||The scope of Three Angels missionary activity, domestic and international,
is overlooked and misstated.
Another factor, which Appellees badly misstate, is the type
and amount of missionary work, the third Inter-Varsity factor,
carried out by Three Angels. In a rather remarkable instance
of internal contradiction and misstatement, the School Districts
say that "Three Angels does not conduct any religious teaching,
apart from its broadcasting or the travels of Danny and Linda
Shelton, whose primary focus is fundraising." SD 33.
But consider that Three Angels broadcasting consists of 24-hours
a day, seven-days a week religious programming, the majority
(75 to 80%) of which it produced. TT 84-87; Record Below 1720.
Combine that with the fact that Danny and Linda's travels were
more than half the weekends of the year, to preach, pray and
sing gospel songs at formal worship services around the country,
with no evidence of primary or even significant fundraising efforts
at these events. TT 130-132.
Then consider the Board of Review's statement again. It is
essentially saying, to paraphrase meaningfully, that "Three Angels
does not conduct any religious teaching, except for its 24-hour
a day, 7-day a week, religious broadcasting, and its every-other
week-end, day-long church-based, worship services." And this
does not even take into account the overseas missionary trips
by Three Angels teams, the thousands of baptisms in India and
Russia, the permanent ministry teams in Russia and the Philippines,
or the mutual agreement that Three Angels and the Seventh-day
Adventist church have to
cooperate on missionary efforts around the world and the activities
that flow from that agreement. TT 133-135, 136, 97.
Three Angels exceeds the level of missionary activity carried
out by the entity at issue in the Inter-Varsity case, as the
entity there was the literature division, which was located in
Downers Grove, Illinois. That division did not itself carry out
field missionary work, but rather prepared "numerous religious
publications."5 In contrast, Three Angels itself, using the buildings
at issue in this case, directly carries out missionary work,
as well as supporting a wide ring of missionaries and missionary work.
||Defendants arguments would penalize large and financially successful religious organizations.
The fourth Inter-Varsity factor is the issue of sales, revenue
and assets. Appellees all claim that the magnitude of Three Angels'
revenue and/or assets disqualifies it from being a religious
ministry. SD 16; B R 34-35; DR 4-5, 14. But this is to misread
Inter-Varsity and the record below. Appellees' argument would
mean that all religious ministries must remain small and insignificant
in size and finances to qualify for tax exemption. The penalty
for growth and success is, according to their logic, loss of tax-exempt status.
Appellees are fond of talking about Three Angels $42 million
in accumulated assets, as though this princely sum was sitting
in a bank account or investment properties. The truth is much
less spectacular. It takes significant operational assets to
run an international media ministry. About $12 million is the
portion that relates to buildings, land, equipment, uplinks,
etc., that is dedicated to the day-to-day functioning of the
ministry. (These figures are drawn from Applicant's Exh. 15,
the audited financials for 2001.)
Another large sum, about $24 or $25 million, represents the
amount held in trust for donors, either in revocable trusts or
gift annuities. In other words, this money is NOT Three Angels'
at the present, and only a small portion of it will ever become
Three Angels'. Some of the trusts will be revoked. Some represent
only a partial gift to Three Angels, of possibly as little as
25%. The gift annuities have to stay funded so they can be paid
out to the donors.
Of the remaining six million, about $2.8 million is in investments,
mostly money from "charitably related unit trust agreements.
. . . and they cannot be used until the donor dies." TT 491.
The other half, about 3.3 million is current assets, but there
were also about 2.5 million in current liabilities. Exh. 15,
p. 3 So when it comes down to it, there was only about $800,000
that was actually available for use at the end of 2001. This
represented an emergency reserve of about one month's operational
costs. This is actually a dangerously thin reserve, and cannot
be remotely characterized, in any fair way, as an inappropriate
accumulation of capital.
Inter-Varsity is concerned with "substantial profits flowing
into a capital surplus."6 A capital surplus is an amount that
increases the stock value of a company. It is equivalent to pure
profit, which is set-aside for the shareholders or some future purpose.
What Three Angels has accumulated is more akin to retained
earnings, where the net revenue from a year is put back into
the company to further expand its religious and missionary activities.
The net revenue over the years has been placed back into items that
are used on a daily basis to carry out religious programming
and broadcasting. There is no meaningful capital surplus, only
a small amount in reserve, sufficient only to cover a single
month's operating expenses. Appeal Brief p. 42.
The Appellees are similarly confused on the issue of revenue.
They argue that it is unclear whether Three Angels' net revenue
comes from donations or from the sale of ministry related CDs,
videos, etc. It is not clear why the distinction matters, as
there is no legal distinction between net revenue either from
donations, or sale items, or both. Rather, the important question
is, what is done with that net revenue.
Yet the School Districts find it significant that "up to 25
percent of 3ABN's total $14 million of annual revenues is derived
from activities other than charitable donations." SD 23. Well,
that means that about 75% of its revenues comes from charitable
donations. And this figure is significantly higher than in Inter-Varsity,
where only 55% of the revenues came from charitable donations.7
Indeed, an acid test to answer the question of whether items
were sold at a profit would be to deduct donations from the income
line, and see whether the income of goods and services sold would
exceed expenses. Well, it would not. If this were done for 2000
and 2001, Three Angels would move from net revenue of 1.2 and
1.9 million respectively, to a net loss of around 9.6 and 9.1
million for those same periods. (Applicant's Exhs. 14 and 15).
Clearly, Three Angels relies almost entirely on the free will,
charitable donations of those who are blessed by and believe
in its religious ministry and outreach. To characterize its modest
sales of ministry items as the primary, commercial purpose of
Id. at 803.
organization would be to have a very small tail wag the quite
large dog. Such a distorted view is not required by Inter-Varsity
or other Illinois law.
III. The Opponents focus on a number of items that are peripheral
to the main issues and are not supported by the record.
Appellees would like to pull a number of issues from the periphery,
or beyond, of the case and make them THE central issue. The Board
of Review spends about one half of its factual section talking
about Three Angels' board make-up and oversight, when this was
never an issue in dispute either prior to or at the hearing.
Further, never has so much been made of such a small amount of
money, that of a $20 alleged "royalty" payment, which is the
only evidence cited of personal inurement. Even if these issues
were factually as appellees claim, they would not disqualify
Three Angels from tax exemption. But the facts do not support
Appellees' construction, and they certainly should not be barriers
to tax exemption.
For both of these points, it is important to remember that,
while the hearing officer can weight credibility, that she cannot
lawfully make findings of fact for which there is no evidentiary
support. "The taxing authorities must decide the question from
a consideration of the facts stated, and not from the conclusion
of any person . . . ." The court may not choose to ignore and disregard
certain factual evidence, when there has been submitted no evidence
to the contrary.
||The identity and make-up of the board of directors was not disputed at trial, and there is
no evidence to support the judge's findings of inadequate board oversight.
The perplexing issue regarding the question of board make-up
is that this issue was never raised or disputed prior to or at
the hearing of this matter. It was first raised by
The People v. Deuthsche Gemeinde, 249 Ill. 132, 136, 94 N.E. 162 (1911).
the hearing officer in her opinion almost a year after the
trial. None of the case law suggests that a necessary burden
of proof in a tax-exemption case is to name the board members.
What is required is proof of organization and operation as
a not-for-profit entity. This was demonstrated by the entry of
appropriate articles and bylaws, and testimony regarding the
board's regular meetings and general oversight role. It was testified
that the board meets three or four times a year, and that it
governed and oversaw the finances and operations of Three Angels.
Trial Transcript 94-96. The board chairman testified as to the
board meetings and policies regarding travel and compensation,
including for the years in question. Trial Transcript 500-501.
There was no evidence given to the contrary on these points,
and there was no sense, either before or at the hearing, that
the board's make-up and independence were in dispute.
Had it been understood that board make-up was a disputed point,
Three Angels would have certainly submitted a full list of board
member names and descriptions, and could have called other board
members to testify. As it was, four board members testified,
three of them from the period in question, and nine board members
were identified in total, either by name or position. All but
one was identified, either explicitly or implicitly, as serving
during the 2000 and 2001 period in question. TT 92-93.
It would be remarkable to take a point over which there had
been no dispute, and little attention paid to, and elevate it
to be the determining factor in the case. If this Court believes
that the issue of board make-up is of crucial importance, the
appropriate response would be to remand for further findings
of fact on this point. To honor a finding of fact that said there
were only four, related board members, when the only available
evidence on the point for the time in question said there
were twelve board members with no evidence of family relations
between all but two for the time in question, would be plain
It would be a travesty of justice to have this case turn on
a finding of fact which is so plainly wrong as that the board
only consists of four Sheltons. The truth is the board consisted
of two Sheltons and ten other independent persons during the
period at issue. This court should either reverse the hearing
officer's finding of fact on this point, or, remand the case
for further factual findings regarding board make-up and oversight.
When an appeals court is presented with an issue where there
has been an insufficient factual development, it should remand
the case for further findings on that question. See Grundy County
Agricultural District Fair v. Dept. of Revenue, 346 Ill.App.3d
1075, 1080, 806 N.E.2d 695, 699, 282 Ill.Dec. 398, 402, (Ill.App.
3 Dist.,2004). ("the record is insufficient to permit us to make
accurate findings... thus, we must remand to the department to
determine the factual bases of these issues."); Bd. of Educ.
Minooka Comm. v. Ingels, 75 Ill.App.3d 334, 337, 31 Ill.Dec.
153, 156 (Ill.App. 3 Dist., 1979) ("Because the record is inadequate
in this regard, the circuit court should have remanded this cause
to the bearing officer so that he might reconsider his decision . . .");
Columbia Quarry Co. v. Dep't. of Revenue, 34 Ill.2d 46, 47,
213 N.E.2d 497,497 (Ill. 1966) ("We have carefully examined the
record but find ourselves unable to resolve the issues presented
without further findings of fact. We therefore vacate the judgment
and remand the cause to the Department of Revenue with directions
to conduct an additional hearing, make appropriate findings,
and, if necessary, redetermine the plaintiff's claim for [tax]
||No evidence exists of any private inurement of Three Angels
revenue, whether in the form of royalty or other payment.
The Appellees continue the fiction; either directly or through
strong implication, that Linda Shelton received royalty payments
from Three Angels for the sale or playing of her CDs. SD 16,22;
BR 12; DR 3. There is no support to be found for this in the
record. However, even if this were true, this should not disqualify
Three Angels tax exemption. There is nothing that prevents an
artist from receiving a commercially reasonable royalty, even
if their product is produced and sold by a not-for-profit organization,
as reasonable compensation for services rendered can be paid
by not-for-profit organizations. The only evidence of an amount
of any royalty is $20, which is less than trivial given Three
Angels' revenue and assets. TT 619.
But the important point is this: no royalty ever came from
Three Angels, but from a private company, completely unconnected
with Three Angels, known as BMI. TT 619.
Thus, the royalty issue, which should not even be an issue
if Mrs. Shelton did get some minor royalty from Three Angels,
is even less of an issue, because the royalty actually comes
from another source entirely that has no connection with Three
Angels. Employees of not-for-profit corporations are not slaves
or indentured servants, forbidden from selling their artistic
or literary properties to outside organizations. Yet Appellees
would argue that any royalty from any source to a Three Angels
employee somehow strips the entire organization of its tax-exempt
status. There is nothing in Illinois case law or statutes that
would compel, or even suggest, such a result.
The fact that Appellees are so aggressive and insistent on
attacking this alleged "royalty" shows the complete absence of
any real evidence they have showing private inurement. This is
the strongest evidence they have on that point, so they have
the most of it. Unfortunately for them, this evidence shows
no such thing, and merely reveals the weakness of their case on this point.
For the reasons stated above, this Court should find that
Three Angels is indeed a religious ministry, that it uses the
subject property for religious purposes, and that it should be
granted a property tax exemption. In the alternative, this Court
should remand the case for further findings of fact on the issue
of Three Angel's board membership and oversight role, to take
the testimony of the previously excluded witnesses Dr. Denis
Fortin and Elder Ted Wilson, and to allow discovery on the existence
of other religious broadcast ministries in Illinois that enjoy
Dated this 30th day of August, 2005
By: [signed] Nicholas P. Miller
Nicholas P. Miller,
Freedom Law Group
2352 Bond Street
Niles, MI 49120
[signed] D. Michael Riva
D. Michael Riva
226 E. Main Street
West Frankfort, IL 62896
Attorneys for Plaintiff Three Angels Broadcasting Network, Inc.