Case Title: Arangold Corp. v. Zehnder

Citation: 

Docket Number: 93836

State: illinois

Court: Illinois Supreme Court

Date: 2003-03-20T00:00:00Z

Document:
Docket No. 93836-Agenda 16-November 2002.
ARANGOLD CORPORATION, d/b/a Arango Cigar Company, 
Appellant, v. KENNETH E. ZEHNDER, Director of Revenue,  								
et al., Appellees.
Opinion filed March 20, 2003.
	JUSTICE GARMAN delivered the opinion of the court:
	This case concerns the constitutionality of the Tobacco
Products Tax Act of 1995 (Act) (35 ILCS 143/10-10 et seq. (West
2000)). The trial and appellate courts upheld the Act against
challenges based upon the Illinois due process clause (Ill. Const.
1970, art. I, §2) and the uniformity clause (Ill. Const. 1970, art. IX,
§2). We granted leave to appeal (177 Ill. 2d R. 315) and we now
affirm.

I. BACKGROUND
	Plaintiff, Arangold Corporation, is an Illinois corporation
doing business as a wholesale tobacco distributor of noncigarette
tobacco products, such as cigars and chewing tobacco. Arangold
is subject to the Act, which imposes a tax on such products.
Proceeds from the tax are deposited into the Long-Term Care
Provider Fund of the State Treasury (Fund). 35 ILCS 143/10-10
(West 2000). Disbursements from the Fund are made to skilled
and intermediate nursing facilities under Title XIX of the Social
Security Act, known as the Medicaid program, and pursuant to
article V of the Illinois Public Aid Code (305 ILCS 5/5B-8(b)(1)
(West 2000)). These programs provide medical care for people
whose income and resources are inadequate to meet their medical
needs.
	In November 1995, Arangold brought an action in the circuit
court of Cook County challenging the constitutionality of the tax
imposed by the Act. It alleged that the Act contravened the federal
due process and equal protection clauses (U.S. Const., amend.
XIV), the Illinois due process and equal protection clauses (Ill.
Const. 1970, art. I, §2), the uniformity clause of the Illinois
constitution (Ill. Const. 1970, art. IX, §2), and the Illinois
constitution's prohibition on special legislation (Ill. Const. 1970,
art. IV, §13). The trial court denied Arangold's motion for
summary judgment on all counts of its complaint. Arangold
subsequently amended its complaint to challenge Public Act
89-21, the legislative enactment that included the Act, on the basis
that it violated the single subject rule of the Illinois constitution
(Ill. Const. 1970, art. IV, §8(d)). In April 1998, the trial court
granted summary judgment to Arangold on its single subject
claim. A direct appeal was taken to this court due to the finding of
unconstitutionality. In July 1999, this court reversed, finding no
single subject violation, and remanded the cause to the trial court
for further proceedings. Arangold Corp. v. Zehnder, 187 Ill. 2d 341 (1999).
	In March 2000, defendants filed a motion for summary
judgment as to all of Arangold's constitutional claims. Following
oral argument, the trial court granted the motion. Arangold
appealed to the appellate court, which affirmed the trial court's
decision. 329 Ill. App. 3d 781.

II. ANALYSIS
A. Standard of Review
	Summary judgment is proper where "the pleadings,
depositions, and admissions on file, together with the affidavits,
if any, show that there is no genuine issue as to any material fact
and that the moving party is entitled to a judgment as a matter of
law." 735 ILCS 5/2-1005(c) (West 2000). A trial court's grant of
summary judgment is reviewed de novo. Morris v. Margulis, 197 Ill. 2d 28, 35 (2001).
	The constitutionality of a statute is also reviewed de novo.
Miller v. Rosenberg, 196 Ill. 2d 50, 57 (2001). Statutes carry a
strong presumption of constitutionality. People ex rel. Ryan v.
World Church of the Creator, 198 Ill. 2d 115, 120 (2001). The
party challenging a statute carries the burden of rebutting that
presumption and "clearly establishing" its unconstitutionality.
Russell v. Department of Natural Resources, 183 Ill. 2d 434, 441
(1998). This court has a duty to uphold the constitutionality of a
statute whenever reasonably possible. City of Chicago v. Morales,
177 Ill. 2d 440, 448 (1997).

B. Due Process
	In this court, Arangold has abandoned its federal
constitutional claims, as well as its Illinois equal protection and
special legislation claims, choosing to pursue only its Illinois due
process and uniformity claims. We first address Arangold's due
process arguments.
	The Act neither involves a suspect classification nor impinges
on a fundamental right. Accordingly, to comport with due process,
it must bear a rational relationship to the public interest sought to
be served and the means adopted to accomplish this goal must be
reasonable. Messenger v. Edgar, 157 Ill. 2d 162, 176 (1993);
Russell, 183 Ill. 2d  at 447. In applying the rational basis test, a
court must identify the public interest that the statute is intended
to protect, examine whether the statute bears a reasonable
relationship to that interest, and determine whether the method
used to protect or further that interest is reasonable. People v.
Lindner, 127 Ill. 2d 174, 180 (1989). Rational basis review is
limited (Miller, 196 Ill. 2d at 59) and "highly deferential"
(Committee for Educational Rights v. Edgar, 174 Ill. 2d 1, 33
(1996)). As long as there is any reasonably conceivable state of
facts showing that the legislation is rational, it must be upheld.
People v. Hamm, 149 Ill. 2d 201, 216 (1992). Whether a statute is
wise or whether it is the best means to achieve the desired result
are matters left to the legislature, not the courts. People v.
Shephard, 152 Ill. 2d 489, 503 (1992). The judgments made by the
legislature in crafting a statute are not subject to courtroom fact
finding and may be based on rational speculation unsupported by
evidence or empirical data. Cutinello v. Whitley, 161 Ill. 2d 409,
421-22 (1994).
	Defendants argue that the government interest at
stake-funding medical care for the poor in long-term care
facilities-is legitimate and that the General Assembly could
reasonably have found that tobacco products cause diseases
requiring such care.
	Revenues collected pursuant to the Act are used to pay the
cost of long-term medical care for those persons unable to bear the
cost of such care themselves. The State has a legitimate interest in
preserving the health of its citizens (New Energy Co. of Indiana v.
Limbach, 486 U.S. 269, 279, 100 L. Ed. 2d 302, 312, 108 S. Ct. 1803, 1810 (1988)) and in assisting the poor to meet their needs
(Carmichael v. Southern Coal & Coke Co., 301 U.S. 495, 515, 81 L. Ed. 1245, 1256, 57 S. Ct. 868, 875 (1937)). The General
Assembly may have believed that the use of tobacco products
causes a variety of health problems and that such problems require
long-term medical care. With respect to those persons who lack
the resources to afford such care, the General Assembly may have
believed that responsibility to pay rests with the state and that
those, such as Arangold, whose products impose such costs on the
state, should bear some measure of those costs through the taxing
of their products.
	Recognizing that litigants may not challenge the factual
underpinnings of the General Assembly's legislative judgments
under due process analysis (People ex rel. Lumpkin v. Cassidy,
184 Ill. 2d 117, 124 (1998)), Arangold challenges the method
chosen in the Act to fund long-term care for the poor. It argues that
the tax imposed by the Act is arbitrary and unreasonable because
it selectively targets for taxation distributors of cigars and chewing
tobacco to fund a general welfare program of the state, designed
to benefit a broad range of taxpayers. It principally relies on two
cases decided by this court, Crocker v. Finley, 99 Ill. 2d 444
(1984), and Boynton v. Kusper, 112 Ill. 2d 356 (1986).
	In Crocker, the plaintiff challenged the constitutionality of a
$5 fee charged to all petitioners for dissolution of marriage. The
fee was assessed in addition to the usual filing fees and, pursuant
to statute, was collected to fund shelters and other services for
victims of domestic violence. This court invalidated the fee,
which, in reality, was a tax, on the basis that it conflicted with the
Illinois constitutional right to obtain justice by law freely (Ill.
Const. 1970, art. I, §12). Recognizing that statutes imposing
litigation taxes are not necessarily unconstitutional, we determined
that court filing fees and taxes may be imposed only for purposes
relating to the operation and maintenance of the courts. We found
such a requirement to be inherent in the constitutional right to
obtain justice freely. "If the right to obtain justice freely is to be a
meaningful guarantee, it must preclude the legislature from raising
general revenue through charges assessed to those who would
utilize our courts." Crocker, 99 Ill. 2d  at 455. We also held the fee
violative of due process. Focusing on the means chosen by the
legislature to fund domestic violence shelters and programs, we
noted that these services were available to all adults and their
dependents who are the subjects of domestic violence. There was
no requirement that recipients of the services be married or
divorced, yet the legislature chose to tax dissolution petitioners as
a means of funding the programs. Doing so caused the members
of that class to bear the cost of maintaining this public welfare
program, while excluding other classes of taxpayers who would
also benefit from the programs. Crocker, 99 Ill. 2d  at 456-57.
	In Boynton, we struck down a similar fee imposed upon those
who applied for marriage licenses. The statute required county
clerks to pay $10 of the fee collected for issuance of a marriage
license into the Domestic Violence Shelter and Service Fund. The
plaintiffs challenged this portion of the license fee as an
unconstitutional tax violative of due process and uniformity of
taxation. Finding our decision in Crocker controlling, we held that
the fee violated the Illinois due process clause. We first noted that
the fee was a tax, as it bore no relationship to the county clerk's
service of issuing and recording marriage licenses. Its sole purpose
was to raise revenue for the domestic violence fund. We noted
that, "[i]n considering the reasonableness of a classification from
a due process point of view, under either the police power or the
taxing power of the State, 'it must appear that the particular
classification is based upon some real and substantial difference
in kind, situation or circumstance in the persons or objects on
which the classification rests, and which bears a rational relation
to the evil to be remedied and the purpose to be attained by the
statute ***.' (Emphasis in original.)" Boynton, 112 Ill. 2d  at 366-67, quoting Grasse v. Dealer's Transport Co., 412 Ill. 179, 193-94
(1952). Like the tax on dissolution petitioners in Crocker, the tax
on marriage licenses in Boynton rested upon an arbitrary
classification. We held that the relationship between the purchase
of a marriage license and domestic violence was too remote to
satisfy the rational basis test. A contrary finding would open the
door to the imposition of the costs of other social programs upon
marriage license applicants. Boynton, 112 Ill. 2d  at 367-68.
	Arangold argues that Crocker and Boynton prohibit the
targeting of a narrow group of taxpayers to fund a general welfare
program. However, Arangold's reliance on those cases is
misplaced. In Crocker and Boynton, this court found the
relationship between dissolution actions and marriage licenses on
the one hand and domestic violence programs on the other to be
too remote to permit the tax to stand. The main thrust of the
Crocker decision was its holding that the tax unconstitutionally
burdened litigants' access to the courts. In Boynton, while we
engaged in a rational basis analysis, we also noted that the tax
directly impeded the fundamental right to marry and that it failed
to satisfy the heightened strict scrutiny standard of review.
Boynton, 112 Ill. 2d  at 369. Here, Arangold conceded in the
appellate court that the General Assembly could have believed that
"cigars, pipes, chewing tobacco, and other tobacco products cause
any number of health problems and that those problems require
care in long-term health care facilities." 329 Ill. App. 3d at 792.
Accordingly, we do not have the same remoteness problem here
as existed in Crocker and Boynton.
	In addition, we note that the activities being taxed in Crocker
and Boynton were constitutionally protected, unlike Arangold's
activities here. We also point out that the objective of the taxes
imposed in those cases was, at least in part, to provide a benefit to
those taxed in the form of domestic violence programs. However,
in neither case was it clear that most of those taxed would benefit
from the services, yet the services were available to others not
taxed. The tax imposed on Arangold, in contrast, is not intended
to provide any benefit to it or any other member of the taxed class.
Even could it be said that Arangold's products impose no costs on
the state for the long-term care of the poor, we note that "[n]othing
is more familiar in taxation than the imposition of a tax upon a
class or upon individuals who enjoy no direct benefit from its
expenditure, and who are not responsible for the condition to be
remedied." Carmichael, 301 U.S.  at 521-22, 81 L. Ed.  at 1260, 57 S. Ct.  at 878.
	Due process neither prohibits taxing one group to benefit
another nor does it require that those taxed benefit directly from
the tax. "A tax is not an assessment of benefits. It is, as we have
said, a means of distributing the burden of the cost of government.
The only benefit to which the taxpayer is constitutionally entitled
is that derived from his enjoyment of the privileges of living in an
organized society, established and safeguarded by the devotion of
taxes to public purposes. [Citation.] Any other view would
preclude the levying of taxes except as they are used to
compensate for the burden on those who pay them, and would
involve the abandonment of the most fundamental principle of
government-that it exists primarily to provide for the common
good." Carmichael, 301 U.S.  at 522-23, 81 L. Ed.  at 1260-61, 57 S. Ct.  at 878-79.
	Arangold argues that this court has found Carmichael to be
inconsistent with the Illinois due process clause, citing Boynton.
However, the majority there did not even cite Carmichael, much
less discuss its viability for Illinois due process purposes. While
it is true that this court will construe the Illinois due process clause
independently of its federal counterpart (Lewis E. v. Spagnolo, 186 Ill. 2d 198, 227 (1999)), and we have interpreted it to provide
greater protections in appropriate cases (e.g., People v.
Washington, 171 Ill. 2d 475, 485-86 (1996); People v. McCauley,
163 Ill. 2d 414, 440 (1994)), Arangold presents no compelling
reason to do so here. As noted by defendants and the appellate
court, many tax statutes in Illinois impose taxes on specific groups
of taxpayers and earmark the proceeds for special funds. See, e.g.,
35 ILCS 120/3 (West 2000) (Retailers' Occupation Tax Act); 35
ILCS 130/2 (West 2000) (Cigarette Tax Act); 35 ILCS 145/3(b)
(West 2000) (Hotel Operators' Occupation Tax Act).
	We conclude, therefore, that the trial court did not err in
granting summary judgment to defendants on Arangold's due
process claim.

C. Uniformity Clause
	Arangold next challenges the Act as violative of the
uniformity clause of the Illinois constitution, which provides:
			"In any law classifying the subjects or objects of
nonproperty taxes or fees, the classes shall be reasonable
and the subjects and objects within each class shall be
taxed uniformly. Exemptions, deductions, credits, refunds
and other allowances shall be reasonable." Ill. Const.
1970, art. IX, §2.
	To survive scrutiny under the uniformity clause, a
nonproperty tax classification must (1) be based on a real and
substantial difference between the people taxed and those not
taxed, and (2) bear some reasonable relationship to the object of
the legislation or to public policy. Milwaukee Safeguard Insurance
Co. v. Selcke, 179 Ill. 2d 94, 98 (1997). The uniformity clause was
intended to be a broader limitation on legislative power to classify
for nonproperty tax purposes than the limitation of the equal
protection clause (Searle Pharmaceuticals, Inc. v. Department of
Revenue, 117 Ill. 2d 454, 469 (1987)) and was meant to insure that
taxpayers would receive added protection in the state constitution
based upon a standard of reasonableness that is more rigorous than
that contained in the federal constitution (Milwaukee Safeguard,
179 Ill. 2d at 102). The party attacking a tax classification is not
required to negate every conceivable basis that might support it.
Searle, 117 Ill. 2d  at 468. When faced with a good-faith uniformity
challenge, the taxing body bears the initial burden of producing a
justification for the classification. The challenging party then has
the burden of persuading the court that the taxing body's
explanation is insufficient as a matter of law or unsupported by the
facts. Geja's Cafe v. Metropolitan Pier & Exposition Authority,
153 Ill. 2d 239, 248-49 (1992); Allegro Services, Ltd. v.
Metropolitan Pier & Exposition Authority, 172 Ill. 2d 243, 255
(1996). Despite the more stringent standard under the uniformity
clause, the scope of a court's inquiry is "relatively narrow."
Allegro, 172 Ill. 2d  at 250. "[I]n a uniformity clause challenge the
court is not required to have proof of perfect rationality as to each
and every taxpayer. The uniformity clause was not designed as a
straitjacket for the General Assembly. Rather, the uniformity
clause was designed to enforce minimum standards of
reasonableness and fairness as between groups of taxpayers."
Geja's Cafe, 153 Ill. 2d  at 252.
	We note that before the appellate court, Arangold abandoned
its claim that the Act discriminates between different classes of
competing tobacco distributors. Thus, only the second prong of the
uniformity clause is involved here.
	Arangold argues that the tax imposed is "arbitrarily
underinclusive" in relation to the stated legislative objective.
According to Arangold, taxpayers who are equally or more related
to the Act's stated purpose are excluded from paying the tax. It
argues there is medical evidence that alcohol, red meat, and eggs
are associated with diseases requiring long-term medical care. In
support of its argument, Arangold cites this court's decisions in
Searle and Milwaukee Safeguard. Searle involved a tax law that
permitted corporations which were members of an affiliated
corporate group filing a separate federal income tax return to carry
back net operating losses for Illinois tax purposes. However,
corporations that were members of an affiliated corporate group
filing a consolidated federal income tax return were not permitted
to carry back such losses. The asserted justification for the
difference in tax treatment was administrative convenience and
fiscal planning. This court found that there was no real and
substantial difference between the two groups of taxpayers. Searle,
117 Ill. 2d  at 469. In Milwaukee Safeguard, the law treated two
classes of insurance companies-foreign companies and domestic
companies-differently, imposing a tax only on foreign companies
doing business in Illinois for the privilege of doing business in the
State. After examining the defendants' justification for the law,
this court found that, although the classification of foreign and
domestic insurance companies was based on a real and substantial
difference between the two groups, the classification was not
reasonably related to the objective of the law. Milwaukee
Safeguard, 179 Ill. 2d  at 102.
	We reject Arangold's argument. Here, in contrast to Searle
and Milwaukee Safeguard, we are not required to consider whether
there are differences between classes of persons or entities. We
need only determine whether the tax classification bears some
reasonable relationship to the object of the legislation.
	Citing Crocker, Arangold complains that the Act improperly
selectively imposes a tax only on cigars and chewing tobacco
products for the sole purpose of funding a general welfare
program, thus making it "arbitrarily limited in relation to its
legislative objective." Arangold finds no rational justification for
"arbitrarily" targeting noncigarette tobacco products for taxation
to fund nursing home care for the indigent, while other taxpayers
equally or more related to that objective are not taxed. Thus,
according to Arangold, the legislature may not tax it and its fellow
tobacco distributors because, even assuming a relationship
between the class taxed and the objective of the law, the
legislature was bound to tax all those who are equally or more
related to the objective. Arangold's citation of Crocker is
unavailing, as Crocker was not a uniformity case. Arangold cites
no other case supporting its theory of taxation. We note that
perfect rationality is not required as to each taxpayer. A minimum
standard of reasonableness is all that is required. See Geja's Cafe,
153 Ill. 2d  at 252. In any event, we are not concerned here with the
question of whether the legislature should have taxed everyone
who may contribute to diseases that require long-term nursing
home care. We need only consider whether there is a reasonable
relationship between the taxation of Arangold and its fellow
tobacco distributors and the objective of the Act.
	We are likewise unpersuaded by Arangold's argument that the
uniformity clause prohibits taxing a narrow group to fund a
general welfare program of the state. Arangold's citation of
Crocker for this contention is once again unavailing. Crocker was
decided under the free access clause and, to a lesser extent, under
the due process clause. It was not a uniformity case. Arangold cites
no case that supports its argument.
	Arangold argues that defendants admitted in the trial court
that they have no evidence linking use of cigars and chewing
tobacco to diseases requiring long-term care. Arangold bases this
assertion on defendants' failure to answer a request for
admissions. It argues that the more rigorous standard of
reasonableness in uniformity analysis requires the state to produce
facts justifying the tax classification. Arangold cites no cases so
holding. In Geja's Cafe, we clarified the burdens placed on the
parties in a uniformity challenge. We stated that the challenging
party is not required to prove that every conceivable explanation
for the tax is unreasonable. Rather, the taxing body must "produce
a justification for its classifications. The plaintiff then has the
burden to persuade the court that the defendant's explanation is
insufficient as a matter of law, or unsupported by the facts ***."
Geja's Cafe, 153 Ill. 2d  at 248-49. Similarly, in Milwaukee
Safeguard, we noted that when faced with a good-faith uniformity
challenge, the taxing body has the initial burden of producing a
justification for the classification. Thereafter, the party challenging
the tax has the "burden of persuading the court that the
justification offered is unsupported by the facts or insufficient as
a matter of law." Milwaukee Safeguard, 179 Ill. 2d  at 98-99.
Arangold cites no cases in which this court has held that a taxing
body bears an evidentiary burden in justifying the tax in a
uniformity challenge. Rather, the above-cited cases demonstrate
that the taxing body need only assert a justification for the
classification. It is the plaintiff who then has the evidentiary
burden of proving that the asserted justification is unsupported by
the facts. The more rigorous standard of reasonableness in
uniformity analysis simply allows the plaintiff to mount a good-faith uniformity challenge without having the initial burden of
disproving every conceivable explanation for the tax. The ultimate
burden remains with the plaintiff, however, to demonstrate that the
taxing body's asserted justification is unsupported by the facts or
insufficient as a matter of law. To hold otherwise would
undermine the well-settled principle that a statute bears a strong
presumption of constitutionality and that the party challenging the
statute has the burden of demonstrating the statute's
unconstitutionality.
	Turning to the case before us, the objective of the Act, as
defendants assert, is to provide funds for the care of those persons
who lack the resources to pay for long-term care in skilled or
intermediate nursing homes. Further, defendants assert that the Act
taxes tobacco distributors because their products cause diseases
that conceivably require long-term care for those persons who
cannot pay for it. Defendants having asserted a justification for the
tax, it was then Arangold's burden to come forward with evidence
showing that the asserted justification was unsupported by the
facts. We agree with the appellate court that Arangold failed to
satisfy that burden. Although they were not required to do so,
defendants submitted documentary evidence with their summary
judgment motion, in an effort to demonstrate the connection
between use of tobacco products and a variety of diseases, such as
heart disease, lung disease, circulatory system diseases, and
various forms of cancer. It is by now beyond dispute that the use
of tobacco products can cause a variety of serious and debilitating
diseases, including heart disease, respiratory diseases and cancer.
As the appellate court noted, the National Nursing Home Survey,
submitted to the trial court by Arangold, shows that 30% of all
persons admitted to long-term nursing care were diagnosed with
diseases of the circulatory system, respiratory disease, or cancer.
329 Ill. App. 3d at 799. In addition, data presented to the trial court
by defendants from the Illinois Department of Public Health
demonstrate that, in 1994, almost two-thirds of all Illinois nursing
home residents received public assistance in paying for their care.
In response, Arangold offered the affidavits of Dr. Phillip A.
Immesoete, a nursing home medical director at seven Illinois
nursing homes, and Jay Lewkowitz, a nursing home administrator
and social worker. Both men stated that, in their experience, they
had seen no causal link between the use of noncigarette tobacco
products and nursing home admissions. We find such anecdotal
evidence insufficient to prove that defendants' asserted
justification for the tax is unsupported by the facts. We therefore
conclude that the tax imposed under the Act bears a reasonable
relationship to the objective of the Act and that it does not violate
the uniformity clause. Accordingly, the trial court properly granted
summary judgment to defendants on Arangold's uniformity claim.

III. CONCLUSION
	For the reasons stated, we affirm the judgment of the appellate
court.
Appellate court judgment affirmed.