                                              FIRST DIVISION
                                              September 24, 2007




No. 1-06-3388

EXELON CORPORATION,                      )    Appeal from the
                                         )    Circuit Court of
     Plaintiff-Appellant,                )    Cook County.
                                         )
          v.                             )
                                         )
ILLINOIS DEPARTMENT OF REVENUE, and      )
BRIAN A. HAMER, as Director of           )
Revenue,                                 )    Honorable
                                         )    Sheldon Gardner,
     Defendants-Appellees.               )    Judge Presiding.


     JUSTICE WOLFSON delivered the opinion of the court:

     At issue in this case is whether Commonwealth Edison

(ComEd), a wholly-owned subsidiary of Exelon Corporation, as

successor to Unicom Corporation, is entitled to a tax credit for

investments in “qualified property” on its 1995 and 1996 tax

returns pursuant to section 201(e) of the Illinois Income Tax Act

(Act) (35 ILCS 5/201(e) (West 1994)).   We also are asked to

consider whether section 201(e), as applied to gas and electric

utility providers, violates the uniformity clause of the Illinois

Constitution.   The Department of Revenue rejected Exelon’s claims

and we agree.

FACTS

     In 1995 and 1996, ComEd invested nearly $3 billion in




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property used for generating, transmitting, and distributing

electricity to customers in Illinois.    The property was

depreciable under section 167 of the Internal Revenue Code, and

had not been previously used in Illinois.    Neither ComEd nor its

parent company claimed a section 201(e) credit on its original

combined 1995 or 1996 Illinois tax return.    On May 28, 1998,

ComEd’s parent company, Unicom Corporation, filed amended

Illinois combined income tax returns, seeking a $10,419,507

section 201(e) credit for 1995 and a $4,398,115 credit for 1996.

Section 201(e) provides a tax credit against the Personal

Property Tax Replacement Income Tax for investments in “qualified

property.”

     The Department of Revenue (Department) denied the requests.

Unicom submitted an administrative protest and requested a

hearing.    The parties filed cross-motions for summary judgment.

     In support of its motion for summary judgment, Unicom

attached an affidavit and report from its expert witness, Dr.

Joel Fajans, a professor of physics at University of California,

Berkeley.    Dr. Fajans opined that, as a matter of irrefutable

scientific fact, electricity itself is both a physical and

material commodity.    Dr. Fajans noted that electricity can be

sensed, measured, stored, and weighed.

     Unicom also asked the Department to admit whether it had



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ever approved an investment credit for either a natural gas

utility or another regulated electric utility.     After raising a

relevancy objection, the Department admitted it allowed

investment credits to natural gas utilities generally.     The

Department denied granting the credit to a regulated electric

utility.    The Department admitted, however, that between the tax

years 1992 and 1998, a combined gas and electric utility filed an

amended return claiming the section 201(e) credit for property

used in its electricity business.      The Department did not audit

the amended return and the taxpayer received the credit.

     The Administrative Law Judge (ALJ) recommended granting the

Department’s summary judgment motion.     The ALJ found the Illinois

General Assembly did not intend to include electricity within the

meaning of “tangible” when enacting section 201(e), relying in

large part on our supreme court’s decision in Farrand Coal Co. v.

Halpin, 10 Ill. 2d 507, 140 N.E.2d 698 (1957).     The ALJ also

found that “[t]reating electric utilities differently than

natural gas utilities *** does not violate the uniformity clause

of the Illinois Constitution.”    The Director of the Department

accepted the ALJ’s recommendation.     Unicom petitioned for circuit

court review of the administrative decision.     After Unicom was

purchased by Exelon Corporation, the circuit court ordered the

case caption changed to “Exelon Corporation, as successor to



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Unicom Corporation.”    The court affirmed the Director’s decision.

Exelon appeals.

DECISION

     We review the administrative agency’s decision, not the

circuit court’s decision.    Wigginton v. White, 364 Ill. App. 3d

900, 905, 847 N.E.2d 646 (2006).        An administrative agency’s

factual determinations are reviewed under a manifest weight of

the evidence standard.     Lindsey v. Board of Education of the City

of Chicago, 354 Ill. App. 3d 971, 978, 847 N.E.2d 1161 (2004).

An administrative agency’s legal conclusions, however, are

reviewed de novo.    Wigginton, 364 Ill. App. 3d at 905; Lindsey,

354 Ill. App. 3d at 979.    We review the issues here de novo.

I. Classification of Electricity as Intangible

     Section 201(e) of the Act provides a tax credit for

investments in “qualified property.”        35 ILCS 5/201(e) (West

1994).   The statute defines “qualified property” as property

“used in Illinois by a taxpayer who is primarily engaged in

manufacturing, or in mining coal or fluorite, or in retailing.”

35 ILCS 5/201(e)(2)(D) (West 1994).        “Retailing” is defined as

“the sale of tangible personal property or the sale of services

rendered in conjunction with the sale of tangible consumer goods

or commodities.”    35 ILCS 5/201(e)(3) (West 1994).      At issue in

this case is whether electricity is “tangible personal property.”



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The legislature did not define “tangible personal property”

within the Act.

     Exelon contends the Department erred in determining ComEd

does not, as a matter of law, engage in “retailing” as defined by

section 201(e).   Specifically, Exelon contends the Department

erred in determining the Illinois legislature did not intend for

electricity to be considered “tangible” when enacting the section

201(e) tax credit.

     When the facts are undisputed, the determination of whether

property is exempt from taxation is a question of law.     Chicago

Patrolmen’s Association v. Department of Revenue, 171 Ill. 2d

263, 271, 664 N.E.2d 52 (1996); Schwak, Inc. v. Zehnder, 326 Ill.

App. 3d 752, 755, 761 N.E.2d 192 (2001).   “Statutes exempting

property from taxation are to be strictly construed in favor of

taxation.”   Chicago Patrolmen’s Association, 171 Ill. 2d at 271.

     The primary goal of statutory interpretation is to ascertain

and give effect to the legislature’s intent.   Andrews v. Kowa

Printing Corp., 217 Ill. 2d 101, 105-06, 838 N.E.2d 894 (2005).

“The best indication of legislative intent is the statutory

language, given its plain and ordinary meaning.”   Andrews, 217

Ill. 2d at 106.   “Where the language is clear and unambiguous, we

must apply the statute without resort to further aids of

statutory construction.”   Andrews, 217 Ill. 2d at 106.



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       In Farrand Coal Co. v. Halpin, 10 Ill. 2d 5077, 140 N.E.2d

698 (1957), our supreme court considered whether electricity was

tangible personal property under the Retailers’ Occupation Tax

Act.    The court noted the ordinary and popularly understood

meaning of “tangible” is “ ‘Capable of being touched; also,

perceptible to the touch; tactile; palpable.’ ” Farrand Coal, 10

Ill. 2d at 511, quoting Webster’s New International Dictionary,

Second Edition, Unabridged, 1946.       The same dictionary defined

“ ‘tangible property’ as ‘Corporeal property either real or

personal’ and defines ‘corporeal’ as meaning ‘Of the nature of,

consisting of, or pertaining to, matter or a material body;

physical; bodily; material;-opposed to spiritual or

immaterial.’ ”    Farrand Coal, 10 Ill. 2d at 511.

       In light of the ordinary and popularly understood meaning of

“tangible”, the court held:

            “All witnesses who testified on the subject

            *** agreed that energy cannot be separated

            from matter and tagged or otherwise

            physically identified in any way, cannot be

            located spacially, and does not have

            dimensions.   In all these respects energy

            falls short of fitting into the ordinary and

            popularly understood meaning of the word



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            ‘tangible’ as used by the General Assembly in

            this act in question.”     Farrand Coal, 10 Ill.

            2d at 511.

The court noted that although it had previously recognized

electricity as personal property, it had at no time held

electricity to be “tangible” personal property.       Farrand Coal, 10

Ill. 2d at 512.

     In light of our supreme court’s decision in Farrand Coal, we

find including electricity within the classification of “tangible

personal property” for the purposes of section 201(e) would be

inconsistent with Illinois precedent classifying property as

intangible in the context of other tax statutes.       See Schwak,

Inc., 326 Ill. App. 3d at 755 (“Moreover, as we look beyond the

dictionary definitions of manufacturing, the inclusion of

Schwak’s business in the classification “manufacturing” [for the

purposes of section 201(e)] is inconsistent with Illinois

precedent classifying the graphic arts as a service occupation in

the context of other statutes.”)       Contrary to Exelon’s

contentions, we are bound by the principle of stare decisis and

must adhere to the decisions of our supreme court.       See

Wreglesworth ex rel. Wreglesworth v. Arctco, Inc., 316 Ill. App.

3d 1023, 1030, 738 N.E.2d 964 (2000).

     Moreover, we recognize that “[w]here statutes are enacted



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after judicial opinions are published, it must be presumed that

the legislature acted with knowledge of the prevailing case law.”

Burrell v. Southern Truss (Wood River Tp. Hospital), 176 Ill. 28

171, 176, 679 N.E.2d 1230 (1997).      The section 201(e) tax credit

was enacted in 1982, nearly 25 years after Farrand Coal was

decided.    See Pub. Act 82-315, eff. Jan. 1, 1982.   Therefore, we

must presume the legislature was aware of, and approved, the

Farrand Coal court’s classification of electricity as intangible

property when it enacted the tax credit and continued to use the

phrase “tangible personal property” to refer to those who may

receive the credit.    See Burrell, 176 Ill. 2d at 176.    If the

legislature intended to re-classify electricity as “tangible

personal property” under section 201(e), it could have

specifically modified the classification in the statutory

language.    See Modern Dairy Co. v. Department of Revenue, 413

Ill. 55, 66, 108 N.E.2d 8 (1952) (“When this court construes a

statute and that construction is not interfered with by the

legislature, it is presumed that such construction is in harmony

with the legislative intent.”) The legislature chose not to do

so.

      We find the Department did not err in determining Exelon

does not, as a matter of law, engage in “retailing” as defined by

section 201(e).



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II. Uniformity Clause

     Exelon contends section 201(e) violates the uniformity

clause of the Illinois Constitution because the statute

unlawfully differentiates between suppliers of energy

commodities.

     The uniformity clause provides:

            "In any law classifying the subjects or

            objects of non-property taxes or fees, the

            classes shall be reasonable and the subjects

            or objects within each class shall be taxed

            uniformly.   Exemptions, deductions, credits,

            refunds and other allowances shall be

            reasonable."   Ill. Const. 1970, art. IX, § 2.

     When a statute is challenged on uniformity grounds, the

scope of a court’s inquiry is relatively narrow.      Geja’s Café v.

Metropolitan Pier & Exposition Authority, 153 Ill. 2d 239, 248,

606 N.E.2d 1212 (1992).     "To survive scrutiny under the

uniformity clause, a nonproperty tax classification must be based

on a real and substantial difference between the people taxed and

those not taxed, and the classification must bear some reasonable

relationship to the object of the legislation or to public

policy."    Allegro Services, Ltd. v. Metropolitan Pier &

Exposition Authority, 172 Ill. 2d 243, 250, 665 N.E.2d 1246



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(1996).   Statutes are presumed constitutional.      Broad latitude is

afforded to legislative classifications for taxing purposes.

Geja’s Café, 153 Ill. 2d at 248.

     In this case, Exelon is not challenging a tax or fee; it

claims it is entitled to a credit.       Our reading of the plain

language of the uniformity clause leads us to conclude the first

sentence of the clause does not apply to a credit.       It applies

only to taxes or fees.   The second sentence applies to

"exemptions, deductions, credits, refunds and other allowances."

Ill. Const. 1970, art. IX, § 2.     That sentence merely requires

that a credit be "reasonable."     Thus, under our interpretation of

the uniformity clause, Exelon may challenge the credit only for

reasonableness, not for uniformity.       In other words, Exelon

cannot contend under the uniformity clause that there is no real

and substantial difference between those receiving the credit

(the gas company), and those not receiving the credit (the

electric company).   Its argument must be limited to whether the

credit itself is reasonable.    Exelon has not challenged the

reasonableness of the credit.    It simply wants to receive it.

     Our reading of the uniformity clause finds support in a line

of cases beginning with the Illinois Supreme Court’s decision in

Head v. Korshak, 62 Ill. 2d 226, 227, 341 N.E.2d 706 (1976),

where the court construed a city of Chicago wheel tax ordinance.



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A 1974 amendment to the ordinance gave reduced rates to people

over 65 years of age who owned automobiles in two classes of

smaller automobiles but did not grant the reduction to those over

65 years of age who owned automobiles in the largest class.

     The court held the amended ordinance did not add another

classification; rather, it established an exemption, or a right

to a deduction or credit within the meaning of the second

sentence of the uniformity clause.       Head, 62 Ill. 2d at 229.   The

court said:

            "The constitutional determination to require

            that ‘exemptions, deductions, credits,

            refunds and other allowances’ meet only a

            standard of reasonableness, and not a

            standard of uniformity and reasonableness

            seems clear."   Head, 62 Ill. 2d at 229.

     The court accepted the reasons advanced by the city to

support the reasonableness of the exemption.      First, persons aged

65 years and older who were able to afford vehicles with large

horsepower engines were less in need of tax relief than others.

Second, motor vehicles with higher horsepower created greater

environmental problems than lower horsepower vehicles.      These

reasons were sufficient to justify the exemption granted by the

ordinance.    Head, 62 Ill. 2d at 230.



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     In Toney v. Bower, 318 Ill. App. 3d 1194, 1208, 744 N.E.2d

351 (2001), the court upheld the validity of a statutory income

tax credit for school expenses.     Toney, 318 Ill. App. 3d at 1196;

35 ILCS 5/201(m) (West Supp. 1999).      Qualified parents were

eligible for a credit of up to $500 against their income tax

liability equal to 25% of qualified education expenses.

Qualified expenses were defined as amounts incurred on behalf of

a qualifying pupil in excess of $250 for tuition, books, and lab

fees.   The plaintiffs contended the credit violated the

uniformity clause because it disqualified nearly all parents of

public school students.     Toney, 318 Ill. App. 3d at 1207.      They

argued the $250 per child threshold was unreasonable because it

was unrelated to the taxpayers’ total financial burden of

educating their children.

     The court held:

            "The sole requirement placed on tax credits

            by section 2 of article IX is that the

            ‘[e]xemptions, deductions, credits,

            refunds[,] and other allowances shall be

            reasonable.’   [Citation.]   Thus, our

            constitution recognizes that differences will

            exist in the deductions granted to various

            classes of taxpayers and merely imposes a



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            requirement of reasonableness."     Toney, 318

            Ill. App. 3d at 1208.

     The court found the education credit was reasonable because

certain parents who did not benefit from the tax credit had

incurred lower costs in educating their children.       Toney, 318

Ill. App. 3d at 1208.    Parents who sent their children to private

schools relieved the State and other taxpayers of the expense of

educating their children.    The credit was related to the

"appropriate legislative goal" of assisting private schools in

remaining financially viable.       Toney, 318 Ill. App. 3d at 1208.

     In Brown v. Illinois Department of Revenue, 89 Ill. App. 3d

238, 243, 411 N.E.2d 882 (1980), the plaintiffs challenged

sections of the Illinois Income Tax Act that allowed noncorporate

taxpayers who had sold property during the year to deduct the

amount of appreciation that had accrued before the effective date

of the Act.    Ill. Rev. Stat. 1975, ch. 120, pars. 2-203(a)(2)(F),

2-203(c)(2)(F).    The plaintiffs, shareholders of a small business

corporation, were not allowed to deduct the gain realized from

the sale of the corporation’s equipment and goodwill.        Brown, 89

Ill. App. 3d at 239.

     Citing the language in the second sentence of the uniformity

clause, the court said, "The constitution recognizes that there

will be differences in the deductions granted to various classes



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of taxpayers and merely imposes a requirement of reasonableness

on these deductions."   Brown, 89 Ill. App. 3d at 243.    The court

held the sections of the Act granting the deduction only to

noncorporate taxpayers were reasonable.

     We acknowledge that despite clear language in the uniformity

clause separating nonproperty taxes and fees from credits,

exemptions, and other allowances, several courts have analyzed

exemptions and credits under the uniformity analysis used for

taxes and fees--although none of those cases pitted gas companies

against electricity providers.    None reflected the distinctions

between gas and electricity drawn in Farrand and Peoples Gas

Light & Coke Co. v. City of Chicago, 9 Ill. 2d 348, 137 N.E.2d

330 (1956) (despite similarities in the energy products sold by

gas and electric companies, the court held the legislature may

classify the two providers separately).

     In Milwaukee Safeguard Insurance Co. v. Selcke, 179 Ill. 2d

94, 688 N.E.2d 68 (1997), the court examined a privilege tax

imposed on foreign companies by section 409 of the Illinois

Insurance Code.   215 ILCS 5/409(1) (West 1992).   The section

contained an exemption for domestic companies.     The court first

found a real and substantial difference between those who pay the

privilege tax and those who do not--the disparity in power the

Illinois Department of Insurance has over foreign versus domestic



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insurance companies.    Milwaukee Safeguard, 179 Ill. 2d at 101.

The court next found the classification did not bear a reasonable

relationship to the object of the legislation or to public

policy.    The court held the section imposed an unreasonable

burden on foreign insurance companies because the tax was imposed

on all foreign companies regardless of their financial strength

or their compliance with recordkeeping requirements.       Milwaukee

Safeguard, 179 Ill. 2d at 103.

     The supreme court analyzed another set of exemptions using

the two-part test for uniformity challenges in Commercial

National Bank of Chicago v. City of Chicago, 89 Ill. 2d 45, 432

N.E.2d 227 (1982).    The Chicago service tax statute exempted from

the tax all commodities and securities businesses and all

transactions on a futures or securities exchange for a period of

10 years.    Commercial National Bank, 89 Ill. 2d at 70.    The

plaintiffs contended they provided services to their clients that

were substantially similar to those provided to clients of

commodities and securities businesses that were not subject to

the tax.    The court held:

            "[t]here does not appear to be any real or

            substantial difference between those taxed

            and those not taxed which bears a reasonable

            relationship to the revenue-gathering purpose



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            of the tax***   The distinction is wholly

            arbitrary and cannot be upheld."   Commercial

            National Bank, 89 Ill. 2d at 73.

     See also Zunamon v. Zehnder, 308 Ill. App. 3d 69, 77-78, 719

N.E.2d 130 (1999) (applying uniformity analysis to foreign tax

credit); Moran Transportation Corp. v. Stroger, 303 Ill. App. 3d

459, 473-75, 708 N.E.2d 508 (1999) (exemption of railroads from

diesel fuel tax survived uniformity challenge because there was a

real and substantial difference between those taxed and those not

taxed, and a reasonable relationship existed between the

exemption and the object of the legislation).

     We believe the more appropriate approach to the claim for a

credit in this case is to follow the plain language of the

uniformity clause and require only that the credit be reasonable.

Exelon does not specifically challenge the reasonableness of the

credit itself.    We find the legislature’s decision to limit the

section 201(e) tax credit to “mining,” “manufacturing,” and

“retailing,” is reasonably related to the goal of the legislature

in enacting the credit.     Because Exelon does not claim the credit

is unreasonable, we find its’ uniformity argument must be

rejected.

CONCLUSION

     For the reasons we have stated, we affirm the Department’s



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order.

    Affirmed.

    CAHILL, P.J., and GARCIA, J., concur.




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