                                                                          SECOND DIVISION
                                                                            October 30, 2007




No. 1-06-3229



METRO DEVELOPERS, LLC, an Illinois Limited                    )   Appeal from the
Liability Company,                                            )   Circuit Court of
                                                              )   Cook County
                      Plaintiff-Appellant,                    )
                                                              )
v.                                                            )   No. 05 L 51051
                                                              )
THE CITY OF CHICAGO DEPARTMENT OF                             )
REVENUE and THE CITY OF CHICAGO                               )   Honorable
DEPARTMENT OF ADMINISTRATIVE HEARINGS,                        )   Alexander P. White, Judge
                                                              )   Presiding.
                      Defendants-Appellees.                   )




       JUSTICE KARNEZIS delivered the opinion of the court:

       Plaintiff, Metro Developers, LLC, appeals from an order of the circuit court on

administrative review upholding the determination by defendants, City of Chicago

Department of Revenue and City of Chicago Department of Administrative Hearings,

that plaintiff was not entitled to a property transfer tax exemption. On appeal, plaintiff

contends that it was entitled to the exemption because it satisfied all the conditions

necessary to qualify for the exemption. For the foregoing reasons, we affirm.

       Chapter 3-33 of the Chicago Municipal Code (Code) imposes the Chicago real

property transfer tax (transfer tax) on "the privilege of transferring title to, or beneficial
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interest in, real property located in the city." Chicago Municipal Code §3-33-030(A)

(1999). The buyer of property must pay the tax, which is $3.75 per $500 of the transfer

price of the property. Chicago Municipal Code §3-33-030(A) (1999). The Code

provides for several exemptions, including "[t]ransfers of title to, or beneficial interest

in, real property used primarily for commercial or industrial purposes located in an

enterprise zone, as defined in Chapter 16-12 of this Code." Chicago Municipal Code §

3-33-060(L) (1999). An "enterprise zone" is a depressed area of the city that has been

designated a "proposed enterprise zone" by the city council and approved and certified

by the proper state or federal authorities as an enterprise zone. Chicago Municipal

Code §16-12-020 (1999).

       In December 1998, the Chicago department of revenue issued Revenue Ruling

No. 2, effective January 4, 1999, which clarified that the exemption was only intended

to apply to property that "was being used primarily for commercial or industrial

purposes before the transfer, and continued to be used primarily for commercial or

industrial purposes after the transfer."

       On June 29, 1999, plaintiff paid $5.9 million for real property located at 1500

West Monroe Street in Chicago. Plaintiff purchased the property from AP& P

Manufacturing, Inc., which manufactured and distributed paper products at that

location. The sales contract provided that plaintiff would lease the property to AP & P

for a period of 9 months after the sale was completed. Plaintiff filed a Chicago real

property transfer tax declaration form, claiming an exemption because the property was

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used primarily for commercial or industrial purposes and it was located in an enterprise

zone, pursuant to section 3-33-060(L) of the Code.1 AP & P did lease the property from

plaintiff after the sale, but due to an intervening bankruptcy, AP& P had to be evicted

from the property approximately 11 months later, on June 9, 2000.

       Although the property was zoned only for commercial usage, plaintiff purchased

the property intending to obtain a zoning classification change and to convert the

building located on the property into residential condominiums. Pursuant to plaintiff's

lease with AP & P, plaintiff reserved the right to use an area of less than 5% of the

property for a sales and marketing office for the future condominium development. On

August 13, 1999, plaintiff applied for a permit to construct a sales office, and on

December 10, 1999, plaintiff applied for a demolition permit. Plaintiff's application for a

zoning classification change and business plan development was approved on June

27, 2000. On March 14, 2001, plaintiff was issued a permit to convert the existing

building to residential condominiums. The property was developed into 175 residential

condominiums, and on November 6, 2001, plaintiff sold its first condominium.

       On August 27, 2004, the department of revenue issued plaintiff a notice of tax

determination and assessment in the amount of $86,142.93. The sum included

amounts for $44,250 tax due, $28,617.93 interest due, $2,212.50 late penalty and



       1
           The record is clear and the parties agree that the property is located within an

enterprise zone.

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$11,062.50 negligence/wilfulness penalty. Plaintiff protested the tax, claiming that it

was exempt from the tax because the property was located in an enterprise zone and,

because of the lease agreement with AP & P, the property was used primarily for

commercial or industrial purposes both before and immediately after the sale.

       After a hearing, the department of administrative hearings (Department) upheld

the assessment because "there is no question, based on the stipulated facts, that

[plaintiff] purchased this property intending to develop it into condominium residences."

Plaintiff filed an appeal in the circuit court and the circuit court affirmed the judgment of

the Department. Plaintiff now appeals.

       Our standard of review for reviewing an administrative agency's decision is

governed by the Administrative Review Law. 735 ILCS 5/3-101 et seq. (West 1996).

"[It] provides that our review extends to all questions of law and fact presented by the

entire record." Abrahamson v. Illinois Department of Professional Regulation, 153 Ill.

2d 76, 88 (1992). Our role as an appellate court is to review the administrative

decision, not the circuit court decision. Denton v. Civil Service Comm'n, 277 Ill. App.

3d 770, 773 (1996). If the record contains evidence supporting the agency's decision,

it should be affirmed. Abrahamson, 153 Ill. 2d at 88. We review the Department's

interpretation of a municipal ordinance de novo. Branson v. Department of Revenue,

168 Ill. 2d 247, 254 (1995).

       We note that a taxpayer bears the burden of proving he is entitled to an

exemption. Balmoral Racing Club, Inc. v. Topinka, 334 Ill. App. 3d 454, 457 (2002).

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Statutes exempting property from taxation are to be strictly construed in favor of

taxation. Balmoral, 334 Ill. App. 3d at 457-58.

       On appeal, plaintiff contends that it is exempt from paying the tax because it

satisfied all the conditions necessary in the ordinance to qualify for the exemption.

Specifically, plaintiff maintains that it obtained a transfer of title to the property, the

property was used primarily for commercial or industrial purposes before and for 11

months after the transfer, and the property was located in an enterprise zone.

       We look to this court's opinion in West Belmont, L.L.C. v. City of Chicago, 349

Ill. App. 3d 46 (2004), for guidance. In West Belmont, the plaintiff, a developer, bought

property that had been occupied by a furniture retailer, wholesaler and rental company.

The developer immediately demolished the building on the property and began

constructing and selling residential townhouses on the property. The developer sought

an exemption from the transfer tax, claiming that it purchased real property used

primarily for commercial purposes located in an enterprise zone. This court found on

appeal that the developer was not entitled to the exemption because the property was

no longer used for commercial or industrial purposes. West Belmont, 349 Ill. App. 3d

at 51. The court determined that the word "used" in the ordinance was ambiguous

because it could refer either to past use of the property, use of the property at the time

of transfer, or the use the transferee intended to make of the property. West Belmont,

349 Ill. App. 3d at 50. Therefore, the court looked to the intent of the ordinance, which

it noted was to encourage commercial or industrial use of property located in an

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enterprise zone. The court determined that because the buyer of the property pays the

transfer tax or receives the exemption, the exemption was not intended to reward past

use of the property. West Belmont, 349 Ill. App. 3d at 51. Therefore, the court held

that a determination of whether the exemption applies depends upon the future use of

the property. West Belmont, 349 Ill. App. 3d at 51.

       Applying the principles set forth in West Belmont to the facts in this case, we find

that whether the exemption applies depends upon plaintiff's intended future use of the

property. Plaintiff admitted that its intent for purchasing the property was to construct

residential condominiums. Plaintiff's actions subsequent to the purchase were clearly

consistent with this intent. Plaintiff constructed a sales office on the property shortly

after the sale, applied for a zoning classification change, applied for demolition and

construction permits and ultimately constructed and sold residential condominiums on

the property. Therefore, we find that plaintiff was not exempt from the transfer tax

because plaintiff intended to build residential condominiums on the property and

subsequently did so.

       Plaintiff maintains that because it leased the property to AP & P, which

continued its commercial activity for nearly 11 months subsequent to the sale, it

satisfied all the conditions necessary to qualify for the exemption. Plaintiff notes that

neither the ordinance nor Revenue Ruling No. 2 contains a time frame in which the

property must continue to be used for commercial or industrial purposes.

       We do not find the lack of a specific time frame that the property must continue

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to be used for commercial or industrial purposes to be problematic. As stated above,

we look to the buyer's intended and future use of the property. Plaintiff's intended use

of the property was always to construct residential condominiums and plaintiff

successfully did so. Merely because the property was used for commercial purposes

for a brief period of time after the sale cannot negate plaintiff's intent to build the

condominiums and the fact that the condominiums were actually constructed on the

property.

       Plaintiff further maintains that it was entitled to the exemption because there was

no guarantee that when plaintiff purchased the property it would receive the necessary

zoning classification change and permits to construct the condominiums. However,

plaintiff's theory ignores the facts of this case that plaintiff's intended use was to build

residential condominiums and plaintiff actually did build the condominiums. As stated

in West Belmont, the exemption depends upon the future use of the property, and here,

the future use of the property was for residential purposes.

       Accordingly, we affirm the judgment of the circuit court and the Department.

       Affirmed.

       THEIS, J., and CUNNINGHAM, J., concur.




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