G. Pricing and Revenue of Religious Materials.
Along with its TV broadcasts, Three Angels also distributes
its message via video and audio tapes, CDs, books, and other
types of literature that are all consistent with the Adventist
message. TT 117-118. At times these items are given away, at
other times, a
nominal fee is charged to cover a portion of the costs of the
item. RD par. 5; TT 118, 171-172. If an item is sold, the price
is set based on affordability to the donors rather than based
on the need to cover the costs of the item. TT 169-170. If a
caller cannot afford the item, it is given away. TT 169. There
is no evidence that any items are sold at more than cost, and
there is only evidence that items, including satellite dishes,
which Three Angels makes available for persons living in areas
where the broadcast is not available on cable or the airwaves,
and airtime, are sold at or below cost. TT 161,166-167.
Revenue attributed to the sales of books, tapes, videos, CDs,
satellite dishes, or any other material Three Angels sells did
not exceed the expenses associated with purchasing, promoting
or distributing those items. TT 449-450, 476-477. The sale of
airtime covers only a fraction of the expenses associated with
the broadcast of that airtime, when equipment costs, satellite
fees, and other direct overhead are factored in. TT 436, 441-444;
Appl. Exh. 14-15. The gross amount of revenue associated with
these sales is only a few percent of Three Angels total revenue.
TT 433, 435-436. Between 75% to 85% of Three Angels' revenue
comes from charitable donations made by its viewers and listeners.
H. Salaries and Issues of Personal Inurement.
The board sets the salaries of the President and Vice-President
of Three Angels. TT 144-145. The salaries are guided by the equivalent
salary, including benefits, of a minister of the Seventh-day
Adventist Church. TT 145. President Danny Shelton received about
$50,000 per year in 2000 and 2001, and Vice President Linda Shelton
received about $45,000 in 2000 and $47,000 in 2001. TT 141, 144.
The Sheltons, along with the other salaried employees of Three
Angels, received health benefits and one-half dental benefits,
and the use of a company car for business purposes. TT 141, 144.
Apart from erroneous finding by the trial judge that Linda
Shelton received royalties from the sale of her CDs and that
Three Angels board was made up of only four members of the Shelton
family, which will be discussed and disputed in the next section,
there are no other facts or evidence that show any other inurement
or improper benefit flowing to a private person from Three Angels.
Indeed, the testimony of both the internal treasurer, Larry Ewing
was that there was no personal inurement of Three Angels revenue
to private persons. This also was the conclusion of the testimony
of Three Angels' independent, external auditor, Alan Lovejoy,
of Gray, Hunter, & Stenn, LLP, as it would be a violation of
basic not-for-profit corporation standards. TT 453-54, 476,486.
Neither the state nor the interveners called any witness or
submitted any evidence regarding the operations, mission, financial
matters, personal matters or board operations of Three Angels.
The interveners called a single witness who testified to the
simple and largely irrelevant claims that prior to the assessment
year 2000, the subject property had been assessed as vacant ground,
and that new construction in 1999 had caused it to be re-assessed
as taxable. TT 656-658. Thus, the testimony of the Three Angels'
witnesses was essentially unchallenged and unrebutted.
2. Disputed Factual Findings.
The hearing judge made certain erroneous factual findings,
and erroneous applications of the law to the facts, that this
Court should overrule. The Illinois Administrative Review Law
provides the following description of the standard of review
for questions of fact:
§ 3-110. Scope of review. Every action to review any
final administrative decision shall be heard and determined by
the court with all convenient speed. . . . The hearing and determination
shall extend to all questions of law and fact presented by the
entire record before the court.
The code also says that "the findings and conclusions of the
administrative agency on questions of fact shall be held to be
prima facie true and correct." Id. But this has come to mean
different things depending on whether a "pure" question of fact
is at issue, or whether the question involves the application
of law to fact.
For "pure" questions of fact, the appropriate standard of
review is whether "they are contrary to the manifest weight of
the evidence."2 "Factual findings are against the manifest weight
of the evidence" where all "reasonable and unbiased persons would
agree it is clearly evident the administrative agency erred and
should have reached the opposite conclusion."3 Only if "the record
contains evidence supporting the agency's decision" should it
As opposed to a "fact" question, a question of mixed fact
and law involves "the examination of the legal effect of a given
set of facts . . ."5 The standard of review in the case of mixed
fact and law was recently discussed by the Illinois Supreme Court,
where they noted that if:
the issue presented cannot be accurately characterized as
either a pure question of fact or a pure question of law and,
therefore, will be treated as a mixed question, subject to an
intermediate standard of review. Under the clearly erroneous
standard, we give somewhat less deference to the agency than
we would if the decision related solely to a question of fact,
because the decision is based on fact-finding that is inseparable
from the application of law to fact.6
Bd. Of Educ. of Gibson City-Melvin-Sibley Community Unit
School v. The Illinois Property Tax Appeal Board, 2005 WL 293638
at *3 (Ill.App. 4 Dist.); See Hasco, Inc. v. Roche, 299 Ill.App.3d
118 at 126, 700 N.E.2d 765 at 773, 233 Ill.Dec. 240 at 245 (Sept.
11, 1998) (as the court was dealing with "pure questions of fact"
the court stated "our standard of review is whether the court's
decision is contrary to the manifest weight of the evidence.")
See La Salle Partners, Inc. v. Illinois Property Tax Appeal
Board, 269 Ill.App.3d 621, 632, 207 Ill.Dec. 101, 646 N.E.2d 935,
Abrahamson, 153 Ill.2d at 88, 180 Ill.Dec. 34, 606 N.E.2d
at 1117. Caterpillar, Inc v. Illinois Commerce Com'n, 348 Ill.App.3d
823 at 828, 283 Ill.Dec. 482, 485-86 (Ill.App. 1 Dist., 2004).
AFM Messenger Service, Inc. v. Department of Employment Security,
198 Ill.2d 380, 391, 261 Ill.Dec 302, 763 N.E.2d 272 (2001).
Carpetland U.S.A., Inc. v. Illinois Dept. of Employment Sec.,
201 Ill.2d 351, 369, 267 Ill.Dec. 29, 41 (Ill. 2002):
Under these circumstances, the Court noted, they would reverse
if, "after review of the entire record, we are 'left with the
definite and firm conviction that a mistake has been committed.'
The hearing judge made a number of findings below, some of
which are "pure" fact, but most of which involve application
of law to fact, that are against the manifest weight of the evidence
and/or otherwise clearly erroneous. These findings are central
to the issues in this case. They relate to the existence and
legitimacy of the Three Angels' board, whether certain persons
receive private benefit or inurement from Three Angels' operations,
whether Three Angels makes donations or gives away materials
and airtime, and whether its officers are actively engaged in
religious ministry. The conclusions reached by the hearing judge
on these topics are not supported by and, in a number of instances,
are directly contrary to the trial record and the manifest weight
of the evidence.
A. Issue of Inurement and Board Makeup.
The hearing judge mistakenly ruled that the evidence showed
that the only board members during 2000 and 2001 were persons
with the last name Shelton. DR par 8, fn 2. From this clearly
erroneous finding, the judge reaching the equally erroneous conclusion
that the company was not run by an independent board of directors,
but was operated as a closely held business for the personal
benefit of the Sheltons. DR 35-36. The Administrative Law Judge
reaches this erroneous conclusion based on the name of the four
individuals listed as the original incorporating directors on
the Three Angels' 1985 Articles of Incorporation, all of which
had the last name Shelton and listed the same address. Extraordinarily,
Id., quoting, AFM, 198 Ill.2d at 395, 261 Ill.Dec. 302,
763 N.E.2d 272, quoting United States v. United States Gypsum
Co., 333 U.S. 364, 395, 68 S.Ct. 525, 542, 92 L.Ed. 746, 766 (1948).
Administrative Law Judge made this finding despite having
acknowledged that Dr. Thompson, the chairman of the board, was
a board member, during 2000 – 2001. RD 7, fn. 2.
Indeed, at trial, there was no testimonial or documentary
evidence that Kenneth Shelton and Emma Lou Shelton were members
of the board of directors in 2000 or 2001. They were only identified
as founding directors in the 1985 Articles of Incorporation.
On the contrary, Danny Shelton testified that during 2000 and
2001, there were twelve directors on the Board. (TT 92. Of the
twelve, nine directors were identified at trial. In addition
to Danny and Linda Shelton, Dr. Walter Thompson, a doctor living
in Burr Ridge, Illinois, testified that he had been a member
of the board since approximately 1986 or 1987, and had held the
position of Chairman of the Board from approximately 1994 to
the present. TT 494, 497-499.
Dr. Thompson confirmed that May Chung was also a member of
the board. TT 527. Danny Shelton testified as to the identity of five additional board
members. He testified that the Illinois Conference President of the Seventh-day Adventist
Church has a standing position on Three Angels' board of directors, and during 2000 and 2001,
that position was filled by Elder Wayne Coulter, who was also an ordained minister. TT 92-93.
Elder Coulter's replacement, Elder Ken Denslow, the current Illinois conference president
and Three Angels board member, also testified at the trial regarding
his board involvement. TT 551. Mr. Shelton further testified that the Under Secretary of
the General Conference of the World Church of the Seventh-day
Adventist sat on the board and was an ordained minister, although
this individual was not disclosed by name. Id. In addition, Mr.
Shelton testified that: Owen Troy, an ordained minister and the Communication Director
for the North American Division of Seventh-day Adventist; Larry
Welch, an ordained minister; and, Ellsworth McKee, also sat on
the board during 2000 and 2001.
Moreover, this Court may take administrative notice of Three
Angels' federal form 990, which lists the directors and their
compensation, because the forms are a matter of public record
pursuant to §6104(b) of the Internal Revenue Code. In Muller
v. Zollar8 the Illinois Appellate Court held that judicial notice
of a public record is proper and may be taken despite the fact
the public document was not offered at the administrative hearing:
Notwithstanding the limitations of section 3-110 [of the Administrative
Review Act], Illinois courts recognize that documents containing
readily verifiable facts capable of instant and unquestionable
demonstration may be judicially noticed. [citation omitted] Judicial
notice is proper where the document in question is part of the
public record [citation omitted] and where such notice will aid
in the efficient disposition of a case. [citation omitted] Moreover,
this court may take judicial notice regardless of whether such
notice was sought at the trial court level.
Applicant therefore requests that administrative notice be
taken of Three Angels' federal form 990 for the years 2000 and 2001. These forms were made
available to the State and Interveners during the discovery period
of this case, and there is no reason that they should not be
considered by this Court in the interests of justice. Copies of
the federal forms 990 are marked as Applicant's Exhibit 25 and
attached as Exhibit A.
In light of the testimonial evidence alone (or in conjunction
with Three Angels' federal form 990), it was erroneous for the
Administrative Law Judge to find as a factual matter that Three
Angels had "only submitted the names of Danny Shelton, Linda
Shelton, Kenneth Joel Shelton, and Emma Lou Shelton as the four
directors of 3 ABN" for 2000 and 2001. RD. at 7, n.2. The erroneous
conclusion that the board of directors was biased and partial
(because it allegedly consisted exclusively of four family members)
led the Administrative Law Judge to commit further error by concluding
that Three Angels was a "closely held business with profits
267 Ill. App. 3d 339, 341. 642 N.E.2d 860, 862 (1994) (emphasis
added), See also Country Cos. V. Universal Underwriters Ins.
Co., 343 Ill. App. 3d 224, 229; 796 N.E.2d 639, 643 (2003).
inuring to the [Shelton] family." RD 35-36.