{ "id": 222567, "name": "AMERICAN STORES COMPANY, and its Subsidiaries, Plaintiff-Appellee, v. THE DEPARTMENT OF REVENUE et al., Defendants-Appellants", "name_abbreviation": "American Stores Co. v. Department of Revenue", "decision_date": "1998-05-01", "docket_number": "No. 1\u201496\u20144444", "first_page": "295", "last_page": "302", "citations": [ { "type": "official", "cite": "296 Ill. App. 3d 295" } ], "court": { "name_abbreviation": "Ill. App. Ct.", "id": 8837, "name": "Illinois Appellate Court" }, "jurisdiction": { "id": 29, "name_long": "Illinois", "name": "Ill." }, "cites_to": [ { "cite": "533 N.E.2d 1072", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1989, "opinion_index": 0 }, { "cite": "126 Ill. 2d 326", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 5557342 ], "year": 1989, "pin_cites": [ { "page": "331" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/126/0326-01" ] }, { "cite": "664 N.E.2d 61", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1996, "opinion_index": 0 }, { "cite": "171 Ill. 2d 230", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 57346 ], "year": 1996, "pin_cites": [ { "page": "239" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/171/0230-01" ] }, { "cite": "606 N.E.2d 1111", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1992, "opinion_index": 0 }, { "cite": "153 Ill. 2d 76", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 4738801 ], "year": 1992, "pin_cites": [ { "page": "88" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/153/0076-01" ] }, { "cite": "545 N.E.2d 695", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1989, "pin_cites": [ { "parenthetical": "Van's Material" } ], "opinion_index": 0 }, { "cite": "131 Ill. 2d 196", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 5570158 ], "weight": 6, "year": 1989, "pin_cites": [ { "page": "202", "parenthetical": "Van's Material" }, { "page": "202" }, { "page": "203" }, { "page": "205-06, 209" }, { "page": "216-17" }, { "page": "217" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/131/0196-01" ] }, { "cite": "680 N.E.2d 1355", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1997, "opinion_index": 0 }, { "cite": "176 Ill. 2d 536", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 544908 ], "weight": 2, "year": 1997, "pin_cites": [ { "page": "543" }, { "page": "542" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/176/0536-01" ] }, { "cite": "610 N.E.2d 1250", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1993, "opinion_index": 0 }, { "cite": "155 Ill. 2d 103", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 4810424 ], "year": 1993, "pin_cites": [ { "page": "111" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/155/0103-01" ] }, { "cite": "628 N.E.2d 297", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1994, "opinion_index": 0 }, { "cite": "256 Ill. App. 3d 27", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 5382987 ], "year": 1994, "pin_cites": [ { "page": "29" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/256/0027-01" ] }, { "cite": "618 N.E.2d 957", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1993, "opinion_index": 0 }, { "cite": "249 Ill. App. 3d 280", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 5409869 ], "weight": 3, "year": 1993, "pin_cites": [ { "page": "281" }, { "page": "281" }, { "page": "281" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/249/0280-01" ] }, { "cite": "589 N.E.2d 508", "category": "reporters:state_regional", "reporter": "N.E.2d", "year": 1992, "opinion_index": 0 }, { "cite": "147 Ill. 2d 326", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 3278519 ], "weight": 2, "year": 1992, "pin_cites": [ { "page": "345" }, { "page": "345" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/147/0326-01" ] } ], "analysis": { "cardinality": 794, "char_count": 17763, "ocr_confidence": 0.77, "pagerank": { "raw": 7.830672175395867e-08, "percentile": 0.4581653216075532 }, "sha256": "53e4fec10af565ba3018b89787fe7a35f6efad60e1a34a25d4466952a551fb90", "simhash": "1:7b9038ffe187f590", "word_count": 2785 }, "last_updated": "2023-07-14T20:46:46.961592+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [], "parties": [ "AMERICAN STORES COMPANY, and its Subsidiaries, Plaintiff-Appellee, v. THE DEPARTMENT OF REVENUE et al., Defendants-Appellants." ], "opinions": [ { "text": "JUSTICE HARTMAN\ndelivered the opinion of the court:\nPlaintiff, American Stores Company and its subsidiaries (American), sought circuit court administrative review of the decision of the Department of Revenue (Department) disallowing an investment tax credit (ITC) for property American utilized during the 1984-87 taxable years. The court reversed the Department\u2019s decision, finding that the property qualified as property used in retailing pursuant to section 2 \u2014 201(g) of the Income Tax Act (Ill. Rev. Stat. 1985, ch. 120, par. 2 \u2014 201(g)) (section 2 \u2014 201(g)). The Department appeals.\nIn November 1984, American acquired Jewel Companies, Inc. (Jewel), which is primarily engaged in the retail sale of food, drugs, and general merchandise for personal and household use. Jewel conducts its domestic operations through its divisions, which include Jewel Food Stores, and its wholly owned subsidiary corporations, including Oseo Drug, Inc. (Oseo). Jewel Food Stores operated approximately 190 supermarkets and, in conjunction with Oseo, combination supermarket and retail drug stores in Illinois and other Midwestern states. Jewel Food Stores also owned and operated a warehouse, a truck maintenance facility, and several food manufacturing operations, as well as a fleet of trucks used to deliver inventory to its stores. The warehouse was used to supply merchandise to Illinois stores, and the maintenance facility serviced trucks and trailers used to deliver the merchandise to stores and food manufacturing plants. Oseo operated approximately 300 retail drug stores in Illinois.\nAmerican timely filed income tax returns for the taxable years ending on January 31, 1983, January 28, 1984, November 16, 1984, February 2, 1985, February 1, 1986, and January 31, 1987. The Department conducted an audit of those returns and issued notices of deficiencies to American on June 13, 1989, August 10, 1989, and January 25, 1990. American timely filed protests against all these notices and filed claims for a refund.\nOne of the disputes between American and the Department involved ITCs claimed by Jewel and Oseo against their personal property tax replacement income tax liability, imposed by section 2 \u2014 201(c) of the Income Tax Act (Ill. Rev. Stat. 1985, ch. 120, par. 2 \u2014 201(c)) (section 2 \u2014 201(c)). Jewel and Oseo claimed the ITCs for buildings, machinery, and equipment acquired and placed in service in its Illinois retail business. The items claimed amenable to ITC treatment included semi-trailers used to haul inventory between suppliers, stores, and the Jewel warehouse, and to haul recyclable material for recycling; warehouse equipment such as forklift trucks, warehouse racks, shelving used to store products, and office furniture and equipment; building costs for remodeling the warehouse, administrative offices, and storage garage; a mainframe computer used for administration and distribution of inventory; a pressure washer for cleaning truck parts; and a time management system used to keep track of the work hours of Jewel\u2019s truck drivers.\nAfter auditing American, the Department allowed it to claim ITC credit for items used on retail floor areas of the stores, but disallowed all other items claimed as an ITC. The Department categorized the disallowed property as (1) store equipment not located on retail floor areas; (2) warehouse and related equipment; (3) transportation facilities and related equipment; and (4) office equipment. The Department asserted that this property did not qualify for ITC because it was not used \u201cin retailing\u201d as required by section 2 \u2014 201(g).\nAmerican requested an administrative hearing to review the Department\u2019s decision, where it introduced the testimony of Hugh Muncy, a former president of the Illinois Retail Merchants Association, David Vite, the Association\u2019s current president, and the former senior vice president of Jewel, Gene B. Kilham. Each witness defined \u201cproperty used in retailing\u201d to include the machinery, equipment, and offices used to carry out functions such as accounting, purchasing, risk management, marketing strategies, personnel functions, and legal matters, which they said were essential parts of the retailing business. Nevertheless, the administrative law judge (ALJ) ruled in favor of the Department on the ITC and other issues. The Director of the Department accepted the ALJ\u2019s recommendations and adopted its decision.\nAmerican filed a complaint in the circuit court, seeking administrative review of the Director\u2019s ruling pursuant to the Administrative Review Law (735 ILCS 5/3 \u2014 101 et seq. (West 1992)). While the case was pending, the parties settled all tax issues with the exception of the ITC question and the Department\u2019s assessment of penalties against American. In a written decision, the circuit court reversed the administrative ruling, holding that American was entitled to claim ITCs for the disputed property. The court also reversed a portion of the Department\u2019s decision assessing penalties against American.\nOn appeal, the Department argues that the circuit court\u2019s interpretation of section 2 \u2014 201(g) unduly expanded the term \u201cretailing\u201d to include all property used in support of retailing, an interpretation the Department contends is supported by neither the plain language nor the legislative history of section 2 \u2014 201(g).\nSection 2 \u2014 201 imposes a personal property tax replacement income tax on every corporation, partnership, and trust that earns or receives income in this state. Section 2 \u2014 201(g) allows for an investment tax credit against this tax \u201cfor investment in qualified property.\u201d \u201cQualified property\u201d is defined as:\n\u201cproperty which:\n* * *\nis used in Illinois by the taxpayer in manufacturing operations or in mining coal or fluorite, or in retailing.\u201d (Emphasis added.) Ill. Rev. Stat. 1985, ch. 120, par. 2 \u2014 201(g)(2)(d).\nThe term \u201cretailing\u201d includes:\n\u201cthe sale of tangible personal property or services rendered in conjunction with the sale of tangible consumer goods or commodities.\u201d Ill. Rev. Stat. 1985, ch. 120, par. 2 \u2014 201(g)(3).\nIn construing the scope of section 2 \u2014 201(g), and determining whether the disputed property is subject to the ITC, this court\u2019s primary purpose must be to ascertain and give effect to the true intent and meaning of the legislature. People v. Frieberg, 147 Ill. 2d 326, 345, 589 N.E.2d 508 (1992); Powers v. Retirement Board of the Policemen\u2019s Annuity & Benefit Fund, 249 Ill. App. 3d 280, 281, 618 N.E.2d 957 (1993). The statutory language is the best indication of the drafters\u2019 intent (People ex rel. Village of McCook v. Indiana Harbor Belt R.R. Co., 256 Ill. App. 3d 27, 29, 628 N.E.2d 297 (1994); Powers, 249 Ill. App. 3d at 281) and should be given its plain or ordinary and popularly understood meaning. Collins v. Board of Trustees of the Firemen\u2019s Annuity & Benefit Fund, 155 Ill. 2d 103, 111, 610 N.E.2d 1250 (1993). In determining legislative intent, courts may look at the reason and necessity for the law, the evils sought to be remedied, and the purpose to be achieved. Frieberg, 147 Ill. 2d at 345. The legislative history or background of a statute also may be instructive. In re B.C., 176 Ill. 2d 536, 543, 680 N.E.2d 1355 (1997); Van\u2019s Material Co. v. Department of Revenue, 131 Ill. 2d 196, 202, 545 N.E.2d 695 (1989) (Van\u2019s Material). Where the language of a statute is clear and unambiguous, it will be given effect without resort to other aids for construction. B.C., 176 Ill. 2d at 542; Powers, 249 Ill. App. 3d at 281. Taxing statutes must be construed strictly, and in cases of doubt will be construed most strongly against the government and in favor of the taxpayer. Van\u2019s Material, 131 Ill. 2d at 202.\nThe Department has provided varying interpretations of the term \u201cin retailing.\u201d Its regulation defines \u201cretailing\u201d as\n\u201cthe sale of tangible personal property. It is not required that such tangible personal property be finished consumer goods, or that the property be sold to its ultimate consumer. For example, sales of tangible personal property for resale are included in the definition of retailing.\u201d 86 Ill. Adm. Code \u00a7 100.2900(c)(9) (1986).\nAt the administrative hearing, the Department argued that qualified property must be associated with a specific retail sale, such as property used in retail floor areas. In the circuit court, however, the Department adopted a more expansive view, conceding that all property located at the site of a retail store qualified as property used \u201cin retailing,\u201d but continuing to insist that the remaining three categories of property \u2014 warehouse equipment, transportation facilities and related equipment, and office equipment \u2014 did not qualify for ITC treatment.\nUnder the Administrative Review Law (735 ILCS 5/3 \u2014 101 (West 1994)), judicial review extends to all questions of law and fact presented by the record before the court. Abrahamson v. Illinois Department of Professional Regulation, 153 Ill. 2d 76, 88, 606 N.E.2d 1111 (1992). An agency\u2019s interpretation of a statute it is charged with administering, where based on agency expertise, is entitled to some deference. An erroneous construction of a statute, however, is not binding on the court (Boaden v. Department of Law Enforcement, 171 Ill. 2d 230, 239, 664 N.E.2d 61 (1996)), and a decision based upon an erroneous, arbitrary, or unreasonable construction cannot be allowed to stand. Harrisburg-Raleigh Airport Authority v. Department of Revenue, 126 Ill. 2d 326, 331, 533 N.E.2d 1072 (1989). Moreover, administrative rules interpreting a statute may neither limit nor extend the scope of that statute. Van\u2019s Material, 131 Ill. 2d at 203.\nIn the present case, neither the plain language of section 2 \u2014 201(g) nor its legislative history supports the Department\u2019s distinction between property located at the site of the retail store and property located at a retailer\u2019s warehouse, administrative offices, or transportation facilities. Section 2 \u2014 201(g) provides that qualified property must be used \u201cin retailing.\u201d Under section 2 \u2014 201(g)(3), retailing specifically encompasses \u201cservices rendered in conjunction with the sale\u201d of tangible personal property. Ill. Rev. Stat. 1985, ch. 120, par. 2 \u2014 201 (g)(3). Therefore, property used for the purpose of obtaining the sale of tangible goods qualifies for the tax credit.\nSection 2 \u2014 201(g) contains no limiting language requiring that qualified property be located at the retail store. As noted above, the General Assembly provided a more expansive definition of \u201cretailing\u201d than suggested by the Department, allowing retailers to claim an ITC not only for property used in \u201cthe sale of tangible property,\u201d but also property used to perform \u201cservices rendered in conjunction with the sale of tangible consumer goods or commodities.\u201d Ill. Rev. Stat. 1985, ch. 120, par. 2 \u2014 201(g). This language includes property located at the retail store site or off-site, and demonstrates the legislature\u2019s intention that qualified property used \u201cin retailing\u201d includes any property used by a retailer to obtain and complete a retail sale, or to perform services in conjunction with the completion of such a sale.\nThe Department claims the legislative history of section 2 \u2014 201(g) demonstrates that the General Assembly did not intend to create an expansive definition of property used \u201cin retailing.\u201d During legislative debates over the personal property tax replacement income tax, several legislators expressed concern that allowing taxpayers to claim ITCs would reduce substantially the amount of revenue received from that tax. 82d Ill. Gen. Assem., Senate Proceedings, May 18, 1981, at 14, 16, 17. The State Senate subsequently voted to reduce the rate of ITCs that a taxpayer could claim, from 1% of the basis of qualified property to .5%. 82d Ill. Gen. Assem., Senate Proceedings, May 18, 1981, at 18. These debates do not establish legislative intent to limit the scope of property that would qualify for use in retailing. In addressing revenue concerns, legislators instead chose to decrease the monetary amount of ITCs, rather than restrict the type or location of property that qualified for ITCs.\nThe Department\u2019s argument for such a limitation is further undermined by its position with regard to wholesale sellers who, by their nature, do not sell goods from a retail store. The Department acknowledges that the ITC applies to qualified property used by wholesalers, but contends that \u201csales at a wholesaler\u2019s place of business would be considered sales at a \u2018retail\u2019 site.\u201d This interpretation of the term \u201cretailing\u201d would result in an inconsistent application of section 2 \u2014 201(g), in that property located at a wholesaler\u2019s \u201cplace of business\u201d could qualify for an ITC, whereas identical property used by a retailer for analogous purposes, but not located at the retail store, would not so qualify. Further, property used at the site of a Jewel or Oseo store would qualify for an ITC although the same property, used for the same purposes but located at the warehouse, administrative offices, or transportation facilities, would not qualify for an ITC. The Department offers no evidence, either from the language of section 2 \u2014 201(g) or its legislative history, that the General Assembly intended such a dichotomy in dealing with wholesalers and retailers, or in the treatment of property located at or away from a retail store.\nMoreover, such a restriction would punish unfairly larger retailers who, unlike small retailers, do not store all their personal property at the retail store site, and who require the use of warehouses and transportation facilities to conduct retail business. Undisputed evidence presented at the administrative hearing established that Jewel and Oseo could not conduct their retailing business if they did not purchase trucks to transport the goods to the retail stores, or provide adequate storage for the goods at a warehouse until they could be transported to the various stores by the trucks.\nThe Department criticizes the circuit court\u2019s interpretation of and reliance on the supreme court\u2019s decision in Van\u2019s Material, which the Department claims is distinguishable from the present case. The court in Van\u2019s Material was faced with the issue of whether the purchase of two ready-mix concrete trucks qualified for a manufacturing exemption. The Department, relying on its own regulations, argued for a narrow interpretation of the term \u201cmanufacturing process,\u201d which the Van\u2019s Material court rejected, finding that such an interpretation was not \u201cinherently clear\u201d from the statutory language, and concluding that the Department\u2019s regulations were \u201cunduly restrictive.\u201d Van\u2019s Material, 131 Ill. 2d at 205-06, 209. After construing the remaining portions of the statute providing for the exemption, the court concluded that the exemption applied to the purchase of the trucks. 131 Ill. 2d at 216-17.\nIn the present case, it does not \u201cfollow naturally\u201d from the language of section 2 \u2014 201(g), as the Department urges, that the General Assembly intended to limit property used in retailing to property located at the site of the retail store. Furthermore, the Department\u2019s narrow interpretation of section 2 \u2014 201(g), and its regulations further limiting the scope of that provision, are unduly restrictive in light of the clear language allowing ITCs for all property used in \u201cthe sale of tangible personal property or services rendered in conjunction with the sale of tangible consumer goods or commodities.\u201d\nThe Van\u2019s Material court concluded that the manufacturing exemption applied to ready-mix concrete trucks because \u201c[t]he entire vehicle is essential to the process\u201d of preparing concrete. Van\u2019s Material, 131 Ill. 2d at 217. This conclusion reflected the statutory requirement that the property be used \u201cprimarily\u201d in the manufacturing process. Employing a similar analysis, the circuit court in the present case found that the property at issue had the \u201cpredominant purpose\u201d of furthering American\u2019s ability to sell its products at retail, and \u201cwere at the very core\u201d of its retail business. In contrast to the manufacturing exemption at issue in Van\u2019s Material, section 2 \u2014 201(g) does not require that the property be used \u201cprimarily\u201d for retailing, or that the \u201cpredominant purpose\u201d of the property\u2019s use be for retailing. The statute simply requires that the property be used in the sale of tangible personal property, or in services rendered in conjunction with such a sale.\nIn this case, undisputed evidence presented at the administrative hearing established not only that the property at issue was used in retailing, but also that the property was essential to the retailer\u2019s retail operations, without which the retailer could not conduct sales of goods. The Department erred in disallowing ITCs for property located at the warehouse, transportation facilities, and administrative offices.\nIn its notice of appeal, the Department requested review of the circuit court\u2019s reversal of the imposition of penalties against American. The Department waived that issue by failing to raise it in its brief. 134 Ill. 2d R. 341(e)(7).\nFor the foregoing reasons, the circuit court\u2019s order reversing the Department\u2019s decision is affirmed.\nAffirmed.\nHOFFMAN, P.J., and HOURIHANE, J., concur.", "type": "majority", "author": "JUSTICE HARTMAN" } ], "attorneys": [ "James E. Ryan, Attorney General, of Chicago (Barbara A. Preiner, Solicitor General, and Erik G. Light, Assistant Attorney General, of counsel), for appellants.", "Sidley & Austin, of Chicago (Constantine L. Trela, Jr., and Scott J. Heyman, of counsel), for appellee." ], "corrections": "", "head_matter": "AMERICAN STORES COMPANY, and its Subsidiaries, Plaintiff-Appellee, v. THE DEPARTMENT OF REVENUE et al., Defendants-Appellants.\nFirst District (5th Division)\nNo. 1\u201496\u20144444\nOpinion filed May 1, 1998.\nJames E. Ryan, Attorney General, of Chicago (Barbara A. Preiner, Solicitor General, and Erik G. Light, Assistant Attorney General, of counsel), for appellants.\nSidley & Austin, of Chicago (Constantine L. Trela, Jr., and Scott J. Heyman, of counsel), for appellee." }, "file_name": "0295-01", "first_page_order": 313, "last_page_order": 320 }