PT 97-62 Tax Type: PROPERTY TAX Issue: Charitable Ownership/Use STATE OF ILLINOIS DEPARTMENT OF REVENUE OFFICE OF ADMINISTRATIVE HEARINGS CHICAGO, ILLINOIS BIG TEN CONFERENCE, INC, No: 94-16-1415 APPLICANT Real Estate Tax Exemption For 1994 Tax Year v. P.I.N: 12-02-114-060 Cook County Parcel ILLINOIS DEPARTMENT Alan I. Marcus, OF REVENUE Administrative Law Judge RECOMMENDATION FOR DISPOSITION APPEARANCE: Ms. Sally L. Davis of Sonnenschein, Nath & Rosenthal on behalf of the Big Ten Conference. SYNOPSIS: This proceeding raises the issue of whether Cook County Parcel Index Number 12-02-114-060 (hereinafter the "subject property" or the "subject parcel") should be exempt from 1994 real estate taxes under 35 ILCS 200/15-35.1 In relevant part, that statute provides as follows: 1. In People ex. rel. Bracher v. Salvation Army, 305 Ill. 545 (1922), the Illinois Supreme Court held that the issue of property tax exemption necessarily depends on the statutory provisions in force during the time for which the exemption is claimed. This applicant seeks 1 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 [from real estate taxation] whether owned by a resident or non- resident of this State or by a corporation incorporated in any state of the United States. Also exempt is: *** (c) property donated, granted, received or used for public school, college, theological seminary, university, or other educational purposes, whether held in trust or absolutely. The controversy arises as follows: On June 30, 1995, the Big Ten Conference, Inc. (hereinafter the "Conference" or the "applicant") filed a Real Estate Tax Exemption Complaint with the Cook County Board of (Tax) Appeals (hereinafter the "Board"). (Dept. Ex. No. 2). The Board reviewed applicant's complaint and recommended to the Illinois Department of Revenue (hereinafter the "Department") that the requested exemption be denied. The Department accepted this recommendation on December 22, 1995 and issued a certificate finding that the subject parcel was neither in exempt ownership nor in exempt use. (Id. ). Applicant filed a timely request for hearing as to this denial on January 8, 1996 (Dept. Ex. No. 2) and thereafter presented evidence at a formal administrative hearing. Following submission of all evidence, and a careful review of the record, I recommend that the subject property not be exempt from 1994 real estate taxes. FINDINGS OF FACT: 1. The Department's jurisdiction over this matter and its position therein, namely that the subject parcel was neither in exempt ownership nor in exempt use during 1994, are established by the admission into evidence of Dept. Ex. No. 2. exemption from 1994 real estate taxes. Therefore, the applicable provisions are those found in 2 2. The subject parcel, which applicant assumed ownership of via a warranty deed dated April 26, 1990, is located at 1500 West Higgins Road, Park Ridge, IL 60068. It is improved with a 13,182 square foot building. Id; Applicant Ex. No. 12; Tr. p. 51-52. 3. The building is divided into two stories. Each story contains approximately 50% of the total building area. Dept. Ex. No. 2; Tr. pp. 39-40. 4. The first floor contains a reception area, conference rooms and a kitchen. The second floor holds the Conference's administrative offices. Id. 5. The Conference uses the building as a worksite for many of its employees, such the commissioner and other administrative personnel. Clerical and support staff also work in the building, as do people involved in various Conference functions, such as managing sports championships, negotiating contracts on behalf of member universities, hosting promotional luncheons, monitoring and enforcing compliance with all applicable rules (especially those which pertain to the Conference's academic and eligibility standards), developing policy directives, assigning officials (referees, etc.) for various athletic events and conducting supervision thereof. Tr. pp. 39, 42-44. 6. Applicant also uses the building to conduct meetings. It conducted approximately 110 meetings at the subject property during 1994, approximately 60% of which did not entail discussion of athletic activities. Tr. pp. 40, 42. 7. One meeting involved the education deans from each of the member universities,2 who met to discuss common matters. Tr. p. 40. the Property Tax Code, 35 ILCS 200/1 et seq. 2. For information on Conference membership, See, Findings of Fact 13E and 14, infra at pp. 5 - 6. 3 8. Applicant also coordinates participation in its Success Comes From Reading Everyday (hereinafter "SCORE") program at the building. Applicant designed SCORE as a mechanism for encouraging local school children to improve their reading skills. Tr. p. 41. 9. Applicant participates in SCORE by providing money for schools to purchase books. It also distributes awards and obtains involvement from its employees, some of whom become involved on a volunteer basis. Id. 10. The Conference also gives occasional seminars on various topics, including coaching and officiating, at the subject property. It does not, however, offer classes on a regularly scheduled basis. Tr. pp. 42-43, 60. 11. Applicant did not lease the subject property to third parties in 1994. It did, however, allow other universities and the local school district to use its facilities during that time. Tr. pp. 50-51. 12. The Conference was originally formed in 1896. Its founding members were a group of Midwest university presidents who met to address various problems associated intercollegiate athletics. One problem of particular concern was the practice of barnstorming, wherein players moved from school to school to compete but did not enroll as true students at any one university. Applicant Ex. No. 6; Tr. pp. 9-10. 13. Applicant was issued a Certificate of Incorporation by the Office of the Secretary of State of the State of Delaware on November 16, 1987. Said Certificate recites, inter alia, that: A. The Conference is organized exclusively for charitable, educational and scientific purposes consistent with Section 501(c)(3) of the Internal Revenue Code; B. Its specific organizational purposes are: (1) to control and regulate intercollegiate athletics as institutional activities; (2) to encourage sound academic practices for student athletes and (3) to 4 establish harmonious intercollegiate relationships among member institutions; C. Applicant shall have no authority to issue capital stock; D. Membership is expressly limited to colleges and universities which are exempt from taxation pursuant to Section 501(a) of the Internal Revenue Code as organizations described in Section 501(c)(3) of the Code and to colleges and universities of the type described in Section 511(2)(B) of same; E. Its current members are the University of Illinois at Urbana-Champaign, Indiana University, the University of Iowa, the University of Michigan-Ann Arbor, Michigan State University, the University of Minnesota, Northwestern University, the Ohio State University, Purdue University and the University of Wisconsin-Madison;3 F. No part of the corporation's net earnings are to inure to the benefit of or be distributable to its members, directors, or other private persons, except that the corporation shall be authorized and empowered to pay reasonable compensation for services rendered and make payments and distributions in furtherance of its corporate purposes; G. Applicant shall neither participate in nor devote a substantial part of its activities to influencing public legislation or engaging in other political activity; H. Applicant's daily business affairs shall be managed by a Board of Directors which shall consist of the Chief Executive Officers, (Presidents or Chancellors) of each of the member; I. A director may not be removed so long as he or she is the Chief Executive Officer of a member university; J. In the event of corporate dissolution, the Board of Directors shall, after paying or making provisions for the payment of all liabilities of the corporation, dispose of all the assets thereof as the Board of Directors shall determine, provided that such distribution 3. All Conference members except Northwestern are publicly-supported universities. Tr. pp. 12 - 13. For additional information about each member's operations, See, Applicant Ex. Nos. 1 and 6. For information and argument about the effect of their respective tax-exempt statuses, See, infra pp. 20-23. 5 is for charitable, educational or scientific purposes consistent with Section 501(c)( 3) of the Internal Revenue Code. Applicant Ex. No. 2. 14. Applicant amended its Certificate of Incorporation on June 3, 1996. This amendment provided that: (1) membership in the conference shall be determined in accordance with the by-laws but shall be limited to (i) organizations described in Section 509(a)(1) or (2) of the Internal Revenue Code, and (ii) colleges and universities which are exempt from taxation pursuant to Section 501(a) of the Internal Revenue Code as organizations described in Section 501(c)(3) of same or colleges and universities of the type described in Section 511(a)(2)(B) of the Internal Revenue Code; (2) a new member may be added or a current member may be removed only by affirmative vote of not less than 70% of the then existing members in good standing; (3) the members shall each be entitled to one vote on all matters submitted to a vote at a meeting of the members; (4) the roster of current members was increased to include the addition of Pennsylvania State University and (5) upon dissolution of the corporation, the corporation's assets remaining after discharging the corporation's liabilities shall be distributed to the corporation's members on a pro-rata basis. Applicant Ex. No. 13. 15. Applicant's by-laws contain a purpose statement that is similar to the one found in the Conference's Certificate of Incorporation.