Court Opinion

ID: 7027544
Source: CourtListenerOpinion
Date Created: 2022-07-24 05:31:00.153006+00
Date Added: 2024-06-11T16:10:48.871583
License: Public Domain

PRESIDING JUSTICE COOK, dissenting: I respectfully dissent and would affirm the judgment of the trial court. Section 19.7 of the Act (Ill. Rev. Stat. 1991, ch. 120, par. 500.7) has been interpreted as requiring three things before a property will qualify for a charitable tax exemption: (1) charitable use, (2) ownership by a charitable organization, and (3) apparent from the section’s plain language, the property "cannot be leased or otherwise used with a view to profit.’ ” Chicago Patrolmen’s Ass’n, 171 Ill. 2d at 270, 664 N.E.2d at 55-56, quoting Ill. Rev. Stat. 1987, ch. 120, par. 500.7. At issue here is the second requirement, charitable ownership. It is undisputed that Lincolnland is a charitable, nonprofit organization and that Lincolnland uses the property for charitable purposes. Lincolnland neither leases out the property nor uses it to generate profit. As the majority correctly notes, ownership is distinct from title. Ownership, for purposes of the Act, defies any sort of bright-line analysis. Rather, ownership is determined by the "realities-of-ownership” test, the key elements of which are control and the right to enjoy the benefits of the property. Chicago Patrolmen’s Ass’n, 171 Ill. 2d at 273, 664 N.E.2d at 57. Courts applying the realities-of-ownership test have found nontitleholders to be owners in Christian Action Ministry, Cole Hospital, and Henderson County Retirement Center. Both Cole Hospital and Henderson County Retirement Center involved long-term leases to charities, similar to the lease at issue here. I would hold that this 99-year lease grants Lincolnland sufficient incidents of ownership that Lincolnland should be deemed the owner of the land. Lincolnland’s right to control the property is substantial. Lincolnland can build, remove, mortgage, or otherwise encumber any improvements it wishes without the consent of Coles-Cumberland. Moreover, the benefits of the lease arrangement inure primarily to Lincolnland, not to Coles-Cumberland. Cf. Wheaton College, 155 Ill. App. 3d at 949, 508 N.E.2d at 1138 (college-lessee was not entitled to a tax exemption where the benefits of the 30-year lease inured primarily to the lessor). Although Coles-Cumberland may indirectly benefit from having another medical service provider within its complex, the primary purpose of the lease arrangement is to allow Lincolnland to continue its charitable endeavors in proximity to Sarah Bush Lincoln Health Center without running afoul of zoning ordinances. After the one-time rent payment of $45,000, ColesCumberland receives no meaningful benefit from the property. Although Lincolnland is obligated to pay maintenance fees to ColesCumberland, the lease makes clear those fees are to be tied to actual expenses for the maintenance of common areas, to be shared on a pro rata basis with other tenants. Such fees are not inconsistent with ownership; owners in planned developments commonly pay maintenance fees. There is simply no evidence Coles-Cumberland derives or intends to derive income from the property through fees or any other mechanism. The majority makes the assertion that Lincolnland’s obligation to pay real estate taxes is "part of the rent” due Coles-Cumberland. 284 Ill. App. 3d at 354. That begs the question of whether real estate taxes are due. Had Coles-Cumberland simply transferred title to Lincolnland, Coles-Cumberland would have ceased to pay taxes and other upkeep expenses. In Cole Hospital, Henderson County Retirement Center, and Christian Action Ministry, the nontitleholder charities were obligated by lease or contract to pay any real estate taxes due, but they were nevertheless found to be owners. The majority also characterizes the improvements on the property as part of the rent due Coles-Cumberland. 284 Ill. App. 3d at 357. There is no indication that Coles-Cumberland will ever get to use or enjoy these improvements. The useful life of these improvements may not extend beyond the 99-year lease term. Even if the improvements remain usable a century hence, Lincolnland is free to raze or remove them. As the majority notes, one of the most significant incidents of ownership is the right to choose when and if the property may be transferred. 284 Ill. App. 3d at 355. In Henderson County Retirement Center, a charitable organization was held not to own leased property for purposes of section 19.7 of the Act, but the organization later obtained an ownership interest when the lease was amended to grant the organization an unconditional option to purchase the property on the fifteenth and twentieth anniversaries of the lease for an amount equal to 125 times the average monthly rental. Henderson County Retirement Center, 237 Ill. App. 3d at 524, 604 N.E.2d at 1004. Similarly, in Cole Hospital, this court found that the hospital’s unconditional option to buy the property on the eleventh and sixteenth anniversaries of the lease for 10 times the annual rent was a factor in support of finding that the hospital enjoyed the incidents of ownership. Cole Hospital, 113 Ill. App. 3d at 100, 446 N.E.2d at 565. Here, Lincolnland has no right to purchase title on a certain date, but the lease contemplates that Lincolnland can purchase title as soon as Coles-Cumberland’s attorney believes such a purchase would be legally possible. There is no reason to believe that Coles-Cumberland could block a sale in bad faith. And unlike the charities in Henderson County Retirement Center and Cole Hospital, Lincoln-land may purchase title for the nominal sum of $1. Lincolnland has essentially already paid the purchase price. Because Lincolnland controls the property, enjoys its benefits, and may obtain title for a nominal sum, I would find that Lincolnland is the owner. I would further rule that Lincolnland is at least entitled to a charitable exemption for the value of the improvements it constructed upon the leased land. The majority relies upon Decatur Sports Foundation for the proposition that the improvements cannot be exempt where the underlying property is taxable. I question the continued vitality of Decatur Sports Foundation. The supreme court criticized Decatur Sports Foundation in City of Chicago (147 Ill. 2d at 499, 590 N.E.2d at 485). In City of Chicago, the court held that the city was entitled to an exemption for buildings it owned, although the land which it leased from a private party was not tax-exempt. The court rejected the Department’s argument that section 1(13) of the Act mandated taxing the land and the buildings as a single unit. Ill. Rev. Stat. 1987, ch. 120, par. 482(13). The City of Chicago court declined, however, to expressly overrule Decatur Sports Foundation because the cases involved different sections of the Act. City of Chicago, 147 Ill. 2d at 498-99, 590 N.E.2d at 484-85. City of Chicago was decided under section 19.6 of the Act, which exempts municipal property. Ill. Rev. Stat. 1987, ch. 120, par. 500.6. Section 19.6 exempts "public buildings *** with the ground” (Ill. Rev. Stat. 1987, ch. 120, par. 500.6) while section 19.7, at issue in Decatur Sports Foundation and this case, speaks simply of "[a]ll property of institutions of public charity” (Ill. Rev. Stat. 1987, ch. 120, par. 500.7). Nevertheless, the supreme court relied upon City of Chicago when it later held that partial or separate exemptions were permissible under section 19.7 of the Act. Chicago Patrolmen’s Ass’n, 171 Ill. 2d at 280, 664 N.E.2d at 60. In Chicago Patrolmen’s Ass’n, a charitable organization and a for-profit organization each held an undivided 50% interest in a property. The court held that the property was entitled to a partial exemption of 50% under section 19.7. Chicago Patrolmen’s Ass’n, 171 Ill. 2d at 281, 664 N.E.2d at 61. Reading City of Chicago and Chicago Patrolmen’s Ass’n in conjunction supports the conclusion that improvements may be divisible from the land for tax purposes. Exemptions under section 19.7 of the Act are not necessarily all or nothing. It is undisputed that Lincolnland’s building and parking lot were exclusively owned and used for charitable purposes. Allowing Lincolnland an exemption for its improvements would further the policy of encouraging charitable work.