                                No. 3--06--0001
______________________________________________________________________________
Filed December 18, 2006.
                                    IN THE

                              APPELLATE COURT OF ILLINOIS

                                       THIRD DISTRICT

                                           A.D., 2006

COMMUNITY HEALTH CARE, INC.,           ) Appeal from the Circuit Court
                                       ) of the 14th Judicial Circuit,
      Petitioner-Appellee,             ) Rock Island County, Illinois,
                                       )
      v.                               ) 05--MR–81
                                       )
ILLINOIS DEPARTMENT OF REVENUE, ) The Honorable
                                       ) Walter D. Braud,
      Respondent-Appellant.            ) Judge Presiding.
______________________________________________________________________________

      JUSTICE McDADE delivered the opinion of the court:
______________________________________________________________________________

       Petitioner, Community Health Care, Inc. (CHC), operates a community-based primary

care clinic in Rock Island, Illinois. In October 2003 CHC applied for a property tax exemption on

the basis of the property’s use for charitable purposes. Respondent, the Illinois Department of

Revenue (Department), denied CHC’s request for a property tax exemption. CHC appealed and

the matter proceeded to a hearing before an administrative law judge (ALJ). The ALJ upheld the

Department’s decision to deny CHC’s application for a tax exemption. The ALJ concluded that

CHC failed to demonstrate that it qualified as a charitable organization pursuant to section 15-65

of the Property Tax Code (35 ILCS 200/15-65 (West 2002)) or that it used the subject property

exclusively for charitable purposes. CHC filed a complaint in the circuit court of Rock Island

County for administrative review of the ALJ’s order. The court reversed the ALJ’s order. For
the reasons that follow, we reverse the trial court and affirm the ALJ’s ruling upholding the

Department’s decision.

                                        BACKGROUND

       CHC applied for, and was granted, permission to operate in Illinois as a not-for-profit

corporation. It does not have stock or shareholders. The clinic serves medically underserved

populations, residents of public housing, and the homeless. CHC’s clients pay for services

themselves, with private insurance, and through Medicare, Medicaid, and grants. CHC offers a

sliding scale for fees whereby patients receive a discount of 25%, 50%, 75%, or 100% depending

on their income. CHC offers the discount to any person with an income at or below 200% of the

poverty level and advertises its availability through a variety of media. A patient with an income

at or below the poverty level receives a 100% discount. In 2003, approximately 27% of CHC’s

patients received some level of discounted services. Of those, 58% received the 100 per cent

discount. Regardless of the sliding scale CHC requires all patients, excluding homeless persons,

to pay at least a $10 co-payment for medical services or $20 for dental services; but CHC will not

turn away a patient who cannot provide the co-pay.

       CHC reports charity care on its financial statements as "the sum of all patient adjustments

which are non-contractual adjustments related to private insurance agreements." "Charity care"

includes discounted services as well as Medicare and Medicaid. CHC receives 64.8% of its

revenue from patient fees, 29.7% from federal and state grants, and 5.5% from donations. Of the

patient fees, 16.7% were discounted and 12.8% came from other payors or private grants. The

remainder of the patient fees were paid by Medicare, Medicaid, private insurance, or the patient.

CHC reinvests any revenue surplus in its clinics in the form of new equipment and supplies. CHC


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pays its physicians a base salary and annual bonuses based on productivity. CHC measures

productivity as the physician’s gross revenues before any adjustments for Medicare, Medicaid,

private insurance, or the sliding scale discount. CHC, which operates four other facilities in the

Quad Cities area, opened its Rock Island location in March 2003. The facility houses 16

examination rooms for use by three full-time and part-time medical providers. CHC also plans to

have three dental stations in the facility.

        The Department appeals the circuit court’s order reversing the ALJ’s order affirming the

denial of CHC’s application for a tax exemption.

                                              ANALYSIS

                        "To determine whether the clinics are eligible for a property

                tax exemption under section 15-65, we use the test established in

                Methodist Old Peoples Home v. Korzen, 39 Ill. 2d 149, 233 N.E.2d

                537 (1968). In order to be eligible, the alleged charity must show

                that: (1) it is set up for the benefit of an indeterminate number of

                persons; (2) it has no capital, capital stock or shareholders and

                earns no profits or dividends; (3) it derives its funds primarily from

                public and private charity and holds those funds in trust for the

                objectives and purposes expressed in its charter; (4) it dispenses

                charity to all who need and apply for it, does not provide gain or

                profit in a private sense to any person connected with it, and does

                not appear to place obstacles of any character in the way of those

                who need and would avail themselves of the charitable benefits it


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               dispenses; (5) the property is actually and factually used exclusively

               for the charitable purpose, regardless of any intent expressed in the

               organization's charter or bylaws; and (6) charity use is the primary

               purpose for which the property is used and not a secondary or

               incidental purpose." (Emphasis added.) Riverside Medical Center

               v. Department of Revenue, 342 Ill. App. 3d 603, 607, 795 N.E.2d

               361, 365 (2003).

       "An appellate court's role is to review the administrative decision, not the circuit court

decision." Calabrese v. Chicago Park Dist., 294 Ill. App. 3d 1055, 1065, 691 N.E.2d 850, 857

(1998). "[T]he findings and conclusions of an administrative agency on questions of fact are

considered prima facie true and correct." Calabrese, 294 Ill. App. 3d at 1065, 691 N.E.2d at

857. The decision of the administrative agency should not be overturned unless it is clearly

erroneous. Lutheran Church of the Good Sheperd of Bourbonnais v. Department of Revenue,

316 Ill. App. 3d 828, 831, 737 N.E.2d 1075, 1078 (2000). "In other words, the determination

should not be overturned unless the record leaves the reviewing court with the < "definite and firm

conviction that a mistake has been committed." ’ [citation]" Riverside Medical Center v.

Department of Revenue, 342 Ill. App. 3d 603, 607, 795 N.E.2d 361, 364-65 (2003). Statutes

exempting property from taxation are to be strictly construed in favor of taxation. Harrisburg-

Raleigh Airport Authority v. Department of Revenue, 126 Ill. 2d 326, 331, 533 N.E.2d 1072

(1989). The burden of proving the right to exemption rests upon the party seeking it. Chicago

Patrolmen's Ass'n v. Department of Revenue, 171 Ill. 2d 263, 271, 664 N.E.2d 52, 56 (1996).

       The Department argues CHC did not satisfy any of the six criteria used in determining


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whether a tax payer is entitled to a charitable-use exemption. CHC responds it meets the

definition of "charity" because it provides free or reduced-fee health care to any patient who

presents him or herself to its facility and does not set a limit on the number of people who can

receive free or reduced-fee health care services. CHC argues it uses its property primarily for this

purpose because it only uses the property for the provision of medical and dental care.

        We reverse the decision of the circuit court and affirm the ALJ’s ruling affirming the

Department’s decision to deny CHC’s application for a tax exemption. CHC’s primary use of its

facility is not for its "charitable purpose."

                        "The law in Illinois exempts from taxation that property of

                charitable institutions that is ‘actually and exclusively used for * * *

                charitable or beneficent purposes.’ (Ill. Rev. Stat.1985, ch. 120,

                par. 500.7.) Exclusive use refers to the primary purpose for which

                the property is being used, not a secondary or incidental purpose.

                Northwestern Memorial Foundation v. Johnson, [141 Ill. App. 3d

                309, 490 N.E.2d 161 (1986)]." Norwegian American Hospital,

                Inc. v. Department of Revenue, 210 Ill. App. 3d 318, 322-23, 569

                N.E.2d 83, 86 (1991).

        CHC’s "charitable purpose" is to provide discounted or free medical service to a medically

underserved community. By its own admission it uses the property for that purpose only 27% of

the time. The remaining 73% of the time, CHC uses the property as a not-for-profit medical

clinic. Further, CHC’s evidence as to the level of charitable operations at this facility is

speculative. CHC relied on "organization-wide financial data to extrapolate the patient and payor


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mix" at the Rock Island facility. In fact, CHC states that it "had little concrete data to support its

conclusion other than reliance on its previous years of historical data and knowledge" at other

facilities.

        "‘[The] burden of proving the right to exemption is upon the party seeking it, and in

determining whether property is included within the scope of an exemption, all facts are to be

construed and all debatable questions resolved in favor of taxation.’" Pontiac Lodge No. 294,

A.F. & A.M. v. Department of Revenue, 243 Ill. App. 3d 186, 192-93, 611 N.E.2d 62, 67 (1993),

quoting Methodist Old Peoples Home, 39 Ill .2d at 155, 233 N.E.2d at 540. Because CHC

admits that its application is based on data from other facilities and an assumption that the facility

in question will serve the same number and type of patients, we find that CHC has not carried its

burden of proving a right to an exemption at the Rock Island facility. As the question of how

much CHC uses the Rock Island facility for its "charitable purpose" is, at best, "debatable," we

must resolve the issue in favor of taxation. See Pontiac Lodge No. 294, A.F. & A.M., 243 Ill.

App. 3d at 192-93, 611 N.E.2d at 67.

                                          CONCLUSION

        We hold that a 27% use is insufficient to find the property is used primarily for a charitable

purpose and, regardless, that CHC has failed to provide clear and convincing evidence of its

charitable operations--providing reduced cost health care--at the Rock Island facility. The circuit

court of Rock Island County’s order is reversed, and the ALJ’s ruling is affirmed.

        Reversed.

        HOLDRIDGE and O’BRIEN, JJ., concur.




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