                           NO. 4-07-0404             Filed 12/28/07

                     IN THE APPELLATE COURT

                            OF ILLINOIS

                          FOURTH DISTRICT

THE MOST WORSHIPFUL GRAND LODGE OF     )    Appeal from
ANCIENT FREE AND ACCEPTED MASONS OF    )    Circuit Court of
THE STATE OF ILLINOIS, an Illinois     )    Moultrie County
Corporation; and THE ILLINOIS MASONIC )     No. 06MR16
HOME, an Illinois Not-for-Profit       )
Corporation,                           )
          Plaintiffs-Appellants,       )
          v.                           )
THE DEPARTMENT OF REVENUE OF THE       )
STATE OF ILLINOIS and BRIAN A. HAMER, )
Director of Revenue of the State of    )    Honorable
Illinois,                              )    Dan L. Flannell,
          Defendants-Appellees.        )    Judge Presiding.
_________________________________________________________________

          JUSTICE STEIGMANN delivered the opinion of the court:

          In November 2003, plaintiffs, the Most Wonderful Grand

Lodge of Ancient Free and Accepted Masons of the State of Illi-

nois and the Illinois Masonic Home (collectively, the Lodge),

filed an application for a nonhomestead property-tax exemption

for 2003, pursuant to sections 15-65 and 15-125 of the Property

Tax Code (35 ILCS 200/15-65, 15-125 (West 2002)).     In January

2004, defendants, the Department of Revenue of the State of

Illinois and Brian A. Hamer (collectively, the Department),

denied the application.   The Lodge later filed a petition under

section 8-35 of the Code (35 ILCS 200/8-35 (West 2004)), request-

ing reconsideration of the application.     Following a July 2006

hearing, the Department accepted the administrative law judge's

(ALJ’s) recommendation that the Lodge did not qualify for the

specific tax exemption it sought.   In December 2006, the Lodge
filed a complaint for administrative review, pursuant to section

8-40 of the Code (35 ILCS 200/8-40 (West 2006)), seeking reversal

of the Department's determination.     Following an April 2007

hearing, the circuit court affirmed the Department's decision.

           The Lodge appeals, arguing that (1) the guidelines set

forth in Methodist Old Peoples Home v. Korzen, 39 Ill. 2d 149,

233 N.E.2d 537 (1968), should be applied with regard to the

evolving definition of "charitable use" and (2) the Department

erroneously considered the property in isolation from the Lodge's

integrated community and overarching charitable mission.     We

disagree and affirm.

                           I. BACKGROUND

                           A. The Lodge

           Founded in 1904, the Lodge is an Illinois not-for-

profit corporation that provides nursing-care services.     In

December 1917, the property owned by the Lodge was deemed tax

exempt.   See Most Worshipful Grand Lodge of Ancient Free &

Accepted Masons of the State of Illinois v. Board of Review of

Moultrie County, 281 Ill. 480, 485-86, 117 N.E. 1016, 1018 (1917)

(concluding that the land owned by the Lodge fell within the

statutory definition of lands actually and exclusively used for

charitable or beneficent purposes).

           Prior to 1997, the Lodge offered only two types of

assistance and living programs--sheltered care and intermediate

care.   In 1997, the Lodge began to offer a third type of care,

referred to as the "independent-living program."     The Lodge


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implemented this program based on survey results indicating that

older residents desired to live where nursing care would be

readily available.   In response, the Lodge developed apartment

and duplex housing so that residents could "age in place" and

easily transition within the Lodge's "continuum of care" as their

physical and medical needs changed.    The Lodge's continuum of

care consists of approximately 72 sheltered-care beds, 237

intermediate-care beds, and 48 independent-living units.    These

different levels of assistance are located in separate buildings

on the Lodge’s property.

          Prior to 1999, the Lodge's application procedures

required prospective residents to surrender all assets in ex-

change for lifetime care.   In 1999, the Lodge altered the admis-

sions procedures to include a fee-for-service program.    The

procedures included an option to request financial-subsidy

assistance through the Lodge's endowment-assistance program for

residents in financial need.

          Prospective independent-living residents must enter

into a "life right contract" where they agree, in pertinent part,

to (1) provide detailed information regarding their current

health and financial status before entering into the contract;

(2) provide, at their own expense, updated health and financial

information as requested by the Lodge; (3) not deplete assets to

the extent the applicant cannot meet the financial obligations of

the contract; and (4) pay a $1,000 application fee.

          Independent-living residents must also pay 25% of the


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Lodge's initial unit fee upon occupancy or 60 days after signing

the contract.    The initial unit fee ranges from $18,000 to

$117,000.    In addition, residents are required to pay a monthly

maintenance fee that ranges from $292 to $804.      Both fees are

contingent upon the type (apartment or duplex), size, and loca-

tion of the unit.    Residents in independent-living units may

qualify for the endowment-assistance program if they exhaust

their funds while living in the residence, but they still must

pay the initial fee.

            The Lodge's independent-living unit terms and condi-

tions state, in pertinent part, that (1) the Lodge can terminate

the agreement if a resident fails to pay monthly service fees and

(2) if the resident cannot pay the independent-living unit fees,

the Lodge has the right to reasonably accommodate the resident in

another residential program where public or private assistance is

available.    When residents vacate their units, a portion of their

initial fee is returned based upon their length of stay (ranging

from an 80% to 95% refund for duplex residents and 55% to 90%

refund for apartment residents).

                    B. Administrative Proceedings

            In November 2003, the Lodge applied for a nonhomestead

property-tax exemption for 2003, pursuant to sections 15-65(a),

(c), and 15-125 of the Code (35 ILCS 200/15-65(a), (c), 15-125

(West 2002)).    Prior to the Department’s decision on the applica-

tion, the Lodge and the Department stipulated that (1) the

Lodge's request for a tax exemption applied only to the property


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where the independent-living units were located and (2) the

remainder of the Lodge's property continued to be tax exempt.    In

January 2004, the Department denied the application, upon finding

that the property in question was neither owned nor used exclu-

sively for charitable purposes.   The Lodge later requested

reconsideration under section 8-35 of the Code (35 ILCS 200/8-35

(West 2004)), and the matter proceeded to a hearing before an

ALJ.

            Following a June 2004 hearing, the ALJ recommended that

the portion of the Lodge's property containing the independent-

living units did not qualify for a tax exemption.   Specifically,

the ALJ made the following findings of fact: (1) before prospec-

tive residents can live in the independent-living units, they

must pay a substantial fee that varies according to the size and

desirability of the unit; (2) prospective residents must complete

an application that demonstrates they have the financial and

physical ability to reside in the units; (3) despite a provision

in the Lodge's bylaws that it will waive fees in certain circum-

stances, initial fees for the independent-living program were not

waived; (4) none of the residents in the independent-living units

received assistance from the endowment-assistance program; (5)

the Lodge does not have the legal obligation to keep residents in

the units; and (6) the Lodge can remove residents for failure to

pay fees.   Based upon the guidelines announced by our supreme

court in Methodist Old Peoples Home, 39 Ill. 2d at 156-57, 233

N.E.2d at 541-42, the ALJ determined that the primary use of the


                                - 5 -
independent-living program "appear[ed] to be to provide housing

to residents who can pay for it."    In May 2005, the Department

accepted the ALJ’s recommendation.

            In June 2005, the Lodge filed a petition under section

8-35 of the Code (35 ILCS 200/8-35 (West 2004)), seeking recon-

sideration.   The Lodge argued that the Department's decision (1)

failed to adequately reflect evidence that the Lodge's charitable

mission included providing a continuum of care, (2) incorrectly

divided various elements of the Lodge's charitable program not

intended to be operated in isolation from the remainder of the

Lodge's programs, and (3) arbitrarily faulted the Lodge for not

waiving initial fees prior to the original hearing.    In June

2005, the Department accepted the ALJ’s order denying the Lodge's

petition.

            The Lodge later filed its first complaint for adminis-

trative review, pursuant to section 8-40 of the Code (35 ILCS

200/8-40 (West 2006)), seeking reversal of the Department's

determination.   In February 2006, the circuit court remanded the

matter to the Department with instructions to "conduct a rehear-

ing and re-open [sic] proofs" to permit the Lodge to introduce

additional financial evidence.

            Following a June 2006 rehearing, the ALJ again recom-

mended that the Lodge's application be denied.    The ALJ

acknowledged that the Lodge "provided evidence that the

independent[-]living units did not generate a profit" but reaf-

firmed that the facts "do not support a finding that the primary


                                 - 6 -
use of the apartment and duplexes is charitable."      In November

2006, the Department accepted the ALJ's recommendation.

            In December 2006, the Lodge filed another complaint for

administrative review, pursuant to section 8-40 of the Code (35

ILCS 200/8-40 (West 2006)), arguing that the Department's deci-

sion was (1) contrary to law and (2) against the manifest weight

of the evidence.    Following an April 2007 hearing, the circuit

court denied the Lodge's complaint, upon finding that the Depart-

ment's decision was not against the manifest weight of the

evidence.

            This appeal followed.

                            II. ANALYSIS

                      A. The Standard of Review

            Prior to addressing the merits, we must determine the

appropriate standard of review.      The Lodge contends that the

appropriate standard of review is de novo.       The Department

responds that this court's review is under the clearly erroneous

standard.    We agree with the Department.

            We first note that the appellate court’s role is to

review the administrative decision, not the circuit court's

decision.    Metro Developers, LLC v. City of Chicago Department of

Revenue, 377 Ill. App. 3d 395, 397, 877 N.E.2d 785, 788 (2007).

The appropriate standard of review concerning administrative

decisions is contingent upon whether the question being reviewed

is one of fact, law, or both.       Express Valet, Inc. v. City of

Chicago, 373 Ill. App. 3d 838, 847, 869 N.E.2d 964, 972 (2007).


                                - 7 -
"An administrative agency's decision on questions of fact are

entitled to deference and are reversed only if against the

manifest weight of the evidence."        Friends of Israel Defense

Forces v. Department of Revenue, 315 Ill. App. 3d 298, 302, 733

N.E.2d 789, 792-93 (2000).    An administrative agency's decisions

on questions of law are not afforded deference and thus are

reviewed de novo.     Friends of Israel Defense Forces, 315 Ill.

App. 3d at 302, 733 N.E.2d at 793.       However, when a case "in-

volves an examination of the legal effect of a given set of

facts, it involves a mixed question of fact and law."        City of

Belvidere v. Illinois State Labor Relations Board, 181 Ill. 2d

191, 205, 692 N.E.2d 295, 302 (1998).       In such cases, we review

the agency's decision under the clearly erroneous standard.          City

of Belvidere, 181 Ill. 2d at 205, 692 N.E.2d at 302; see Board of

Trustees of the University of Illinois v. Illinois Labor Rela-

tions Board, 224 Ill. 2d 88, 97, 862 N.E.2d 944, 950 (2007) ("As

we explained in City of Belvidere, the clearly erroneous standard

of review is proper when reviewing a decision of [an administra-

tive agency] because the decision represents a mixed question of

fact and law").   Under this standard, the agency’s decision will

not be deemed clearly erroneous unless the reviewing court is

left with the definite and firm conviction that a mistake has

been committed.     Daley v. Lakeview Billiard Café, Inc., 373 Ill.

App. 3d 377, 381-82, 869 N.E.2d 171, 175 (2007).       "While this

standard is highly deferential, it does not relegate judicial

review to mere blind deference of an agency's order."        Board of


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Trustees of the University of Illinois, 224 Ill. 2d at 98, 862

N.E.2d at 951.

           Because this case involves a mixed question of fact and

law--namely, does the independent-living-program property qualify

for a tax exemption--we review the Department's decision under

the clearly erroneous standard.

         B. The Lodge’s Claim That the Department Failed To
        Consider the Evolving Definition of "Charitable Use"

           The Lodge first argues that the guidelines the

Department used to determine whether property is tax exempt based

upon charitable use as set forth in Methodist Old Peoples Home,

39 Ill. 2d at 156-57, 233 N.E.2d at 541-542, should have been

applied with regard to the evolving definition of "charitable

use."   We disagree.

           "[T]he taxpayer seeking the protection of the exemption

bears the burden of proving that he is entitled to it."

Harrisburg-Raleigh Airport Authority v. Department of Revenue,

126 Ill. 2d 326, 331, 533 N.E.2d 1072, 1074 (1989).   "'[I]n

determining whether property is included within the scope of the

exemption, all facts are to be construed and all debatable

questions resolved in favor of taxation.'"    Eden Retirement

Center, Inc. v. Department of Revenue, 213 Ill. 2d 273, 289, 821

N.E.2d 240, 249 (2004), quoting Methodist Old Peoples Home, 39

Ill. 2d at 155, 233 N.E.2d at 540.

           Section 15-65(a) of the Code provides, in pertinent

part, as follows:

                 "All property of the following is exempt

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          when actually and exclusively used for chari-

          table or beneficent purposes, and not leased

          or otherwise used with a view to profit:

                     (a) Institutions of public

               charity."   35 ILCS 200/15-65(a)

               (West 2006).

"Two elements are required to entitle property to an exemption:

exclusive use for charitable purposes and ownership by a charita-

ble organization.   [Citations.]   The term 'exclusive use' refers

to the primary purpose for which the property is used, and not to

the secondary or incidental purpose."    Midwest Physician Group,

Ltd. v. Department of Revenue, 304 Ill. App. 3d 939, 953, 711

N.E.2d 381, 390 (1999).

          In Methodist Old Peoples Home, our supreme court

outlined the following criteria in determining whether property

is exempt from taxation based upon charitable use: (1) the

benefits derived (a) are for an indefinite number of persons for

their general welfare or (b) in some way reduce the burdens on

government; (2) the organization has no capital, capital stock,

or shareholders and does not profit from the enterprise; (3)

funds are derived mainly from private and public charity, and the

funds are held in trust for the objects and purposes expressed in

the charter; (4) the charity is dispensed to all who need and

apply for it; (5) no obstacles appear to be placed in the way of

those seeking the benefits; and (6) the primary use of the

property is for charitable purposes.    Methodist Old Peoples Home,


                              - 10 -
39 Ill. 2d at 156-57, 233 N.E.2d at 541-42.

           In addition, although the court stated that the mere

charging of fees did not necessarily disqualify the property from

a tax exemption, the following facts did not suggest a charitable

use:   (1) different fee schedules based upon size and desirabil-

ity of the residence; (2) requiring applicants to be in good

mental, emotional, and physical health and free of any communica-

ble diseases; (3) rejecting prospective residents who were unable

to pay the required fee; (4) evidence that the property’s primary

source of income was derived from fees rather than donations; and

(5) discharging any legal obligation to house and maintain

residents who were unable to fulfill their financial obligation

or who otherwise became sick or unmanageable.   Methodist Old

Peoples Home, 39 Ill. 2d at 158-59, 233 N.E.2d at 542-43.

           We note that in its brief to this court, the Lodge

fails to mention or even challenge the specific findings that the

Department made to substantiate the denial of the Lodge's appli-

cation for a tax exemption.   Rather, the Lodge asserts only that

the Department, in applying the guidelines announced in Methodist

Old Peoples Home, "failed to consider the larger picture, includ-

ing the overwhelming charitable nature of the [Lodge]."   However,

in so asserting, the Lodge fell woefully short of fulfilling its

burden to prove by clear and convincing evidence that the

independent-living residences were actually and exclusively used

for charitable or beneficent purposes, and not leased or other-

wise used with a view to profit.


                              - 11 -
          Moreover, our review of the record indicates that by

its very terms, the life right contract affords the Lodge the

ability to (1) charge residents a substantial fee, which varies

depending on size and desirability of the residence; (2) require

applicants to be in good mental, emotional, and physical health;

(3) reject prospective residents who are unable to pay the

required fee; and (4) discharge any legal obligation to residents

who are unable to fulfill their financial obligation or who

otherwise become unmanageable.   In addition, the Lodge did not

provide any evidence that any independent-living resident re-

ceived financial assistance from the endowment-assistance pro-

gram.

          Given that all facts must be construed in favor of

taxation, we agree with the Department that the evidence does not

support a finding that the primary use of the apartments and

duplexes under the independent-living program is charitable.    The

primary use of the residences appears to be to provide housing to

residents who can afford to pay for it.

          Therefore, because (1) the Lodge failed to carry its

burden of proving by clear and convincing evidence that the

exemption applied and (2) all facts are to be construed and all

debatable questions resolved in favor of taxation, we conclude

that the Department’s decision that the Lodge’s property used for

the independent-living program did not qualify for a property-tax

exemption was not clearly erroneous.




                             - 12 -
      C. The Lodge’s Claim That the Department Erroneously
       Considered the Property-Tax Exemption in Isolation
             from Its Overarching Charitable Mission

          The Lodge also argues that the Department, in deciding

that the property used for the independent-living program did not

qualify for a tax exemption, erroneously considered the property

in isolation from the Lodge's integrated community and overarch-

ing charitable mission.   We disagree.

          "'[W]here property is used for two purposes, one of

which is exempt from taxation and one of which is not, a tax

should be assessed against that part which is devoted to a use

not exempt from taxation.'"   City of Chicago v. Illinois Depart-

ment Of Revenue, 147 Ill. 2d 484, 499, 590 N.E.2d 478, 485

(1992), quoting City of Lawrenceville v. Maxwell, 6 Ill. 2d 42,

49, 126 N.E.2d 671, 676 (1955).

          Because we have concluded that the Department’s deci-

sion that the Lodge did not qualify for a property-tax exemption

was not clearly erroneous, we reject the Lodge’s assertion that

the Department erroneously considered the property in isolation

from the Lodge's integrated continuum of care.   See Fairview

Haven v. Department of Revenue, 153 Ill. App. 3d 763, 771, 506

N.E.2d 341, 347 (1987) (where this court concluded that 16

independent-living units connected to a dependent-care unit by a

main hallway did not qualify for charitable-use exemption by

virtue of fees charged to residents even though the dependent-

care unit qualified for the exemption).

          However, even if the independent-living units should


                              - 13 -
not have been viewed "in isolation" as the Lodge contends, the

Lodge had the burden of showing that the independent-living units

were merely incidental to the operation of the exempt portion of

the Lodge.   See Streeterville Corp. v. Department of Revenue, 186

Ill. 2d 534, 536, 714 N.E.2d 497, 498 (1999) ("property may be

wholly exempt from tax if any nonexempt use can be described as

'merely incidental' [citation]").

          Thus, because (1) the Department’s decision to reject

the Lodge’s petition for a property-tax exemption was not clearly

erroneous and (2) the Lodge failed to carry its burden of proving

by clear and convincing evidence that the exemption applied, we

reject the Lodge’s assertion that the Department erroneously

considered the property in isolation from the Lodge's integrated

community and overarching charitable mission.

          In so concluding, we note that the Lodge urges this

court to expand the dimensions of charitable use to include

relief for the elderly regardless of pecuniary considerations.

While the Lodge’s argument is not unreasonable, it is directed to

the wrong audience.   "The power to exempt from taxation is

concomitant with the power to tax."       Eden Retirement Center, 213

Ill. 2d at 285, 821 N.E.2d at 247.       "The legislature, having the

inherent power to tax, also has the inherent power to grant

exemptions from those taxes."    Eden Retirement Center, 213 Ill.

2d at 285, 821 N.E.2d at 247.    Thus, although the Lodge urges

this court to modify and expand the current status of the tax

exemption, that role is exclusively within the province of the


                                - 14 -
legislature and not the courts.   See Eden Retirement Center, 213

Ill. 2d at 286, 821 N.E.2d at 248 (the court has no power to

create exemptions from taxation by judicial construction).

                        III. CONCLUSION

          For the following reasons, we affirm the circuit

court's judgment.

          Affirmed.

          KNECHT and COOK, JJ., concur.




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