section 23-25(e) (35 ILCS
200/23-25(e) (West 2014)). (We do not even reach the question of section 15-86’s
constitutionality unless we first find that section 15-86 is applicable to this judicial
proceeding.)
¶ 87 How can this pervasively administrative statute, section 15-86, apply to a judicial
proceeding under section 23-25(e)? After all, section 23-25(e) is supposed to be an alternative
to administrative procedures. It reads as follows:
“(e) The limitation in this Section shall not apply to court proceedings to establish
an exemption for any specific assessment year, provided that the plaintiff or its
predecessor in interest in the property has established an exemption for any subsequent
or prior assessment year on grounds comparable to those alleged in the court
proceedings. For purposes of this subsection, the exemption for a subsequent or prior
year must have been determined under Section 8-35 [(35 ILCS 200/8-35 (West 2014))]
or a prior similar law by the Department or a predecessor agency, or under Section 8-40
[(35 ILCS 200/8-40 (West 2014))]. Court proceedings permitted by this subsection
may be initiated while proceedings for the subsequent or prior year under Section
16-70 [(35 ILCS 200/16-70 (West 2014))], 16-130 [(35 ILCS 200/16-130 (West
2014))], 8-35, or 8-40 are still pending, but judgment shall not be entered until the
proceedings under Section 8-35 or 8-40 have terminated.” Id.
¶ 88 The phrase at the beginning of the quoted passage–“[t]he limitation in this Section”–means
the requirement of obtaining a final decision by the Department as to the assessment year in
question before filing an action in the circuit court. See 35 ILCS 200/23-25(a) (referring to
section 8-40 (35 ILCS 200/8-40 (West 2014))). The plaintiff may skip the normally obligatory
process of litigating to finality before the Department, and may go directly to the circuit court,
if, “for any subsequent or prior assessment year”–that is, any assessment year that came after
or before the assessment year in question–the plaintiff obtained an exemption of the parcel “on
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grounds comparable to those alleged in the court proceedings.” 35 ILCS 200/23-25(e) (West
2014).
¶ 89 “[T]he exemption for a subsequent or prior year must have been determined under Section
8-35 [(35 ILCS 200/8-35 (West 2014))] or a prior similar law by the Department or a
predecessor agency, or under Section 8-40 [(35 ILCS 200/8-40 (West 2014))].” Id. In other
words, the Department must have issued a final administrative decision granting an exemption
for a subsequent or prior year (35 ILCS 200/8-35(b) (West 2014))–or, alternatively, in an
action for administrative review, a circuit court must have reversed a final administrative
decision in which the Department denied an exemption for a subsequent year or prior year (35
ILCS 200/8-40 (West 2014)).
¶ 90 Thus, as to the subject property, section 23-25(e) presupposes a favorable decision, under
sections 8-35 or 8-40, for a subsequent or prior assessment year. But precisely what function
does this favorable decision serve in a proceeding pursuant to section 23-25(e)? What did the
legislature intend in this respect, as evidenced by the language of that statute? See Paris v.
Feder, 179 Ill. 2d 173, 177 (1997).
¶ 91 Plaintiff seems to take the view that the favorable decision serves merely as an admission
ticket into the circuit court and that once the taxpayer is admitted, the ticket is forgotten and the
court applies section 15-86 in a de novo determination of whether the parcel deserves an
exemption for the assessment year in question. In this view, the circuit court would function as
a super agency. Cf. 35 ILCS 200/16-70 (West 2014) (“The Department shall determine
whether the property is legally liable to taxation.”).
¶ 92 We can think of a different interpretation of section 23-25(e), an interpretation that would
have the advantage of not transforming the circuit court into a clone of the Department. The
legislature could have intended the favorable decision to serve not merely as an admission
ticket into the circuit court, but as an object of comparison in the trial. The trial would compare
two sets of facts: the facts existing during the assessment year in question and the facts on
which the Department or the circuit court relied when finding the parcel to be exempt for a
subsequent or prior year. That would not be the same thing as taking over the Department’s
job. There is a significant difference between, on the one hand, trying to do the Department’s
job by processing an application for an exemption and, on the other hand, looking at the facts
in an application that previously was granted and asking the Department, “Why did you deny
an exemption this time, considering that the facts proven by the plaintiff appear to be
substantially the same as the facts set forth in this application for a subsequent or prior, which
was granted? Or, in your view, are the facts different?” Instead of becoming a redundant
agency, the court would be on the lookout for arbitrariness in the form of an inconsistent
treatment of substantially the same facts.
¶ 93 In our de novo review (Paris, 179 Ill. 2d at 177-78), we favor this interpretation of section
23-25(e) that envisions a comparison of facts, not only because this interpretation preserves the
relevance of the Department (which, after all, is the expert, with lots of experience) but also
because it lines up with the statutory phrase “grounds comparable to those alleged in the court
proceedings”: “The limitation in this Section shall not apply to court proceedings to establish
an exemption for any specific assessment year, provided that the plaintiff or its predecessor in
interest in the property has established an exemption for any subsequent or prior assessment
year on grounds comparable to those alleged in the court proceedings.” (Emphasis added.) 35
ILCS 200/23-25(e) (West 2014). When adding section 23-25(e) to the Code in 1998 (Pub. Act
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90-679, § 5 (eff. July 31, 1998)), the legislature presumably knew that Illinois was a
fact-pleading jurisdiction (Knox College v. Celotex Corp., 88 Ill. 2d 407, 426-27 (1981);
Richco Plastic Co. v. IMS Co., 288 Ill. App. 3d 782, 784 (1997)) and that “grounds” “alleged in
the court proceedings” necessarily would be factual grounds. See Nelson v. Kendall County,
2014 IL 116303, ¶ 27.
¶ 94 Here, then, is the procedure the legislature must have contemplated. In an action pursuant
to section 23-25(e), the plaintiff would allege and prove that, as to the subject property, a
certain set of facts existed during the assessment year in question and that substantially the
same facts caused that property to be exempt for a subsequent or prior assessment year. By
hearing this evidence, the circuit court would not make a de novo determination, so much as
compare two sets of facts, to see if the Department is being inconsistent or arbitrary.
¶ 95 Unless the two sets of facts are materially different or unless the Department convinces the
circuit court that the exemption for the subsequent or prior assessment year actually was
unlawful (see Brown’s Furniture, Inc. v. Wagner, 171 Ill. 2d 410, 432 (1996) (“[T]his court
has refused to estop the State from reexamining a taxpayer’s liability even when returns for the
relevant tax period have been filed and approved.”); Austin Liquor Mart, Inc. v. Department of
Revenue, 51 Ill. 2d 1, 4 (1972) (“It is firmly established that where the public revenues are
involved, public policy ordinarily forbids the application of estoppel to the State.”), logic
would likewise require an exemption for the assessment year in question.
¶ 96 Now that we understand how section 23-25(e) works, we return to our question: Did the
legislature intend that section 15-86 would apply to a proceeding pursuant to section 23-25(e)?
The legislature must have intended section 15-86 to apply at least indirectly. If section 15-86
was the authority for exempting the property from taxation for a subsequent or prior
assessment year, section 15-86 would indirectly apply to the proceeding under section
23-25(e) through a comparison of facts: if under those facts the property was entitled to an
exemption pursuant to section 15-86, it follows that under these comparable facts the property
likewise is entitled to an exemption pursuant to section 15-86. Ultimately, the authority would
be the same: section 15-86.
¶ 97 But what if the assessment year in question and a subsequent assessment year to which a
comparison is being made are on different sides of the effective date of section 15-86: June 14,
2012? See Pub. Act 97-688, § 5-55 (eff. June 14, 2012) (adding section 15-86 to the Code).
That is a dilemma the present case poses. Paragraph 4 of the fourth amended complaint alleges:
“Before tax assessment year 2004, and then again for tax assessment year 2012, [plaintiff]
obtained a determination from the [Department] or its predecessor agency under Section 8-35
or a prior law, or from a court under Section 8-40, that it was entitled to a full or partial
exemption with respect to each of the Four Parcels.”
¶ 98 It would seem, then, that, in this proceeding pursuant to section 23-25(e), plaintiff intends
to compare the assessment years 2004 through 2011 not only to a prior assessment year, that is,
a year prior to 2004, but also to a subsequent assessment year, 2012.
¶ 99 Assessment year 2012 was subject to section 15-86. The Department applied section 15-86
when determining the four parcels to be exempt for 2012, as Laurence J. Fallon, plaintiff’s
senior vice president of legal affairs, stated in his affidavit, dated July 15, 2013. He stated in
paragraph 24:
“24. Following the passage of P.A. 97-688 in 2012, [plaintiff] filed Section 15-5
applications seeking exemptions for the Four Parcels and other *** properties
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[belonging to plaintiff], pursuant to the hospital property tax exemption contained in
Section 15-86, for the 2012 tax year. A true and correct copy of the Certificates of
Non-homestead exemption for the Four Parcels issued to [plaintiff] by the
[Department] for the tax year 2012 is attached as Group Exhibit H.”
¶ 100 So, after the passage of Public Act 97-688, plaintiff received an exemption for the
assessment year 2012, and the exemption was pursuant to section 15-86. Now, in this
proceeding pursuant to section 23-25(e), plaintiff wants to compare the assessment years 2004
to 2011, during which section 15-86 did not yet exist, to the assessment year 2012, when
section 15-86 did exist. Can plaintiff do that? Is the anachronism permissible?
¶ 101 It depends on whether the legislature intended section 15-86 to apply retroactively. It also
depends on whether section 15-86 is constitutional–but right now we will take up the question
of retroactivity, in our continuing search for a nonconstitutional disposition of the township
defendants’ appeal.
¶ 102 E. The Retroactivity of Section 15-86
¶ 103 At the outset, we should be clear what we mean by the retroactive application of section
15-86. A retroactive act (or statute) “operat[es] on transactions that have occurred or rights and
obligations that existed before passage of the act.” 2 Norman Singer & J.D. Shambie Singer,
Statutes and Statutory Construction § 41:1, at 383 (7th ed. 2009). Therefore, section 15-86
would apply retroactively if it determined the exempt or nonexempt status of property on the
basis of uses made of the property before June 14, 2012 (the effective date of section 15-86), or
on the basis of other facts existing before that date.
¶ 104 Did the legislature intend section 15-86 to apply retroactively? In section 4 of the Statute
on Statutes (5 ILCS 70/4 (West 2014)), the legislature has clearly manifested its intent that
statutory amendments which are substantive in nature, in contrast to amendments affecting
procedure, will apply only prospectively, not retroactively. Caveney v. Bower, 207 Ill. 2d 82,
92 (2003). By adding section 15-86 to the Code, Public Act 97-688 made a change that was
substantive in nature: section 15-86(c) (35 ILCS 200/15-86(c) (West 2014)) specifies the
conditions for a charitable exemption, specifically, “the value of services or activities” the
hospital must provide during the “hospital year.” Insomuch as section 15-86 prescribes
procedures, they merely implement that substantive change. Because the addition of section
15-86 to the Code was a change that was substantive in nature, section 4 of the Statute on
Statutes requires that the change be given only prospective effect–unless the legislature has
clearly indicated otherwise in the amendatory act, Public Act 97-688. See Caveney, 207 Ill. 2d
at 94-95.
¶ 105 Section 90 of Public Act 97-688 (codified as 35 ILCS 128/90 (West 2012)), entitled
“Applicability,” lists the administrative “decisions” and the “applications for property tax
exemption” to which “[t]he changes made by this amendatory Act *** shall apply.” Pub. Act
97-688, art. 99, § 90 (eff. June 14, 2012). By so doing, section 90 indicates the temporal reach
of the changes. We will quote only the portions of section 90 that pertain to property tax
exemptions:
“Section 90. Applicability. The changes made by this amendatory Act of the 97th
General Assembly to the Property Tax Code, the Illinois Income Tax Act, the Use Tax
Act, the Service Occupation Tax Act, and the Retailers’ Occupation Tax Act shall
apply to: (1) all decisions by the Department on or after the effective date of this
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amendatory Act of the 97th General Assembly regarding entitlement or continued
entitlement by hospitals, hospital owners, hospital affiliates, or hospital systems to
charitable property tax exemptions; (2) all applications for property tax exemption filed
by hospitals, hospital owners, hospital affiliates, or hospital systems on or after the
effective date of this amendatory Act of the 97th General Assembly; (3) all applications
for property tax exemption filed by hospitals, hospital owners, hospital affiliates, or
hospital systems that have either not been decided by the Department before the
effective date of this amendatory Act of the 97th General Assembly, or for which any
such Department decisions are not final and non-appealable as of that date ***.” Pub.
Act 97-688, art. 99, § 90(1), (2), (3) (eff. June 14, 2012) (codified as 35 ILCS
128/1-90(1), (2), (3) (West 2014)).
¶ 106 It is clear from section 90 of Public Act 97-688 that the legislature intended section 15-86
to apply retroactively. All three subsections of the quoted passage would entail the retroactive
application of section 15-86.
¶ 107 Let us begin with subsection (1) (Pub. Act 97-688, art. 99, § 90(1) (eff. June 14, 2012)
(codified as 35 ILCS 128/1-90(1) (West 2014))). If, as subsection (1) says, Public Act 97-688
applies to “all” decisions the Department makes on charitable exemptions on or after the
effective date of the act, June 14, 2012, it follows that section 5-55 of Public Act 97-688,
codified as section 15-86 of the Code, applies to all those decisions, including decisions
pending on June 14, 2012–decisions that necessarily scrutinize the uses made of property
before that date. Id.
¶ 108 Now let us look at subsection (2) (Pub. Act 97-688, art. 99, § 90(2) (eff. June 14, 2012)
(codified as 35 ILCS 128/1-90(2) (West 2014))). Public Act 97-688, and therefore section
15-86, will apply to “all applications for property tax exemption filed *** on or after the
effective date of this amendatory Act.” Id. If a hospital files an application on June 14, 2012,
the application necessarily will be based on uses made of the property before that date.
¶ 109 Finally, let us look at subsection (3) (Pub. Act 97-688, art. 99, § 90(3) (eff. June 14, 2012)
(codified as 35 ILCS 128/1-90(3) (West 2014))), with its unfortunate double negative. Public
Act 97-688, including section 15-86 of the Code, shall apply to “all applications for property
tax exemption filed by hospitals *** that have either not been decided by the Department
before the effective date of this amendatory Act ***, or for which any such Department
decisions are not final and non-appealable as of that date” (id.)–by which the legislature
apparently means “not final and appealable” (the “not” modifying both “final” and
“appealable”). Thus, if, on June 14, 2012, the Department made a nonfinal decision on an
application for a property tax exemption–an application that necessarily would concern uses of
the property earlier than June 14, 2012–section 15-86 will apply to that application.
¶ 110 We conclude, then, that the legislature “plainly” intended section 15-86 to apply
retroactively. Caveney, 207 Ill. 2d at 94-95.
¶ 111 The county defendants, perhaps anticipating that conclusion, argue it is untenable because
the fourth amended complaint is not, in the words of sections 90(2) and (3) (Pub. Act 97-688,
art. 99, § 90 (eff. June 14, 2012)), an “application[ ] for property tax exemption” (cf. 35 ILCS
200/15-5 (West 2014) (“Any person wishing to claim an exemption for the first time *** shall
file an application with the county board of review ***.”)), and a decision by the circuit court
in a proceeding pursuant to section 23-25(e) is not, in the words of section 90(1) (Pub. Act
97-688, art. 99, § 90 (eff. June 14, 2012)), a “decision[ ] by the Department.”
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¶ 112 True enough, but plaintiff’s action is pursuant to section 23-25(e), not section 90, and
section 90 does not say that the changes made by Public Act 97-688 apply only to the items
listed in section 90. Again, the question is not whether this action fits within section 90 but,
rather, whether the legislature intended section 15-86 to apply retroactively. Section 90 clearly
evinces such an intent. See Caveney, 207 Ill. 2d at 94-95.
¶ 113 Understandably, the county defendants are concerned about open-ended retroactivity.
They point out that “[i]f a taxpayer can raise an exemption claim long after the [equalized
assessed valuation] for a given year has been certified to the Department, there is no way for
taxing districts to recoup the lost taxes: there is no statutory authority for the assessor to go
back to prior years and collect additional taxes,” to make up for the exemption that a court has
retroactively granted. But we do not know how else to interpret the phrase “any subsequent
*** assessment year” in section 23-25(e). (Emphasis added.) 35 ILCS 200/23-25(e) (West
2014). “[A]ny subsequent *** assessment year” can serve as the object of comparison,
meaning that, in a proceeding pursuant to section 23-25(e), the plaintiff can obtain an
exemption for an assessment year on the basis of an exemption granted anytime afterward, if
the facts are comparable. (Emphasis added.) Id. If such open-ended retroactivity is unwise or
impractical as public policy, the remedy is with the legislature, not with us. See People ex rel.
Brenza v. Gebbie, 5 Ill. 2d 565, 583 (1955).
¶ 114 F. Is Section 15-86 Constitutional?
¶ 115 1. The Unavoidability of This Constitutional Question
¶ 116 The township defendants argue that section 15-86 is facially unconstitutional in that it
creates an exemption unauthorized by article IX, section 6, of the Illinois Constitution (Ill.
Const. 1970, art. IX, § 6). See Chicago Bar Ass’n v. Department of Revenue, 163 Ill. 2d 290,
297 (1994). Plaintiff agrees that, if indeed section 15-86 is facially unconstitutional, as the
township defendants contend, the trial court should have denied rather than granted its motion
for a summary judgment on count II. (Again, count II sought a declaratory judgment that
section 15-86 applied to counts III to XXXIV, which sought exemptions for the four parcels
for the assessment years 2004 to 2011.) An unconstitutional statute is unenforceable from the
moment of its enactment (People v. Blair, 2013 IL 114122, ¶ 30), and if section 15-86 were
unconstitutional and hence unenforceable, it could not apply, indirectly or otherwise, to the
question of whether the four parcels should be exempt from taxation.
¶ 117 We do not see how we can avoid assessing the constitutionality of section 15-86. See In re
Haley D., 2011 IL 110886, ¶ 54. We cannot say that section 15-86 is inapplicable to counts III
to XXXIV for any nonconstitutional reason (we already have explored that possibility in our
discussion thus far). Standing squarely before us, blocking the hallway, is the question of
whether section 15-86 violates article IX, section 6, of the Illinois Constitution. So far as we
can see, the question cannot be sidestepped.
¶ 118 2. An Introduction to Article IX, Section 6
¶ 119 Article IX, section 6, of the Illinois Constitution of 1970 provides as follows:
“The General Assembly by law may exempt from taxation only the property of the
State, units of local government and school districts and property used exclusively for
agricultural and horticultural societies, and for school, religious, cemetery and
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charitable purposes. The General Assembly by law may grant homestead exemptions
or rent credits.” Ill. Const. 1970, art. IX, § 6.
¶ 120 In this appeal, we are concerned with the first sentence of article IX, section 6. We make
three observations about that sentence.
¶ 121 First, it is not self-executing. If there is to be any exemption from property taxes, the
General Assembly must so provide by statutory law–consistently, though, with article IX,
section 6. City of Chicago v. Illinois Department of Revenue, 147 Ill. 2d 484, 492 (1992). If the
General Assembly chooses to exempt property, it can make the exemption more restrictive
than the terms and conditions of article IX, section 6, such as by requiring, for a charitable
exemption, that the property be owned by an “[i]nstitution[ ] of public charity” (35 ILCS
200/15-65(a) (West 2014)) (article IX, section 6, by contrast, says nothing about the ownership
of the property used exclusively for charitable purposes), but the General Assembly cannot
provide an exemption that exceeds the terms and conditions of article IX, section 6. Provena,
384 Ill. App. 3d at 741. In other words, the General Assembly may not “broaden or add to the
exemptions that section 6 of article IX allows” (id.)–a limitation made clear by the adjective
“only” in the constitutional text (Ill. Const. 1970, art. IX, § 6).
¶ 122 Second, the only owners of real estate that can be exempt from property taxes on the basis
of their identity, regardless of how they use the real estate, are “the State, units of local
government[,] and school districts.” Id. All other exemptions–including exemptions for
hospitals–must be based on the “exclusive[ ]” “use[ ]” of the real estate for any of the listed
purposes, namely, “agricultural and horticultural societies, and for school, religious,
cemetery[,] and charitable purposes.” (Emphasis added.) Id.
¶ 123 Third, for the past 106 years, the supreme court has interpreted “exclusive” use as
“primary” use. Chicago Bar Ass’n v. Department of Revenue, 163 Ill. 2d 290, 300 (1994);
Children’s Development Center, Inc. v. Olson, 52 Ill. 2d 332, 336 (1972); Illinois Institute of
Technology v. Skinner, 49 Ill. 2d 59, 65-66 (1971); MacMurray College v. Wright, 38 Ill. 2d
272, 278 (1967); City of Mattoon v. Graham, 386 Ill. 180, 185 (1944); People ex rel. Fix v.
Trustees of Northwestern College, 322 Ill. 120, 125 (1926); First Congregational Church of
De Kalb v. Board of Review, 254 Ill. 220, 224 (1912); People ex rel. Thompson v. First
Congregational Church of Oak Park, 232 Ill. 158, 164 (1908). (Article IX, section 6, of our
present constitution is nearly identical to article IX, section 3, of our previous constitution (Ill.
Const. 1870, art. IX, § 3), which provided: “The property of the state, counties, and other
municipal corporations, both real and personal, and such other property as may be used
exclusively for agricultural and horticultural societies, for school, religious, cemetery and
charitable purposes, may be exempted from taxation; but such exemption shall be only by
general law.” (Emphasis added.) Because of this close similarity in language, cases discussing
property tax exemptions when the 1870 constitution was in force are equally relevant under the
1970 constitution. Eden Retirement Center, Inc. v. Department of Revenue, 213 Ill. 2d 273, 286
(2004).)
¶ 124 It could strike an ordinary reader as counterintuitive that “exclusively,” in article IX,
section 6, means “primarily.” After all, “[t]he meaning of a constitutional provision depends
on the common understanding of the citizens who, by ratifying the constitution, gave it life.
[Citations.] This understanding is best determined by referring to the common meaning of the
words used. [Citations.]” Committee for Educational Rights v. Edgar, 174 Ill. 2d 1, 13 (1996).
“Exclusively” is commonly understood to mean “solely,” whereas “primarily” is commonly
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understood to mean “mostly.” The meanings of these two words might seem, strictly speaking,
incompatible.
¶ 125 Taking a hard line, though, on the meaning of “exclusively” would cause any nonexempt
use of the property, however trivial and fleeting, to disqualify the property from an
exemption–because “exclusively,” if one wanted to be strict and pedantic, means 100%, not
99.99%. To the supreme court, it seemed implausible that the ratifiers intended such a
draconian, unforgiving standard. It seemed implausible that they intended a church, for
example, to lose its exemption, as property used exclusively for religious purposes, merely
because the elders held a business meeting there or because a sexton lived in the furnace room.
First Congregational Church of Oak Park, 232 Ill. at 164. (Since First Congregational Church
of Oak Park, the supreme court has taken a more expansive view of what constitutes use for an
exempt purpose. McKenzie v. Johnson, 98 Ill. 2d 87, 98-99 (1983).) If “exclusively” meant
“solely,” in the absolute sense of 100%, a church would have to forfeit its exemption if one
night it hosted a chamber music concert. Likewise, a hospital that provided nothing but charity
care would have to forfeit its exemption if it allowed a vending machine on the premises or if it
allowed a nurse, during lunch break, to sell Little League popcorn to fellow employees. So, in
a spirit of reasonableness, the supreme court somewhat softened the standard to “primary” use.
¶ 126 This standard of “primary” use might seem to suggest that if a building were used 51% of
the time for religious purposes and the remaining 49% of the time as a nightclub, it would
qualify for an exemption. But that apparently is not what the supreme court means. The
nonexempt use has to be “merely incidental” (Skinner, 49 Ill. 2d at 66); that is, it cannot be a
“major” use. The New Oxford American Dictionary 859 (2001) (definition of “incidental”);
see Streeterville Corp. v. Department of Revenue, 186 Ill. 2d 534, 536-37 (1999) (“In the
instant case, Streeterville concedes that the 26% nonexempt use of the parking facility cannot
qualify as merely incidental.”). Any nonexempt use has to be trivial or de minimis; a
reasonable reader would have to give at least that much rigor to the constitutional phrase “used
exclusively for [exempt] purposes.” (Emphasis added.) Ill. Const. 1970, art. IX, § 6.
¶ 127 3. The Township Defendants’ Argument That
Section 15-86 Is Facially Unconstitutional in That
It Bestows a Charitable Exemption Without Requiring
an Exclusively Charitable Use of the Property
¶ 128 The township defendants argue that section 15-86 is unconstitutional in that it “authorizes
property tax exemption for hospitals without regard to whether a hospital meets the
requirement for a charitable exemption under the Illinois Constitution of 1970, article IX,
section 6.” Id.
¶ 129 For two reasons, plaintiff disagrees with the township defendant’s argument.
¶ 130 First, plaintiff argues that section 15-86 should be construed to condition the exemption on
satisfying the constitutional requirement of exclusive charitable use. See id. (“property used
exclusively for *** charitable purposes”).
¶ 131 Second, plaintiff argues that, regardless of whether section 15-86 is construed to require
exclusive charitable use within the meaning of article IX, section 6, the township defendants
are unable to prove that there is no set of circumstances in which an exemption pursuant to
section 15-86 would be constitutional.
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¶ 132 By addressing these two counterarguments by plaintiff, we effectively would address the
township defendants’ argument. So, let us consider plaintiff’s counterarguments, taking them
one at a time.
¶ 133 a. Construing Section 15-86 So as To Make It Constitutional,
Insomuch as Such a Construction Would Be Reasonably Defensible
¶ 134 In our de novo review of the constitutionality of section 15-86 (see People v. Boeckmann,
238 Ill. 2d 1, 7 (2010)), we begin with the presumption that the statute is constitutional, a
presumption the township defendants have the burden of clearly rebutting (see id. at 6). If the
text of section 15-86 is susceptible to two interpretations, both reasonable, one of which would
make section 15-86 constitutional and the other of which would make it unconstitutional, we
should choose the interpretation that would make it constitutional (thus the township
defendants’ burden of clearly showing the unconstitutionality). See id.
¶ 135 This rule of construction is not a license to rewrite section 15-86; our interpretation should
have an objective basis in the statutory text. See People v. One 1998 GMC, 2011 IL 110236,
¶ 13. We should “construe [the] statute in a manner upholding its constitutionality if
reasonably possible.” (Emphasis added.) Boeckmann, 238 Ill. 2d at 6.
¶ 136 According to plaintiff, “[s]ection 15-86 should be interpreted, consistent with prevailing
case law, to provide a description or illustration of properties owned by not-for-profit
hospital-related entities that may be entitled to exemption, but issuance of an exemption
remains subject to compliance with the charitable use requirement.” The “prevailing case law”
that plaintiff has in mind is Chicago Bar Ass’n and McKenzie. Unlike section 15-86, however,
the statutes at issue in those cases actually stated the constitutional requirement of exclusive
use and then listed examples of properties that, when so used, would be exempt. See Chicago
Bar Ass’n, 163 Ill. 2d at 299-300; McKenzie, 98 Ill. 2d at 96.
¶ 137 The statute at issue in Chicago Bar Ass’n was section 19.1 of the Revenue Act of 1939 (Ill.
Rev. Stat. 1991, ch. 120, ¶ 500.1). Chicago Bar Ass’n, 163 Ill. 2d at 293-94. It exempted “any
other real property used by such schools exclusively for school purposes, *** including, but
not limited to” several examples, among which was “property *** on or adjacent to *** the
grounds of a school which property is used by [a] *** professional society *** which serves
the advancement of learning.” Ill. Rev. Stat. 1991, ch. 120, ¶ 500.1. Evidently confused by the
convolutions of section 19.1, which resembled a wadded-up fishing line, the circuit court in
Chicago Bar Ass’n interpreted the “adjacent” property of the “professional society” as
something in addition to and other than the “real property used by such schools exclusively for
school purposes” (id.). Chicago Bar Ass’n, 163 Ill. 2d at 298. But the supreme court concluded
that the text of section 19.1 was reasonably susceptible to an alternative interpretation, which
was the preferable interpretation because it made section 19.1 constitutional. Under this
alternative interpretation, the “adjacent” property was an example or illustration of “real
property used by such schools exclusively for school purposes” (Ill. Rev. Stat. 1991, ch. 120,
¶ 500.1). Chicago Bar Ass’n, 163 Ill. 2d at 299-300.
¶ 138 Similarly, in McKenzie, the statute established an exemption for “ ‘property used
exclusively for religious purposes,’ ” and then, in an “ ‘including’ ” clause, it listed examples
of “ ‘such property.’ ” McKenzie, 98 Ill. 2d at 94 (quoting Ill. Rev. Stat. 1981, ch. 120,
¶ 500.2). The statute was section 19.2 of the Revenue Act of 1939, and to quote it more fully, it
exempted from taxation “ ‘[a]ll property used exclusively for religious purposes *** and not
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leased or otherwise used with a view to profit, including all such property owned by churches
or religious institutions or denominations and used in conjunction therewith as parsonages.’ ”
Id. (quoting Ill. Rev. Stat. 1981, ch. 120, ¶ 500.2). This statutory exemption of “ ‘parsonages’ ”
was constitutional because (1) “ ‘parsonages’ ” were linked to the explicitly stated exempt use
by an “including” clause and (2) “ ‘parsonages’ ” were “ ‘such property,’ ” that is, “ ‘property
used exclusively for religious purposes.’ ” Id. (quoting Ill. Rev. Stat. 1981, ch. 120, ¶ 500.2).
¶ 139 Because section 15-86, by contrast, lacks any mention of exclusive use for an exempt
purpose, we do not see how it is comparable to the statutes in Chicago Bar Ass’n and
McKenzie. The statute at issue in Chicago Bar Ass’n, section 19.1 of the Revenue Act of 1939
(Ill. Rev. Stat. 1991, ch. 120, ¶ 500.1), exempted “any other real property used by such schools
exclusively for school purposes, *** including, but not limited to *** property *** on or
adjacent to *** the grounds of a school which property is used by [a] *** professional society
*** which serves the advancement of learning.” (Emphasis added.) Cf. Ill. Const. 1970, art.
IX, § 6 (“property used exclusively for *** school *** purposes”). In like manner, the statute
at issue in McKenzie, section 19.2 of the Revenue Act of 1939 (Ill. Rev. Stat. 1981, ch. 120,
¶ 500.2), exempted “ ‘property used exclusively for religious purposes ***, including all such
property owned by churches *** and used in conjunction therewith as parsonages.’ ”
McKenzie, 98 Ill. 2d at 94 (quoting Ill. Rev. Stat. 1981, ch. 120, ¶ 500.2). Cf. Ill. Const. 1970,
art. IX, § 6 (“property *** used exclusively for *** religious *** purposes”).
¶ 140 Section 15-86 is quite different. It omits the constitutional standard, and we should not
effectively rewrite the statute so as to express what simply is not there. See One 1998 GMC,
2011 IL 110236, ¶ 13. Nowhere does section 15-86 say, as a condition of the charitable
exemption, that the property must be “used exclusively for *** charitable purposes.” Ill. Const.
1970, art. IX, § 6. Instead, section 15-86 bestows a charitable exemption if, during the hospital
entity’s fiscal year ending in the year for which it seeks an exemption, the value of the
“[s]ervices” in subsection (e) (35 ILCS 200/15-86(e) (West 2014)) that the hospital entity
provided equals or exceeds the hospital entity’s estimated property tax liability for the year for
which it seeks an exemption. 35 ILCS 200/15-86(c) (West 2014).
¶ 141 This statutory standard for a charitable exemption conflicts with article IX, section 6, of
our constitution. Rather than require the hospital entity to use the subject property exclusively
for charitable purposes (nowhere in section 15-86 is the phrase “used exclusively for charitable
purposes” to be found), section 15-86 merely requires the hospital entity to, in a manner of
speaking, pay for its property tax exemption with certain services of equivalent value. Id. The
legislature thereby added a new exemption to those authorized by article IX, section 6: a
charitable exemption for hospital entities that, regardless of whether they use the property
exclusively for charitable purposes, provide just enough “[s]ervices that address the health care
needs of low-income or underserved individuals” to economically counterbalance the property
tax exemption (35 ILCS 200/15-86(e) (West 2014)). See Provena, 384 Ill. App. 3d at 741
(“[T]he General Assembly may not broaden or add to the exemptions that section 6 of article
IX allows.”).
¶ 142 Not only does section 15-86 settle for something less than exclusive use of the property for
charitable purposes; it does not require any charitable use of the property at all. Under section
15-86, a hospital entity can obtain a charitable exemption simply by paying subsidies to
community clinics, for example (35 ILCS 200/15-86(e)(2) (West 2014)), or by paying
subsidies to the state or local government (35 ILCS 200/15-86(e)(3) (West 2014)). But article
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IX, section 6, of the constitution requires exclusive use of the property itself for charitable
purposes. Ill. Const. 1970, art. IX, § 6. A property owner cannot buy a charitable exemption.
“ ‘The use to which the property is devoted is decisive rather than the use to which income
derived from the property is employed.’ ” Provena, 384 Ill. App. 3d at 764 (quoting City of
Lawrenceville v. Maxwell, 6 Ill. 2d 42, 49 (1955)). “ ‘[P]roperty which is used to produce
income to be used exclusively for charitable purposes may not be exempted from taxation, the
test being, instead, the present use of the property rather than the ultimate use of the proceeds
derived from the property sought to be exempted.’ ” Provena, 384 Ill. App. 3d at 764 (quoting
People ex rel. Goodman v. University of Illinois Foundation, 388 Ill. 363, 374 (1944)).
¶ 143 b. The No-Set-of-Circumstances Test
¶ 144 A party challenging the constitutionality of a statute can contend either that the statute is
unconstitutional on its face or that the statute is unconstitutional as applied to the particular
context in which the party acted or proposed to act. Lamar Whiteco Outdoor Corp. v. City of
West Chicago, 355 Ill. App. 3d 352, 365 (2005). The township defendants challenge the facial
constitutionality of section 15-86.
¶ 145 Our supreme court has said this about facial unconstitutionality:
“It is especially difficult to successfully mount a facial challenge to a statute. The fact
that a statute may operate invalidly under some circumstances is insufficient to
establish facial invalidity; a statute is facially unconstitutional only if ‘ “no set of
circumstances exists under which the Act would be valid.” ’ (Emphasis added.) In re
C.E., 161 Ill. 2d 200, 210-11 (1994), quoting United States v. Salerno, 481 U.S. 739,
745 (1987). Thus, so long as there exists a situation in which a statute could be validly
applied, a facial challenge must fail.” Hill v. Cowan, 202 Ill. 2d 151, 157 (2002).
¶ 146 The no-set-of-circumstances test seems problematic to us for three reasons, which we will
discuss under the following headings.
¶ 147 (1) The Supreme Court of the United States
Apparently Has Never Used the Test,
and in Fact Has Backpedaled From It
¶ 148 Hill poses the question of whether any “set of circumstances exists under which the Act
would be valid” or whether “there exists a situation in which [the] statute could be validly
applied.” (Emphases added and internal quotation marks omitted.) Id. And yet surely, when a
party contends that a statute is unconstitutional on its face, Hill does not expect the court to
perform an extrajudicial investigation to find out if some alternative set of circumstances
empirically “exists.” Id. Rather, Hill must mean “hypothetically exists”: the court should try to
hypothesize an alternative set of circumstances, or imagine a different “situation,” in which the
statute would be constitutionally valid. Id.
¶ 149 One problem with this speculative approach is that the originator of the
no-set-of-circumstances test, the Supreme Court of the United States (see United States v.
Salerno, 481 U.S. 739, 745 (1987)), has more recently stated: “In determining whether a law is
facially invalid, we must be careful not to go beyond the statute’s facial requirements and
speculate about ‘hypothetical’ or ‘imaginary’ cases.” Washington State Grange v. Washington
State Republican Party, 552 U.S. 442, 449-50 (2008). This seems another way of saying that
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when determining whether a statute is facially unconstitutional, we must be careful not to
apply the no-set-of-circumstances test. See City of Chicago v. Morales, 527 U.S. 41, 55 n.22
(1999) (plurality opinion noting that “[t]o the extent we have consistently articulated a clear
standard for facial challenges, it is not the Salerno formulation, which has never been the
decisive factor in any decision of this Court, including Salerno itself”); Doe v. City of
Albuquerque, 667 F.3d 1111, 1125 n.8 (10th Cir. 2012) (giving examples of cases in which the
Supreme Court assessed the facial constitutionality of a statute and in which the
no-set-of-circumstances test would have led to the opposite result, had the Supreme Court
applied that test); Sonnier v. Crain, 613 F.3d 436, 463-64 (5th Cir. 2010) (Dennis, J.,
concurring in part and dissenting in part) (arguing that the no-set-of-circumstances language in
Salerno is “nothing more than a controversial dictum” and stating that “diligent research” has
failed to reveal “a single Supreme Court case–including Salerno itself–in which the holding
actually relied on the ‘no set of circumstances’ test”).
¶ 150 (2) It Is Unclear What the Phrase “Validly Applied” Means
¶ 151 Hill says a statute is facially unconstitutional only if no circumstances could be
hypothesized in which the statute “would be valid” or “could be validly applied.” (Internal
quotation marks omitted.) Hill, 202 Ill. 2d at 157. We are unclear what the phrase “validly
applied” means in this context.
¶ 152 To explain our uncertainty, we invite the reader to assume the existence of an Illinois
statute that provides: “A charitable exemption shall be granted to every parcel of real estate
that has an odd-numbered street address.” Pursuant to the no-set-of-circumstances test, we can
easily hypothesize that, somewhere in Illinois, there exists a parcel of real estate used
exclusively for charitable purposes–a food bank, for instance–that has an odd-numbered street
address. Could the statute be “validly applied” to this hypothetical food bank? Id.
¶ 153 Well, yes and no. It depends on what you mean by “validly applied.” More precisely, it
depends on what part of the statute you are applying. The part of the statute reading “[a]
charitable exemption shall be granted” could be validly (constitutionally) applied to the food
bank, because the food bank is used exclusively for charitable purposes, in satisfaction of
article IX, section 6 (Ill. Const. 1970, art. IX, § 6). But the part of the statute basing the
exemption on having “an odd-numbered street address” could not be validly applied to any
parcel, no matter what the circumstances, because granting an exemption merely on the basis
of having an odd-numbered street address, without regard to exclusive use for charitable
purposes, violates article IX, section 6.
¶ 154 This illustration we have come up with might at first seem far-fetched, but actually, as far
as article IX, section 6, is concerned, providing charitable services equivalent in value to the
estimated property tax liability is just as irrelevant as having an odd-numbered street address.
When it comes to the charitable exemption, all article IX, section 6, cares about is whether the
property is “used exclusively for *** charitable purposes.” Id. Article IX, section 6, on its face,
is completely indifferent to whether this exclusively charitable use makes the exemption
financially worthwhile for the government, just as it is completely indifferent to whether the
property has an odd-numbered street address.
¶ 155 If the legislature wished, it could provide that even though property is used exclusively for
charitable purposes, the property shall be exempt from taxation only if, additionally, the value
of the charitable services equals or exceeds the estimated property tax liability–because, again,
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the legislature is free to make the terms of an exemption more restrictive than the terms in
article IX, section 6 (Provena, 384 Ill. App. 3d at 741). But the legislature lacks the
constitutional authority to provide that, regardless of whether the property is used exclusively
for charitable purposes, the property shall receive an exemption if the value of the charitable
services equals or exceeds the estimated property tax liability–because that would be adding to
or broadening the exemption in article IX, section 6 (see id.).
¶ 156 Such, though, is the import of section 15-86. “[A] constitutional defect inheres in the terms
of the statute itself, independent of the statute’s application to particular cases.” One 1998
GMC, 2011 IL 110236, ¶ 86 (Karmeier, J., specially concurring). “[T]he omission of a
provision which constitutional principles require,” namely, use exclusively for charitable
purposes, “is an inherent and inescapable flaw” in section 15-86 “which renders the [statute]
invalid no matter what the circumstances.” Id. ¶ 87.
¶ 157 (3) The No-Set-of-Circumstances Test Turns the Discussion
Away From the Statutory Text, Whereas, Seemingly,
When the Facial Constitutionality of a Statute Is Challenged,
the Discussion Should Be All About the Statutory Text
¶ 158 One of the drawbacks of the no-set-of-circumstances test is that it
“completely divorces review of the constitutionality of a statute from the terms of the statute
itself, and instead improperly requires a court to engage in hypothetical musings about
potentially valid applications of the statute.” (Emphasis in original.) Doe, 667 F.3d at 1123.
The discussion gets diverted to the subject of the hypothetical food bank (to return to our
illustration) when the discussion should be about the undeniably unconstitutional statutory
provision that would award a charitable exemption merely on the basis of having an
odd-numbered street address (or merely on the basis of equaling or exceeding the estimated
property tax liability).
¶ 159 Even so, our supreme court, in conformance with Salerno, has prescribed the
no-set-of-circumstances test for facial challenges to the constitutionality of statutes (One 1998
GMC, 2011 IL 110236, ¶ 20), and therefore our duty, as an inferior court, is to apply the
no-set-of-circumstances test to determine whether a statute is facially unconstitutional–even
though we have difficulty making sense of the test so as to even be able to apply it. But we will
do our best.
¶ 160 The crucial provision in section 15-86 is the first sentence of subsection (c): “A hospital
applicant satisfies the conditions for an exemption under this Section with respect to the
subject property, and shall be issued a charitable exemption for that property, if the value of
services or activities listed in subsection (e) [(35 ILCS 200/15-86(e) (West 2014))] for the
hospital year equals or exceeds the relevant hospital entity’s estimated property tax liability, as
determined under subsection (g) [(35 ILCS 200/15-86(g) (West 2014))], for the year for which
exemption is sought.” 35 ILCS 200/15-86(c) (West 2014). We can imagine a hospital applicant
that, during the hospital year, provided services and activities listed in subsection (e) that
equaled or exceeded its estimated property tax liability and that also used its subject property
exclusively for charitable purposes (although section 15-86, by its terms, does not require such
exclusively charitable use as a condition of the charitable exemption). “[C]ould” section 15-86
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“be validly applied” to this hypothetical hospital applicant? Hill, 202 Ill. 2d at 157. Again, it
depends on what you mean by “validly applied.”
¶ 161 If you understand “validly applied” in a result-oriented way, yes, section 15-86 could be
validly applied to our hypothetical hospital applicant, because this applicant uses the subject
property exclusively for charitable purposes and because article IX, section 6, of the Illinois
Constitution (Ill. Const. 1970, art. IX, § 6) allows the legislature to grant a charitable
exemption for property used exclusively for charitable purposes.
¶ 162 By this reasoning, though, the legislature could have passed a statute providing simply that
“every hospital applicant shall be granted a charitable exemption,” and because it would be
possible to hypothesize at least one hospital applicant that used its property exclusively for
charitable purposes, a challenge to the facial constitutionality of the statute likewise would fail.
But denying the facial unconstitutionality of such a statute would be absurd. The
result-oriented approach cannot be right.
¶ 163 It would make more sense to say that an unconstitutional criterion cannot be “validly
applied” to any hospital applicant and that by disregarding the unconstitutional criterion, we
would effectively be deleting an essential part of the statute instead of taking the statute as it is.
Hill, 202 Ill. 2d at 157. A statute granting a charitable exemption to all hospital applicants
cannot be “validly applied” even to a hospital applicant that uses its property exclusively for
charitable purposes, because the statute grants an exemption on the basis of an unconstitutional
criterion: being a hospital applicant. A “law” purporting to grant a charitable exemption has to
contain the criterion that article IX, section 6, requires: “use[ ] exclusively for *** charitable
purposes.” Ill. Const. 1970, art. IX, § 6.
¶ 164 Measured against the terms of article IX, section 6 (id.), section 15-86 is unconstitutional
on its face because it purports to grant a charitable exemption on the basis of an
unconstitutional criterion, i.e., providing services or subsidies equal in value to the estimated
property tax liability (35 ILCS 200/15-86(c) (West 2014)), without requiring that the subject
property be “used exclusively *** for charitable purposes.” Therefore, the trial court should
have denied plaintiff’s motion for summary judgment on count II, which sought a declaratory
judgment that section 15-86 applied to the determination of whether the four parcels were
exempt for the assessment years 2004 to 2011. Because section 15-86 was unconstitutional, it
was unenforceable from its inception. See People v. Blair, 2013 IL 114122, ¶ 30.
¶ 165 III. CONCLUSION
¶ 166 For the foregoing reasons, we reverse the trial court’s judgment, and we remand this case
for further proceedings.
¶ 167 Reversed and remanded.
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The Carle Foundation v. Cunningham Township
Court: Appellate Court of Illinois
Date filed: 2016-02-11
Citations: 2016 IL App (4th) 140795
Copy CitationsCombined Opinion