University of Chicago v. Department of Revenue ( 2020 )

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Appellate Court Date: 2021.12.27
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University of Chicago v. Department of Revenue, 2020 IL App (1st) 191195Appellate Court THE UNIVERSITY OF CHICAGO, an Illinois Not-for-Profit
Caption Corporation, and BRIGHT HORIZONS CHILDREN’S CENTERS,
LLC, a Delaware Limited Liability Company, Plaintiffs-Appellees, v.
THE DEPARTMENT OF REVENUE; CONSTANCE BEARD, in
Her Official Capacity as Director of Revenue; and THE COOK
COUNTY BOARD OF REVIEW, Defendants (The Department of
Revenue and Constance Beard, in Her Official Capacity as Director of
Revenue, Defendants-Appellants).
District & No. First District, Sixth Division
No. 1-19-1195
Filed May 15, 2020
Decision Under Appeal from the Circuit Court of Cook County, No. 18-L-50641; the
Review Hon. Michael F. Otto, Judge, presiding.
Judgment Circuit court judgment reversed.
Department decision affirmed.
Counsel on Kwame Raoul, Attorney General, of Chicago (Jane Elinor Notz,
Appeal Solicitor General, and Aaron T. Dozeman, Assistant Attorney
General, of counsel), for appellants.
Thomas J. McNulty, Steven F. Pflaum, and Nicholas S. Graber, of
Neal, Gerber & Eisenberg LLP, of Chicago, for appellees.
Panel JUSTICE CONNORS delivered the judgment of the court, with
opinion.
Justices Cunningham and Harris concurred in the judgment and
opinion.
OPINION
¶1 Defendants, the Department of Revenue (Department) and its director, appeal from the
circuit court’s order reversing the Department’s decision that plaintiffs, the University of
Chicago (University) and Bright Horizons Children’s Centers, LLC (Bright Horizons)
(sometimes referred to as “applicants”), were not entitled to property tax exemptions under
section 15-35 of the Property Tax Code (Code) (35 ILCS 200/15-35 (West 2016)). On appeal,
the Department contends that it properly determined that two on-campus daycares run by
Bright Horizons were not reasonably necessary for fulfilling the University’s educational
objectives and that Bright Horizons operates with a view to profit. The University and Bright
Horizons maintain that (1) the University is entitled to an exemption under section 15-35 of
the Code because its use of the subject properties for daycare facilities was “reasonably
necessary” for the accomplishment of the educational objectives or the efficient administration
of the University and (2) the Department erred as a matter of law in denying the exemption
applications on the ground that Bright Horizons used the subject properties with a view to
profit, where the University did not receive any profit by outsourcing the operation of the
daycare facilities to Bright Horizons. We agree with the Department and reverse the circuit
court.
¶2 I. BACKGROUND
¶3 The University, an Illinois not-for-profit corporation, and Bright Horizons, a Delaware
limited liability company that is registered to do business in Illinois, sought a tax exemption
for tax year 2015 for the two subject properties—5610 South Drexel Avenue (Drexel) and
5824 South Stony Island Avenue (Stony Island). The University had outsourced the operation
of its daycare facilities at Drexel and Stony Island to Bright Horizons through a child care
center development and sponsorship agreement (agreement). The applicants sought property
tax exemptions pursuant to section 15-35 of the Code. Id. Section 15-35 of the Code provides
in pertinent part:
“All property donated by the United States for school purposes, and all property of
schools, not sold or leased or otherwise used with a view to profit, is exempt, whether
owned by a resident or non-resident of this State or by a corporation incorporated in
any state of the United States.” Id.¶4 On October 17, 2016, the Department denied the University’s and Bright Horizons’s
exemption applications. In its denial, the Department stated that the applications were denied
because the properties were not “in exempt ownership and exempt use” and that Bright
Horizons had “no ownership interest in the property.”
¶5 The University and Bright Horizons filed a request for a hearing under section 8-35(b) of
the Code (id. § 8-35(b)). The hearing was held on May 11, 2017, before Administrative Law
Judge (ALJ) Kenneth Galvin. The University and Bright Horizons called three witnesses:
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Ingrid Gould, Shirley Neiman, and Jocelyn Miller. The Department did not call any witnesses.
The testimony presented was as follows.
¶6 Ingrid Gould, the associate provost for faculty affairs at the University, testified that she
was responsible for overseeing the University’s childcare programs. When she came to the
provost’s office in 2004, she was told “we need to do something about childcare, but we are
not ready to have it on campus.” Gould stated that she found area providers and created
partnerships with them. However, there were groups on campus that began pressing for on-site
childcare. As time went on, the University became an outlier amongst its peers in terms of
childcare. Gould testified that when the University would recruit an associate professor or a
full-time professor, “they would come to us from an institution where there had been childcare
and where they had benefitted from childcare, and so they were stunned to take what they
thought was a better job at a better institution, and to find that we didn’t have this amenity.”
She stated that there were “assistant professors or post docs who were coming to us saying,
well, when we were graduate students, we had on-site childcare.”
¶7 Gould stated that in 2010, the provost told her to make a proposal for on-site childcare.
Gould designed a survey with her colleague that was sent to all employees, both academic and
nonacademic. The survey revealed that 95 percent of staff were interested in childcare on
campus. The greatest demand was for infant and toddler care, and people wanted reliability
and priority enrollment for the University community. They wanted to be sure that the hours
would suit their needs so that they could focus on their work. They also cared about proximity,
which was why on-site childcare was so important.
¶8 The University ultimately selected Bright Horizons as its daycare provider. University
families had priority for admission, and community members were welcome to enroll in any
leftover spots, as part of the University’s efforts to be a “good neighbor.” University families
included children of faculty members, academic appointees, lecturers, researchers, and
someone “who is just doing clinical work for us.”
¶9 Gould testified that Bright Horizons does not pay the University rent. The University does
not collect any money from Bright Horizons. The University paid for the build-out and the
construction of the daycare facilities on campus.
¶ 10 When asked about how the partnership with Bright Horizons promoted and assisted the
University in achieving its educational and research goals, Gould stated:
“[W]hat parents have said to us for years is that they want to focus on their work, and,
of course, that’s what we want them to focus on. So having onsite care, especially for
infants, means that mothers can be at the head of a classroom, they can be in a clinic,
they can be in their lab, and they can dart over and feed a child and run right back. It
means they are working 110 percent the way we want them to be all the time, knowing
that their kids are being taken care of right nearby on campus. The hours are extensive,
far more than we would ask for people to be working onsite. [The daycares] are open
11 hours a day. It allows for them to stay for a late meeting and know that if there is
any problem, they are just a few blocks away and that their kids are in competent hands
so they can really dedicate themselves, as we want them to, to their jobs.”
¶ 11 Shirley Neiman, the director of the Bright Horizons on Drexel, testified that the University
was responsible for the exterior of the building, the heating and air conditioning, and the locks
of the daycare facilities. Bright Horizons does not pay the University rent or a management
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fee, but pays the University $955.25 monthly for snow removal or grass cutting, depending on
the season. The University does not get any part of the tuition paid to Bright Horizons.
¶ 12 Neiman testified that 93 percent of the participating children who attended the Drexel
Bright Horizons in 2015 had parents that were University-affiliated. The Drexel location
operated at a profit of $495,000 in 2015.
¶ 13 Jocelyn Miller, the regional manager for Bright Horizons, testified that Bright Horizons
does not pay the University a management fee. She testified that the University has no control
over the tuition rates of the daycare facilities. Miller testified that 83% of the enrollment at the
Stony Island location was University-affiliated, and 18 percent was community families.
¶ 14 The exhibits showed that Stony Island operated at a profit of $444,535 in 2015. The
exhibits also showed that Drexel offered enrollment for up to 124 children, 6 weeks old to 5
years old. At the time of the hearing, Drexel had 124 children enrolled, 105 of which were
children of University employees and 19 of which were children from the Hyde Park/Chicago
community. Stony Island offered enrollment of up to 122 children. At the time of the hearing,
119 children were enrolled, 94 of which were children of University employees and 25 of
which were from the Hyde Park/Chicago community.
¶ 15 ALJ Galvin retired before issuing a recommendation in this case. On September 29, 2017,
ALJ Kelly Yi, who did not attend the hearing, but reviewed all submissions and testimony,
issued a recommendation for disposition. The ALJ found as a preliminary matter that both
applicants had standing. The University was the owner of the properties in question, and Bright
Horizons, pursuant to an operating agreement, was obligated to pay real estate taxes on the
subject property.
¶ 16 The ALJ then found that the applicants had not provided—by the presentation of testimony,
exhibits, and argument—“evidence sufficient to warrant exempting the subject property from
property taxes for tax year 2015.” The ALJ stated that the applicants “presented no evidence
there was an actual shortage of quality daycare in the community prior to [a]pplicants building
and operating onsite daycare” and found that, prior to opening Bright Horizons, the area
childcare providers had agreed to set aside some spaces for University employees. The ALJ
stated, “no testimony or documentary evidence was presented that the shortage of quality care
continued after the University formed partnerships with area daycare providers.” There was no
governmental obligation to provide top tier education or subsidize through property tax
exemption ancillary services based on employee demand.
¶ 17 Finally, the ALJ found that the subject properties were used with a view to profit and,
therefore, could not be exempt from property taxes in 2015. The ALJ supported this conclusion
with the fact that Bright Horizons, a for-profit corporation, made profits of approximately
$940,000 during an unidentified period of time. 1
¶ 18 On August 16, 2018, the director of the Department accepted the recommendation of the
ALJ and denied the University’s and Bright Horizons’ application for exemption.
¶ 19 The University and Bright Horizons timely filed a complaint for administrative review in
the circuit court. The parties submitted briefs, and a hearing was held. The circuit court then
issued a memorandum opinion and order reversing the Department’s decision.
We note that Neiman testified that the exhibit containing Drexel’s and Stony Island’s net incomes
1
was based on the year 2015.
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¶ 20 The court found that the property in question was not “used with a view to profit” within
the meaning of section 15-35 of the Code, regardless of the fact that the occupant itself, Bright
Horizons, earned a profit from its operations on the property that satisfied the school’s needs.
The court focused on whether the owner profited, not the occupant of the building.
¶ 21 In addressing the issue of whether the property was used for school purposes, the court
noted that the test is whether “the property is primarily used for purposes which are reasonably
necessary for the accomplishment and fulfillment of the educational objectives, or efficient
administration, of that particular institution.” The analysis must center on the needs of the
particular institution, and some discretion must be given to the governing authorities of the
institution to determine what buildings are necessary or proper to further their educational
objectives. The court found that, in this case, the ALJ did not extend any deference
“whatsoever” to the University’s determination that on-campus childcare was reasonably
necessary. The court held that the ALJ’s conclusion that on-campus childcare cannot be
“necessary” unless there is a total absence of off-campus childcare was “absurd.” There was
nothing in the case law that suggested on-site childcare was unnecessary so long as off-site
facilities existed. Rather, it was just one factor to consider.
¶ 22 The court found that affording even a minimal degree of deference to the University’s
determination compelled the conclusion that childcare facilities were reasonably necessary for
the accomplishment and fulfilment of the educational objectives, or efficient administration,
of the University. The court concluded that the properties were tax exempt, and the Department
now appeals.
¶ 23 II. ANALYSIS
¶ 24 A Department decision that denies an application for a tax exemption is reviewable as a
final administrative decision under the Administrative Review Law (735 ILCS 5/3-101 et seq.
(West 2016)). 35 ILCS 200/8-40 (West 2016). In administrative review cases, this court’s role
is to review the decision of the administrative agency, not the decision of the circuit court.
Calvary Baptist Church of Tilton v. Department of Revenue, 349 Ill. App. 3d 325, 330 (2004).
¶ 25 The general rule is that all property is subject to taxation unless specifically exempted by
statute. Eden Retirement Center, Inc. v. Department of Revenue, 213 Ill. 2d 273, 285 (2004).
Section 6 of article IX of the Illinois Constitution restricts the General Assembly’s power to
exempt. Ill. Const. 1970, art. IX, § 6. Permissible exemptions include “property used
exclusively for agricultural and horticultural societies, and for school, religious, cemetery and
charitable purposes.” Id. Statutory exemptions are always construed narrowly and strictly in
favor of taxation. Swank v. Department of Revenue, 336 Ill. App. 3d 851, 855 (2003).
Moreover, the party claiming the benefit of exemption bears the burden of proving clearly and
conclusively that it is entitled to the exception, and all facts and all debatable questions are
resolved in favor of taxation. Rogy’s New Generation, Inc. v. Department of Revenue, 318 Ill.
App. 3d 765, 771 (2000).
¶ 26 The University and Bright Horizons claim they met their burden and were entitled to relief
from taxation pursuant to section 15-35 of the Code, in which the General Assembly has
granted a property tax exemption for property that is “donated by the United States for school
purposes, and all property of schools, not sold or leased or otherwise used with a view to
profit.” 35 ILCS 200/15-35 (West 2016). Their first argument turns on whether the daycares
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were used exclusively for school purposes.
¶ 27 A. School Purposes
¶ 28 As an initial matter, the parties disagree on the applicable standard of review for this issue.
Generally, when an administrative agency’s decision involves a pure question of law, we
review it de novo. Skokie Firefighters Union, Local 3033 v. Illinois Labor Relations Board,
State Panel, 2016 IL App (1st) 152478, ¶ 11. When reviewing purely factual findings, the
agency’s findings and conclusions are deemed to be prima facie true and correct and, thus, are
reviewed under a manifest weight of the evidence standard. 735 ILCS 5/3-110 (West 2016);
Skokie Firefighters Union, Local 3033, 2016 IL App (1st) 152478, ¶ 11. When an agency’s
decision presents a mixed question of law and fact, it will be overturned on appeal only if it is
clearly erroneous. Village of North Riverside v. Boron, 2016 IL App (1st) 152687, ¶ 14.
¶ 29 Here, we are presented with a situation where the ALJ was required to apply the law to a
given set of facts. The University nevertheless contends that this is a challenge to the ALJ’s
interpretation of statutory provisions with undisputed facts and advocates for de novo review.
However, the issue before the Department was whether the University met its burden to
demonstrate that the on-campus daycares were tax exempt in 2015. That is the same issue on
appeal. This case involves reviewing the parties’ submissions, assessing the import of the facts
submitted, putting the facts through a multi-part legal test, and deciding a fact-intensive
question—whether the property is being used for school purposes. Midwest Palliative Hospice
& Care Center v. Beard, 2019 IL App (1st) 181321, ¶ 19 (whether property being used for an
exclusively charitable purpose is a mixed question of law and fact).
¶ 30 The ALJ was tasked with making a decision that turns on facts: whether this particular
institution and the particular on-campus properties had the requisite factual bases to qualify for
a statutory property tax exemption. Accordingly, we review the Department’s decision to deny
the property tax exemption under the clearly erroneous standard. Id. (Department’s decision to
deny a charitable property tax exemption is reviewed under the clearly erroneous standard);
see also Three Angels Broadcasting Network, Inc. v. Department of Revenue, 381 Ill. App. 3d
679, 693 (2008) (the issue of whether, given the undisputed facts, the broadcasting network
was entitled to a religious-use or charitable-use property exemption is reviewed under a clearly
erroneous standard).
¶ 31 Each individual claim for tax exemption must be determined from the facts presented.
MacMurray College v. Wright, 38 Ill. 2d 272, 278 (1967). A party seeking tax exemption for
property that is exclusively used for school purposes must do more than “merely show that the
property is owned by the school and occupied by school personnel.” Id. The property must be
used exclusively for school purposes. Id. “However, one is not required to show that the use
of the property is absolutely indispensable for carrying out the work of the institution.” Id. Our
supreme court stated, “[e]xemption will be sustained if it is established that the property is
primarily used for purposes which are reasonably necessary for the accomplishment and
fulfillment of the educational objectives, or efficient administration, of the particular
institution.” Id.¶ 32 We note that there are no Illinois cases that have determined whether a childcare center is
reasonably necessary for the accomplishment and fulfillment of the education objectives or
efficient administration of a school. However, as our supreme court has stated, “[i]t is
recognized that a school’s educational processes extend beyond the classroom and laboratory.
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Accordingly, [Illinois courts] have held student dormitories, dining halls, and recreation
facilities tax exempt as properly parts of the educational facilities of particular schools.” Id. at
277-78 (citing People ex rel. Goodman v. University of Illinois Foundation, 388 Ill. 363(1944), and People ex rel. Hesterman v. North Central College, 336 Ill. 263 (1929)).
¶ 33 Moreover, an Illinois court has applied the MacMurray test when analyzing whether a
childcare center was reasonably necessary for the efficient operation of a charitable hospital
under section 15-65. Memorial Child Care v. Department of Revenue, 238 Ill. App. 3d 985,
992-93 (1992); 35 ILCS 200/15-65 (West 2016) (certain property is exempt when exclusively
used for charitable purposes). In Memorial Child Care, the plaintiff, Child Care, operated a
childcare center on the land for the benefit of its affiliate, Memorial Medical Center. Memorial
Child Care, 238 Ill. App. 3d at 986. Memorial Medical Center was an acute-care hospital
located in Springfield, which had previously been granted a property tax exemption as a
hospital operated for charitable purposes. Id. Child Care was a not-for-profit Illinois
corporation that operated about one block west of the main hospital complex. Id. The Illinois
Department of Revenue found the primary use of Child Care’s property was neither charitable
nor educational and denied the applications for exemptions. An administrative hearing was
held. Id.¶ 34 The following testimony was offered at the hearing. In the early 1980s, Memorial Medical
Center conducted a survey because the hospital was experiencing some instability with its staff,
especially in the nursing department. Id. at 987. The study determined that the young
professional staff at the hospital had difficulty obtaining childcare due to a lack of adequate
daycare facilities in the community. Id. Child Care was developed to provide a daycare facility
that could correspond to the scheduling needs of the employees of the hospital. Id. Child Care’s
admission policy limited the enrollment to children of the employees of the affiliated
corporations of the Memorial Medical Center System. Id. The fees charged by Child Care for
daycare services were comparable to other facilities in the area. Id.¶ 35 Testimony further revealed that because adequate childcare for hospital employees was not
available in the community, the hospital needed to operate its own facility. Id. The biggest
difference between Child Care and other daycare centers in the area was the hours of operation.
Child Care was open from 5:30 a.m. until midnight, seven days per week. Child Care offered
both a daily rate and a weekly rate and was used by approximately 140 employees. Id.¶ 36 The ALJ recommended denial of the property tax exemptions, and the Department
accepted the recommended disposition and denied Child Care’s applications. Id. at 988. The
Department rejected Child Care’s argument that the daycare operation was reasonably
necessary to fulfill the charitable objectives of Memorial Medical Center. Id.¶ 37 Child Care filed a complaint for administrative review in the circuit court. Id. The circuit
court reversed the decision of the Department, finding that the daycare was entitled to
exemption from real estate taxes because its activities were “reasonably necessary” to further
the charitable objectives of the hospital and to allow for the more efficient administration of
the hospital. Id.¶ 38 On appeal by the Department, the appellate court affirmed the circuit court. The court on
appeal first noted that there “are no Illinois cases which have determined whether a child-care
center is reasonably necessary for the efficient operation of a charitable hospital.” Id. at 991.
The court then noted that the record indicated a shortage of childcare facilities in the area and
that employees of the hospital had difficulty finding childcare available that met their needs
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and fit the hospital’s scheduling requirements. Id. at 992. The court noted that Child Care was
created specifically as a not-for-profit corporation to alleviate the difficulty the hospital
experienced in hiring and maintaining employment of professional employees with young
children. Id. at 993. The court stated, “[t]he use of the property at issue is for a purpose
reasonably necessary to accomplish the efficient administration of Memorial Medical Center
as a tax-exempt charitable hospital under the Act.” Id. The court found that the facility enabled
the hospital to better serve the needs of central Illinois “by allowing the hospital to attract and
retain quality nurses and other medical professionals.” Id. The court stated, “Although
Memorial Medical Center functioned for years without a child-care center, this alone does not
show that a child-care center for employees of the hospital is not essential to the operation of
the hospital.” Id.¶ 39 The court found in that case that
“the availability of secure, flexible child care is more than a mere convenience; it is a
necessity that directly affects an employee’s willingness and ability to provide much
needed services to the Memorial Medical Center and the community. Child Care’s use
of the property is primarily for purposes reasonably necessary to accomplish the
efficient administration of the hospital ***.” Id.¶ 40 In the case at bar, the Department contends that Memorial Child Care is inapposite
because, in that case, there was a “documented lack of child care and a significant number of
hospital employees had difficulty finding daycare that fit their schedules.” The Department
argues that the University and Bright Horizons, “put up no evidence that University-affiliated
families had scheduling issues or other special, unique considerations that made on-campus
daycare a necessity for them to carry out their educational duties.” We disagree.
¶ 41 While it is the taxpayer’s burden to prove its right to an exemption, each case requires
consideration of the particular facts presented. Norwegian American Hospital, Inc. v.
Department of Revenue, 210 Ill. App. 3d 318, 323 (1991). In the instant case, the University
and Bright Horizons put forth evidence that the University had become an outlier amongst its
peers in terms of childcare. When the University would recruit an associate professor or a full-
time professor, the would-be employee would come from an institution where there had been
childcare and was therefore surprised to take what they thought was a better job at a better
institution, only to find that that the University did not have the same service.
¶ 42 In 2010, a survey was sent to all employees of the University, both academic and
nonacademic. The survey showed that employees wanted reliability and hours that would suit
their needs so that they could focus on their work. They also cared about proximity, which is
why on-site childcare was so important. The survey revealed that 95% of staff and post docs
were interested in childcare on campus. Gould testified:
“[W]hat parents have said to us for years is that they want to focus on their work, and,
of course, that’s what we want them to focus on. So having onsite care, especially for
infants, means that mothers can be at the head of a classroom, they can be in a clinic,
they can be in their lab, and they can dart over and feed a child and run right back. It
means they are working 110 percent the way we want them to be all the time, knowing
that their kids are being taken care of right nearby on campus. The hours are extensive,
far more than we would ask for people to be working onsite. [The daycares] are open
11 hours a day. It allows for them to stay for a late meeting and know that if there is
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any problem, they are just a few blocks away and that their kids are in competent hands
so they can really dedicate themselves, as we want them to, to their jobs.”
¶ 43 As can be seen by this testimony, on-campus childcare was created specifically to alleviate
the difficulty in hiring professional employees with young children. While there were other
childcare facilities in the area, none were on campus. There is no question that on-campus
childcare would enable the University to better serve the needs of the students at the University
by allowing the University to attract and retain quality professors and other staff members.
Although the University functioned for years without on-campus childcare, this alone does not
show that a childcare center for employees of the University is not essential to the operation of
the University. See Memorial Child Care, 238 Ill. App. 3d at 993 (while the hospital functioned
for years without childcare, this alone does not show that a childcare center for employees of
the hospital was not essential to the operation of the hospital). We agree with our colleagues
in the Fourth District that the availability of secure, on-campus childcare is more than a mere
convenience. Id. It is a necessity that directly affects an employee’s willingness and ability to
provide services for the University. Id.¶ 44 We therefore find that the property at issue is primarily used for purposes that are
reasonably necessary for the accomplishment and fulfillment of the educational objectives, or
efficient administration, of the University. The Department’s opposite conclusion was clearly
erroneous. Id.; MacMurray College, 38 Ill. 2d at 277-78.
¶ 45 B. Used With a View to Profit
¶ 46 Next, we must decide whether the subject properties are “used with a view to profit,” within
the meaning of section 15-35. 35 ILCS 200/15-35 (West 2016). The University and Bright
Horizons contend that this phrase applies to the University as the owner of the property, and
not the operator, and therefore the property is exempt because the University is not the entity
profiting from the use of the property. The University does not collect rent from Bright
Horizons and does not receive any portion of the tuition paid to Bright Horizons. The
Department, on the other hand, contends that there is no basis in law to find that a profit must
be made by the owner of the property for the tax exemption to be inapplicable. Rather, the
Department contends that under the plain meaning of the statute, so long as the property is
used with a view to profit, regardless of what entity profits, the exemption fails. The
Department argues that because Bright Horizons made nearly $1 million in tuition in 2015, the
property was used with a view to profit.
¶ 47 The issue here is one of statutory construction. Interpretation of a statute is a question of
law. In cases involving an agency’s interpretation of a statute that the agency is charged with
administering, the agency’s interpretation is considered relevant but not binding on the court.
Branson v. Department of Revenue, 168 Ill. 2d 247, 254 (1995). Accordingly, our review of
this issue is de novo, with some deference afforded to the Department’s statutory interpretation.
Swank, 336 Ill. App. 3d at 860. Our supreme court has specifically acknowledged the wisdom
of judicial deference to an agency’s experience and expertise. AFM Messenger Service, Inc. v.
Department of Employment Security, 198 Ill. 2d 380, 394 (2001). A significant reason for
giving substantial weight and deference to an agency’s interpretation of an ambiguous statute
is that “ ‘agencies can make informed judgments upon the issues, based on their experience
and expertise.’ ” Id. (quoting Abrahamson v. Illinois Department of Professional Regulation,
153 Ill. 2d 76, 97-98 (1992)).
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¶ 48 We reiterate the general rule that all property is subject to taxation unless specifically
exempted by statute, and we must construe the statutory exemption narrowly and strictly in
favor of taxation. Swank, 336 Ill. App. 3d at 856. The primary rule of statutory construction is
to give effect to legislative intent by first looking at the plain meaning of the language. Davis
v. Toshiba Machine Co., America, 186 Ill. 2d 181, 184 (1999). Where the language is clear and
unambiguous, a court must give it effect as written, without reading into it exceptions,
limitations, or conditions that the legislature did not express. Id. at 184-85.
¶ 49 The language in section 15-35 reads, “All property donated by the United States for school
purposes, and all property of schools, not sold or leased or otherwise used with a view to profit,
is exempt ***.” 35 ILCS 200/15-35 (West 2016). Accordingly, school property “cannot be
‘sold’ with a view to profit, ‘leased’ with a view to profit, or ‘otherwise used with a view to
profit.’ ” Swank, 336 Ill. App. 3d at 857. The Second District has found that the term
“otherwise” refers to “all uses of the property ‘with a view to profit’ other than, or different
from, selling or leasing it. This would include property devoted to school purposes, if used
with a ‘view to profit.’ ” Id. at 857-58.
¶ 50 The University and Bright Horizons rely on Provena Covenant Medical Center v.
Department of Revenue, 236 Ill. 2d 368, 392 (2010) for the proposition that outsourcing
services to for-profit vendors does not affect entitlement to tax exemption. The specific passage
they rely on reads as follows:
“The fact that an organization contracts with third-party, for-profit providers for
ancillary services does not, in itself, preclude the organization from being characterized
as an institution of charity within the meaning of section 15-65 of the Property Tax
Code ***. Virtually all charities must contract with for-profit vendors to one degree or
another in order to carry on their operations and perform their charitable functions.
[Citation.] The real concern is whether any portion of the money received by the
organization is permitted to inure to the benefit of any private individual engaged in
managing the organization. (Emphasis omitted.) Id.¶ 51 However, Provena is inapposite, as it addressed whether an entity is still considered tax-
exempt if it outsources some of its services. There is no question that the University is still a
tax-exempt entity. Rather, the question remains as to whether, under section 15-35 of the Code,
the profit must be realized by the owner of the property in order for the exemption to fail or if
the provision applies to any entity making a profit on the property.
¶ 52 The circuit court found that “selling” and “leasing” property are activities engaged in by,
and earning a profit for, the owner of the property. Citing Pooh-Bah Enterprises, Inc. v. County
of Cook, 232 Ill. 2d 463, 492 (2009), the court stated that therefore, “under ejusdem generis,
the catch-all ‘otherwise used with a view to profit’ should be read likewise as referring to
activities profiting the owner.” Under the ejusdem generis doctrine, “when a statutory clause
specifically describes several classes of persons or things and then includes ‘other persons or
things,’ the word ‘other’ is interpreted to mean ‘other such like.’ ” Id.¶ 53 In a vacuum, the circuit court’s interpretation is plausible. However, we must construe the
statutory exemption narrowly and strictly in favor of taxation. Swank, 336 Ill. App. 3d at 856.
There is simply nothing in the statute stating that the owner of the property must be the entity
that profits for the exemption to be inapplicable. We are therefore persuaded by the
Department’s interpretation that the phrase “used with a view to profit” refers to any entity
profiting from the use of the property, not just the owner of the property. This interpretation
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follows the mandate that tax-exemption provisions be construed narrowly, and it gives the
appropriate deference to the Department’s application of the statute. See id. at 859 (citing
Forest Preserve District of Du Page County v. Department of Revenue, 266 Ill. App. 3d 264,
270 (1994), and Abrahamson, 153 Ill. 2d at 97-98).
¶ 54 III. CONCLUSION
¶ 55 For the foregoing reasons, we reverse the circuit court of Cook County’s order and affirm
the Department’s decision that the University and Bright Horizons were not entitled to a tax
exemption under section 15-35 of the Code.
¶ 56 Circuit court judgment reversed.
¶ 57 Department decision affirmed.
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