No. 2--00--0487	

	IN THE

	APPELLATE COURT OF ILLINOIS

	SECOND DISTRICT

LENA COMMUNITY TRUST FUND, INC.,	) Appeal from the Circuit Court

		) of Stephenson County

	Plaintiff-Appellee,	)	

		)

v.		) No. 99--MR--17

		)	

THE DEPARTMENT OF REVENUE and	)

GLEN L. BOWER, Director,	)

		) 

	Defendants-Appellants	) 

		) 

(The Board of Review of	) Honorable

Stephenson County and Stephenson	) Barry R. Anderson,

County, Defendants.).	) Judge, Presiding.

	JUSTICE GEIGER delivered the opinion of the court:

	The plaintiff, Lena Community Trust Fund, Inc. (the Trust), filed this administrative review action after defendants the

Department of Revenue and Director Glen L. Bower (collectively, the

Department) adopted the recommendation of an administrative law

judge (ALJ) denying a 1995 property tax exemption for certain real

property owned and operated by the Trust.  The circuit court

reversed the Department's decision, from which the Department

appeals, arguing that the Trust is not entitled to a charitable

exemption.

	The ALJ's findings of fact, adopted by the Department, are not

in dispute.  The Trust was incorporated in Illinois in 1991 under

the General Not For Profit Corporation Act of 1986 (805 ILCS

105/101.01 et seq. (West 1998)).  The articles of incorporation provided that the Trust was organized to collect and distribute

money for charitable purposes, to assist charitable organizations

in the local community, and to manage a community center used for

public purposes.  The bylaws provided that the trustees shall

consist of members of certain organizations from Lena, Illinois. 

The Trust had no capital, capital stock, or shareholders.  The

Trust was exempt from federal income taxes under section 501(c)(3)

of the Internal Revenue Code (26 U.S.C. §501(c)(3) (1994)).

	In March 1993, the Trust was gifted 2.69 acres of land in

rural Lena, population approximately 3,000.  Thereafter, the Trust

built a two-story building on the property to be used as a

community center.  The lower level consisted of a large meeting

hall and five small meeting rooms.  The upper level consisted of a

large main hall and a kitchen.  In 1995, the Trust opened the

property as a community center and offered space to community

organizations for meetings and functions.   The Trust charged

various fees for the space, ranging from $5 per day for the use of

the small, lower-level meeting rooms by nonprofit groups to $350

per day for the use of the upper-level main hall and kitchen.

	In addition to organizational meetings for the Trust, in 1995,

the community center was used by the following groups: Viking

Insurance, Illinois Department of Transportation, Lena Special

Housing, Jaycees, an investment club, a sorority, Stephenson County

Highway Department, Stephenson County Bar Association, Lena

Business and Professional Association, Lions Club, and the Citizens

State Bank.  In addition to these meetings, Bible studies were

held, as were the local high school prom and fire department dance.  The center was also used for the "turkey chasers," which were not

explained in the record, and by private families for anniversaries

and weddings.

	In 1995, the Trust collected 81% of its revenues from

donations and 19% from rental fees.  The Trust policy was to waive

rental fees for individuals and organizations unable to pay,

although no one had made such a request.  In addition, no one

requesting to use the center in 1995 was denied.  

	The Trust applied for a charitable exemption from real estate

taxes for 1995.  The ALJ found that the Trust did not qualify as an

institution of public charity because the Trust charged fees for

the use of the community center.  The ALJ also found that the Trust

failed to establish that the property was used exclusively for

charitable purposes.  The ALJ concluded that the evidence suggested

that the community center had been used primarily for business

meetings and private social events.  The Department adopted the

ALJ's recommendation that the property be denied a charitable

exemption.  The Trust appealed the Department's decision to the

circuit court of Stephenson County, which reversed the Department's

decision and declared that the property was exempt from real estate

taxes for 1995.  We affirm the circuit court's decision.

	At the outset, we must determine the appropriate standard of

review.  Both parties acknowledge that our supreme court has held

that the "clearly erroneous" standard, falling between the de novo and manifest weight standards, is often applied in administrative

review cases on appeal where the facts are undisputed.  City of Belvidere v. Illinois State Labor Relations Board, 181 Ill. 2d 191, 205 (1998).  Under the "clearly erroneous" standard, which involves

a mixed question of law and fact, we must accept the administrative

agency's findings unless we are firmly convinced that a mistake has

been made.  Friends of Israel Defense Forces v. Department of Revenue, 315 Ill. App. 3d 298, 303 (2000).

	In a recent administrative review case, the Appellate Court, First District, noted a conflict in recent appellate decisions

regarding the standard of review where the only question is the

legal conclusion to be drawn from the facts.  Friends of Israel, 315 Ill. App. 3d at 302.  The First District noted that, in XL Disposal Corp. v. Zehnder, 304 Ill. App. 3d 202, 207 (1999), the Appellate Court, Fourth District, followed the holding in Belvidere and applied the "clearly erroneous" standard to an administrative

review case.

	Although the Friends of Israel court noted that our supreme court recently held that the issue of whether property is exempt

from taxation was a question of law (Chicago Patrolmen's Ass'n v. Department of Revenue, 171 Ill. 2d 263, 271 (1996)), the court nevertheless applied the "clearly erroneous" standard to a question

concerning an exemption from use taxation.  Friends of Israel, 315 Ill. App. 3d at 303.  The Friends of Israel court also noted that our court held in Richard's Tire Co. v. Zehnder, 295 Ill. App. 3d 48, 57 (1998), that de novo review is appropriate where the only question is the legal conclusion to be drawn from the facts.  

	We reject the analysis set forth in Friends of Israel and choose to follow our supreme court's holding in Chicago Patrolmen's Ass'n.  Although our supreme court discussed in Belvidere how the "clearly erroneous" standard might apply in administrative review

cases generally, it did not specifically discuss the application of

the "clearly erroneous" standard to property tax exemption cases. 

The question of the standard of review for property tax exemption

cases was clearly decided by our supreme court in Chicago Patrolmen's Ass'n, which has not been overruled.  As such, it is still good law, notwithstanding the decisions in Friends of Israel  and XL Disposal.  Therefore, consistent with Chicago Patrolmen's Ass'n and Richard's Tire, we will apply the de novo standard of review to this case.

	Charitable ownership and charitable use together entitle a

parcel to exemption.  Institute of Gas Technology v. Department of Revenue, 289 Ill. App. 3d 779, 783 (1997).  Section 15--65 of the Property Tax Code provides as follows:

		"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."  35 ILCS

200/15--65 (West 1998).

	The party claiming a tax exemption must prove clearly and

convincingly that the property falls within the terms of the

exception.  Evangelical Hospitals Corporation. v. Department of Revenue, 223 Ill. App. 3d 225, 231 (1991).  All facts are to be construed in

favor of taxation.  Evangelical Hospitals Corp., 223 Ill. App. 3d at 231.

	In applying section 15--65 of the Property Tax Code to the

present case, three questions emerge: (1) was the Trust an institution of public charity? (2) was the community center used

for charitable or beneficent purposes? and (3) if the community

center was used for charitable or beneficent purposes, was it used

exclusively for those purposes?  On appeal, the Department has

disputed all three components.

	Our supreme court in Methodist Old Peoples Home v. Korzen, 39 Ill. 2d 149, 157 (1968), set forth general guidelines for

determining when a party is deemed an institution of public

charity: (1) the institution has no capital, capital stock, or

shareholders; (2) the institution earns no profits or dividends and

derives its funds mainly from public and private charity and holds

them in trust for the purposes expressed in its charter; and (3)

the institution dispenses charity to all who need and apply for it

and does not place obstacles in the way of those who would avail

themselves of the charitable benefits.  The Korzen factors are not rigid, and the court must balance the guidelines by examining the

facts of each case and focusing on whether the institution serves

the public and lessens the State's burden.  Randolph Street Gallery v. Zehnder, 315 Ill. App. 3d 1060, 1065 (2000).

	The ALJ found, and the Department argues on appeal, that the

Trust did not meet the definition of public charity because the

Trust placed obstacles in the way of those seeking to use the

community center by charging fees for the space.  The ALJ found,

however, that the Trust met several of the Korzen criteria, namely, the following: the Trust had no capital stock or shareholders, the

Trust earned no profits or dividends, the Trust's funds came from

charitable donations, the Trust did not provide any gain to anyone associated with the Trust, and the Trust placed no limits on who

may use the community center.  On appeal, the Department does not

dispute any of these findings but, rather, with respect to the

issue of whether the Trust is deemed an institution of public

charity, the Department focuses on the fact that the Trust charged

"not insignificant fees" for the use of the community center and

further argues that the Trust did not prove that it dispensed

charity to all who needed it.

	We disagree that the Trust placed obstacles in the way of

those seeking to use the community center by charging fees.  In

general, charging fees does not suggest that an organization is not

a public charity.  See Small v. Pangle, 60 Ill. 2d 510, 517 (1975);  Resurrection Lutheran Church v. Department of Revenue, 212 Ill. App. 3d 964, 971 (1991); Randolph Street Gallery, 315 Ill. App. 3d at 1067; Vermilion County Museum Society v. Department of Revenue, 273 Ill. App. 3d 675, 679 (1995).  The dispositive issue is not the

existence of a fee but, rather, whether the institution makes a

profit and/or the fees comprise a significant amount of the

institution's operating expenses.  In this case, it is clear from

the evidence in the record that the Trust did not make a profit

and, indeed, was operating at a loss in 1995.  Moreover, it is

clear that a majority of its operating costs were derived from

charitable donations, including the land on which the community

center sat.  We see no reason to analyze whether the $5 fee for the

small room or the $350 fee for the large room and kitchen was

appropriate.  Rather, we are persuaded that the charitable character of the Trust was exemplified by the existence of the fee-

waiver policy.

	The Department notes that, although the Trust's policy

provided that it could waive fees for those who could not pay, no

such waiver occurred in 1995.  The Department is apparently unmoved

by the testimony at the hearing that no such request had been made

in 1995 and that no one had been denied access to the community

center.  The Department complains that there was no evidence to

suggest that the general public was made aware of the possibility

of fee waivers.  The Trust counters that in a small town such as

Lena, with a population under 3,000, information travels by word-

of-mouth, eliminating the need to divert funds to advertise the

fee-waiver policy.

	We are persuaded that the evidence that no request to use the

community center was ever denied is sufficient proof that the Trust

did not place obstacles in the way of those who would avail

themselves of the center.  We can find no case law, and the

Department does not point to any, suggesting that the failure to

advertise a fee-waiver policy is fatal to the institution's status

as a public charity.  Rather, we are mindful of the fact that the

factors set forth in Korzen are not rigid and that the facts of each case should be examined.  We agree with the Trust that

disseminating published material in a town with a population of

less than 3,000 may not be useful and might in fact be a wasteful

use of Trust funds.  Therefore, we hold that the absence of

evidence indicating that the Trust published its fee-waiver policy

is not dispositive in this case and that the Trust has set forth sufficient evidence that it qualifies as an institution of public

charity.

	The Department next argues that the community center was not

exclusively used for charitable or beneficent purposes.  The

Department argues that there is no evidence that the organizations

using the community center were engaged in charitable activities,

and that the private and business uses of the community center

render the community center not exempt.  The Trust counters that it

provided for the community a valuable service that is charitable,

loosely defined.

	The Korzen court held that whether the primary use of the property was for charitable purposes was a factor in examining

whether a tax exemption was appropriate.  Korzen, 39 Ill. 2d at 157.   Indeed, as noted above, section 15--65 of the Property Tax

Code mandates that exempt property must be exclusively used for

charitable purposes.  Consistent with the holding in Korzen, the requirement of exclusive use has been determined to mean that the

property must be used primarily for charitable activities. 

Evangelical Hospitals Corp., 223 Ill. App. 3d at 231.

	There is no comprehensive way to define charitable activity. 

The court in Randolph Street Gallery undertook to explain why a public forum for art and art education had a charitable purpose so

as to qualify for an exemption:

	" 'A charity, in a legal sense, may be more fully defined as

a gift, to be applied consistently with existing laws, for the

benefit of an indefinite number of persons, either by bringing

their hearts under the influence of education or religion, by relieving their bodies from disease, suffering or constraint,

by assisting them to establish themselves for life, or by

erecting or maintaining public buildings or works, or

otherwise lessening the burthens [burdens] of government.' "

	Randolph Street Gallery, 315 Ill. App. 3d at 1068-69, quoting  	Crerar v. Williams, 145 Ill. 625, 643 (1893).

	In Friends of Israel, the court considered whether certain funds raised by the plaintiff would be subject to use taxation. 

The plaintiff raised funds to support Israeli soldiers and their

families by providing housing, restaurants, and recreation. 

Certain recreation centers in Israel that were underwritten by the

plaintiff's funds also served as temporary housing for Russian and

Ethiopian immigrants and for American soldiers during the Gulf War. 

In determining that the plaintiff was organized for charitable

purposes and engaged in charitable activities, the court relied

upon the fact that the plaintiff provided for many needs of an

indefinite number of persons.  Friends of Israel, 315 Ill. App. 3d at 305.  The court also cited to the Illinois Administrative Code,

which provides that "a charitable purpose may refer to almost

anything which promotes the well-being of society."  86 Ill. Adm.

Code §130.2005(i)(2) (1996).

	As with Friends of Israel and Randolph Street Gallery, we are persuaded that the Trust operates the community center for

charitable purposes.  We disagree with the Department's suggestion

that social events cannot constitute charity.  Indeed, the

availability of space where members of the community can meet

provides a valuable service and most certainly promotes society's well-being.  We do not believe that each and every event must be

open to the public in order to benefit society.  For instance,

uplifting morale among high school students and fire department

members through hosting their dances is a worthwhile endeavor for

the Trust to undertake in promoting the welfare of the Lena

community.  We believe that the spirit of charity is exemplified

not by focusing on who might be excluded from a given event but,

rather, by acknowledging that the community center is available for

any community group to take advantage of, even if the group might

not be able to pay the fees.  See generally People ex rel. Hellyer v. Morton, 373 Ill. 72, 78 (1940); Decatur Sports Foundation v. Department of Revenue, 177 Ill. App. 3d 696, 706 (1988); Highland Park Women's Club v. Department of Revenue, 206 Ill. App. 3d 447, 464 (1990).  We also note that the Trust's use of the center for

its own organizational meetings is a proper charitable use

appropriate for an exemption.  See Evangelical Hospitals Corp., 223 Ill. App. 3d at 231.

	Although the community center was also used for business

purposes, we believe that these events were incidental to its

primary use as a community resource.  Our analysis might change if

there were evidence in the record that the Trust gave priority to

business uses over civic groups and community events in allocating

the space or if there were indications that the Trust had profited

from the business uses.  In this case, we see nothing wrong with

the Trust collecting additional funds to offset maintenance

expenses by permitting businesses to use available space.  We believe that permitting the exemption in this case will lessen the hardship on organizations that seek to improve the quality of life

of its community members.

	For the foregoing reasons, the judgment of the circuit court

of Stephenson County is affirmed.

	Affirmed.

	HUTCHINSON, P.J., and BOWMAN, J., concur.