delivered the opinion of the court:
The Director of Labor and Commissioner of Unemployment Compensation of the State of Illinois appeal directly to this court from an order of the circuit court of Cook County reversing a decision of the Director of Labor in which the Director held that the appellee was not exempt under the provisions of section 2(f)(6)(G) of the Unemployment Compensation Act, as amended. (Ill. Rev. Stat. 1949, chap. 48, par. 218.) The action was brought in the circuit court of Cook County by appellee under the Administrative Review Act, (Ill. Rev. Stat. 1951, chap, no, pars. 264-279,) pursuant to the judicial review provisions of section 25(a)(2) of the Unemployment Compensation Act. Ill. Rev. Stat. 1949, chap. 48, par. 242(a).
The appeal is properly taken directly to this court in accordance with the provisions of the last cited section of the Unemployment Compensation Act.
Appellee filed its claim for credit or refund with the Director of Labor in connection with unemployment compensation contributions allegedly erroneously paid by it covering the period June 1, 1945, to December 31, 1945, contending that it was exempt from coverage under section 2(f) (6) (G) of the Unemployment Compensation Act because it was organized and operated for religious purposes, that no part of its net earnings inured to the benefit of any private shareholder or individual, and that no substantial part of its activities consisted-of carrying on propaganda or otherwise attempting to influence legislation. The Director of Labor denied such claim, and in addition determined that the appellee was an employer subject to the act during the year 1946 and the first three quarters of 1947, and assessed it in the amount of $2321.29 for such period. Appellee followed the prescribed procedure in filing protest, hearings were held on the question, a Director’s representative report was made, to which objections were duly filed, and the Director of Labor finally overruled the objections of appellee and adopted his representative’s recommendations.
Section 2(f)(6) of the Unemployment Compensation Act provides as follows: “The term ‘employment’ shall not include * * * (G) Service performed in the employ of a corporation, community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, literary or educational purposes, or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual, and no substantial part of the activities of which is carrying on propaganda or otherwise attempting to influence legislation.”
The Scripture Press Foundation is an Illinois not-for-profit corporation which was organized on May 5, 1945, and commenced operations on June 1 of the same year. The purposes for which the foundation was organized, as stated in its articles of incorporation, are: “The dissemination of. the Gospel, the distribution of the Scriptures, of extracts therefrom, of devotional and other literature relating thereto, and of helps and supplies for use in Christian activities. The organization and support of organizations, institutions and movements exclusively devoted to Christian missionary, educational and other evangelical efforts. In connection with the foregoing to engage in: 1. The production, purchase, circulation, distribution and sale of Christian literature, including books, periodicals, pamphlets, tracts, placards, mottos and supplies; and 2. The conduct of publication and printing establishments.”
The incorporators, first board of directors, and sole members of the foundation during the period in question were Victor E. Cory, Bernice T. Cory, his • wife, and Harry G. Saulnier, a brother-in-law of Mrs. Cory.
Victor E. Cory, organizer of appellee and its president, throughout his lifetime had participated in Sunday School and other organized religious activities, including the publication of religious song books and other religious books. Believing that Christian workers, particularly in Sunday schools, were not utilizing the most modern techniques in educational teaching, in 1932 Cory entered the religious publishing field by organizing a profit corporation, and business was commenced under name of Scripture Press, Inc. In 1945) Cory and his wife, as owners of the stock of Scripture Press, Inc., told their attorney that the work of the profit corporation was a missionary work, that its success was not of themselves or for themselves but of the Lord, that they felt that this work was not their personal property even though formally so organized, and that they wanted to make the Scripture Press a permanent Christian work by donating it to a foundation. Upon their attorney’s recommendation and advice they created the Scripture Press Foundation, (appellee,) and donated to it all of their stock in Scripture Press, Inc. Such stock had a net worth of about $30,000 when it was given to the foundation. Scripture Press, Inc., was thereafter dissolved and its assets distributed to Scripture Press Foundation, a nonprofit corporation.
Appellee devotes itself primarily to the publication and distribution of religious literature, Sunday school supplies and miscellaneous merchandise used by Sunday schools and churches, such as religious novels, Bibles, wallets, pencils, chalk, greeting cards, etc. Its major publications are The All Bible Graded Series of Sunday School Lessons, The All Bible Vacation Series, a Nursery Series for PreSchool Children, and weekly papers for various aged children. Appellee also published Sunday, a magazine inherited from its predecessor, until November, 1945, when a new profit corporation named Sunday Magazine Inc. was organized and took over the publication of such magazine. During its operation by appellee, such magazine had incurred a continuous deficit.
Appellee also renders advisory educational services to pastors, church officers, and teachers with respect to Sunday school work and has a brochure explaining the steps in perfecting local Sunday school organizations.
While anyone may purchase materials from the appellee, the promotional literature advertising such products hardly ever reaches individuals unconnected with churches or Sunday schools and practically all of its sales are made to such institutions. Its gross sales of incidental supplies, such as pencils, chalk, greeting cards, etc., amounted to less than four per cent of its total sales. Some of appellee’s materials were given away to missionaries. However, appellee does not have missionaries and does not conduct a Bible school or Sunday school itself.
On May 31, 1946, appellee’s total assets were $219,-324.19, with a capital of $30,710.11 and a surplus of $2806.07. On October 31, 1947, appellee’s total assets were $290,833.27, with a capital of $30,000, an earned surplus of $153,220.96, plus a profit for the quarter ending October 31, 1947, of $11,320.58. Gross sales for the nine months ending October 31, 1947, were $775,052.48, and it was anticipated that the 1947 gross sales would exceed $1,000,000.
At the time of the creation of the appellee, its president, Victor E. Cory, was receiving a $10,000 annual salary, and his wife, Mrs. Cory, as vice-president, was receiving a salary of $6000. As of October 31, 1947, their annual salaries were $15,000 and $10,000, respectively.
In 1947 almost one hundred and fifty workers were on appellee’s payroll. In June of that year the Scripture Press Foundation established a pension plan for all of its employees, which was approved by the Commissioner of Internal Revenue as an exempt trust. The current yearly cost of such plan to the foundation was approximately $10,000. In addition, free sickness and accident insurance, Blue Cross hospital insurance, and group life insurance for the employees was paid entirely by the foundation. During the period in question the pay scale of all employees was raised considerably. Under the pension plan as established, based upon the then current salaries, Cory would ultimately be eligible to receive a monthly pension of $262.50 per month and a maximum of $26,000 life insurance. His wife, at the same time, would ultimately become eligible for a monthly pension of $194.26 and a maximum of $19,000 life insurance. Proportionately, other employees would be entitled to monthly pensions and life insurance in proportion to their salaries and service.
The bylaws of appellee, after stating the purposes of the corporation in the language of the articles of incorporation, prohibited the diversion of assets in the following
language: “In no case shall the corporation distribute to its members, directors, or officers any of its income or any of its property; provided however, that it may pay to any members, officers, or directors who shall render it services reasonable compensation for services actually rendered. No funds of the corporation shall be loaned to any member, officer or director.” The bylaws also contain the usual articles as to membership, board of directors, officers and executives, and an executive advisory committee. The initial members of the corporation were the incorporators, namely, Victor E. Cory, Bernice Cory, and Harry G. Saulnier, and additional members could be admitted only on two-thirds vote of the members. Once a person was admitted to membership his membership continued until death, disability or resignation. The bylaws also provided for their amendment at any meeting of the board of directors by the affirmative vote of a majority and quorum of the board, a majority of the board constituting a quorum.
The uncontradicted testimony in the case is to the effect that none of the officers and other employees of appellee were at any time paid more than a reasonable compensation for their personal services.
Shortly after its incorporation, appellee filed an exemption affidavit with the Bureau of Internal Revenue in which it stated that it was an outgrowth or continuation of Scripture Press Inc. (a profit corporation), which was in existence since 1932. No action was taken by the Federal government in connection with this exemption affidavit because the organization had not been in existence for a sufficient period of time. After a year of operation, appellee submitted a new exemption affidavit in essentially the same form. In a letter dated September 11, 1946, the Deptfiy Commissioner of the Treasury Department of the United States notified appellee that, based upon the affidavit and supporting documents, it was exempt from Federal income tax under the provisions of section 101 (6) of the Internal Revenue Code and corresponding provisions of prior revenue acts, and also exempt under the provisions of sections 1426 and 1607 of the Code or corresponding provisions of the Social Security act.
On October 31, 1946, appellee made application to the Director of Labor for exemption under the Illinois Unemployment Compensation Act. While that application was pending, the Division of Unemployment Compensation in Illinois on January 7, 1947, mailed to appellee notice of a deputy’s finding that one M. P. Keying, a former employee, had filed claim for unemployment compensation benefits, that the deputy director had made a finding to the effect that for the year ending December 31, 1945, the appellee was an “employer” liable for payment of unemployment compensation contributions; that claimant rendered services for appellee; and that claimant was paid $24 in wages in a certain calendar quarter of the year 1945. Such notice informed appellee that if it believed the finding to be incorrect it was to file an appeal within nine days from the date of finding, and, if no appeal were filed, the finding of such deputy would be final and uncontrovertable in any further proceedings. The notice did not come to the attention of any officer within the limited time, and no appeal was consequently filed. The claimant was a female part-time worker earning one dollar an hour, who had worked three days for the foundation in June of 1945, leaving the foundation’s employ after three days of work. No hearing was conducted on the Keying claim or on the exemption status of the Scripture Press Foundation prior to the issuance of such notice, and it had not been notified of any hearing.
The trial court reversed the decision of the Director and held that the appellee, Scripture Press Foundation, was exempt from the payment of contributions under the Unemployment Compensation Act as a foundation organized and operated exclusively for religious purposes, no part of the net earnings of which inured to the benefit of any private shareholder or individual.
The Director of Labor urges four errors of the trial court for reversal of its decision, as follows: First, that the trial court erred in holding that Scripture Press Foundation was organized and operated exclusively for religious purposes and that no part of its net earnings inured to the benefit of any private shareholder or individual; Second, in failing to hold that Scripture Press Foundation was an “employer” under the provisions of the Unemployment Compensation Act with respect to the year 1945, because appellee permitted a finding of a deputy, holding that it was an employer subject to the act during such time, to become final; Third, in failing to hold that the record returned by the Director of Labor was sufficient to sustain the decision of the Director denying the claim for refund and modifying the determination and assessment; and, Fourth, in sustaining the complaint filed by appellee under the Administrative Review Act.
The principal issue for decision by this court is whether or not Scripture Press Foundation is a foundation organized and operated exclusively for religious purposes, no part of the net earnings of which inure to the benefit of any private shareholder or individual.
It is well established by previous decisions of this court that in cases such as this the burden is upon the party claiming exemption to prove that it has satisfied the exemption requirements set forth in section 2(f)(6)(G) of the Unemployment Compensation Act. (American Medical Assn. v. Board of Review,
In previous decisions concerning the Unemployment Compensation Act this court has held that such statute is an exercise of the police power of the State for the public purpose of relieving unemployment and that the act must be liberally construed to the end that provision be made for unfortunate persons out of employment. (American Medical Assn. v. Board of Review,
In the American Medical Association case this court was called upon to determine whether or not the American Medical Association was exempt under the provisions of section 2(f)(6)(G) of the Unemployment Compensation Act and held that it was not. In so holding this court recognized that an employer, in order to be exempt from unemployment contributions under the provisions of the statutory section in question, must be organized exclusively for one of the exempt purposes, which is to be determined from its charter and bylaws, and in addition thereto that such employer must operate exclusively for one of the exempt purposes, which question is to be determined from the actual facts relating to its method of operation. Even if an association organized and operated exclusively for an exempt purpose owns productive properties and carries on activities for private gain, yet if the income is used for the stated exempt purpose, and not for the benefit of its members, its exempt character is not thereby lost. However, in construing such exemption paragraph of the statute in question, we held that an association must be organized and operated “exclusively” for the exempt purpose, the word “exclusively” to be given its literal meaning. If the association is organized or operated in any substantial part for other than an exempt purpose and such organization or operation is not merely incidental to the main purpose and does not in any way contribute to such main purpose it cannot be said to be exclusively organized and operated for such purpose.
This court has not heretofore been called upon to determine what constitutes an exclusively religious purpose under the exemption provision of the Unemployment Compensation Act. However, this court in the past has had occasion to determine whether or not property was used for an exclusively religious purpose under exemption clauses of the general property tax laws of this State. In People ex rel. Thompson v. First Congregational Church,
In People v. Deutsche Gemeinde,
In Congregational Church v. Board of Review,
In People ex rel. Wilson v. St. Mary’s Hospital,
In People ex rel. Carson, v. Muldoon,
Our attention has been called to no decision of this court attempting to lay down an all-inclusive definition or specification of what constitutes a religious purpose, although the foregoing cases clearly indicate that this court has repeatedly concluded that use of property for a parsonage or monastery or other residential purposes is use of the property for secular and not a religious purpose.
Courts of other States have reached similar conclusions. In Ham Evangelistic Ass’n v. Matthews,
In United Brethren Publishing Company v. Shaffer,
In Incorporated Trustees of Gospel Worker Society v. Evatt,
None of the above cases, except the American Medical Ass’n case, involves an exemption under unemployment compensation laws. However, in Murphy v. Concordia Publishing House,
With the foregoing decisions in mind, what does a further examination of the facts presented in the instant case disclose? Scripture Press Foundation was incorporated and organized by an individual and his wife, who although Christian persons with a long record of religious service, were neither ordained ministers, pastors, nor representatives of any ecclesiastical or church organization. No church or ecclesiastical organization was an incorporator or a member of the corporation. A study of its charter powers in the light of its actual operation indicates that Scripture Press Foundation was organized for the primary purpose of producing, distributing and selling religious literature and supplies to religious organizations. It is true that the language of its charter powers indicates a purpose for “The dissemination of the Gospel, the distribution of the Scriptures, of extracts therefrom, of devotional and other literature relating thereto, and of helps and supplies for use in Christian activities.” Such purpose is accomplished only by the distribution and sale of such literature and supplies to religious organizations, which organizations in turn use them in conducting their religious activity. We are of the opinion that under the decisions of the Illinois courts and the language of the Illinois constitution and statute, such activities are secular in nature and not exclusively religious, the same as the maintenance of a parsonage for residential purpose of a pastor or the same as any other commercial service organization furnishing to a religious institution necessary services such as fuel, lights, building material or any other item necessary to its ordinary and customary functioning.
We do not believe that it would be seriously contended that either the real estate or personal property owned and used by Scripture Press Foundation in the conduct of its business would be exempt under Illinois law from property taxes as being used exclusively for religious purposes. The normal rules of logic and sound reasoning seem to dictate that if the property of an organization essential to its principal operation could not be considered as primarily devoted to an exclusively religious use under the Illinois law, then the primary purpose of such association would not be deemed to be an exclusively religious purpose under Illinois laws.
Although the corporate powers of Scripture Press Foundation also included “the organization and support of organizations, institutions and movements exclusively devoted to Christian missionary, educational and other evangelical efforts,” the evidence fails to disclose any maintenance of missionaries in the field or the organization and support of any evangelical movement. The most that is shown by the evidence is assistance by the foundation to churches and Sunday schools in methods of organizing and setting up Sunday schools and various religious campaigns, the actual work thereof being performed by the other religious organizations to which the service was rendered.
Although we do not hold that the fact that an otherwise exempt institution may have income from its property and operations destroys its exempt status, it is pertinent to note in this particular instance that the income of Scripture Press Foundation is not turned over to or used by any religious society, church or organization. O11 the contrary, from an examination of the operations of Scripture Press Foundation, it clearly appears that none of its profits have been distributed but have been accumulated in its surplus account. Such surplus is apparently reinvested in the foundation’s stock in trade and merchandise for resale to religious institutions. Such sales are consistently made at stated list prices which yield an overall substantial profit. Such practice would indicate a secular rather than exclusively religious operation.
In the course of its business, Scripture Press Foundation did have an unprofitable operation in its so-called Sunday magazine. The foundation’s membership and board of directors thereupon organized a profit corporation and transferred the losing operation thereto, thus eliminating the unprofitable element from the foundation’s operations. Such action is not questioned and apparently was within the foundation’s power. All the foundation’s assets are held either as an outright gift in absolute unrestricted ownership or as the increment of its operations since its creation. There is nothing appearing in the articles of incorporation or the bylaws of Scripture Press Foundation which impresses its assets with a trust or requires the assets of the foundation on dissolution to be transferred to an exclusively religious organization. The bylaws of the organization may be amended at any time by a majority action of the foundation’s membership. Under the provisions of sections 45(d) and 45(e) of the general Not-For-Profit Corporation Act of Illinois the members and officers of Scripture Press Foundation, upon its dissolution, would determine, in their discretion, the manner in which its assets would be distributed, without limitation.
Considering all of the facts of this case in the light of authorities previously discussed, we are of the opinion that Scripture Press Foundation is not a foundation organized and operated exclusively for religious purposes, no part of the net earnings of which inures to the benefit of any private shareholder or individual, but on the contrary is a not-for-profit corporation organized and operated for the purpose of rendering services to religious organizations on a business basis, and is therefore organized and operated for secular purposes as opposed to exclusively religious purposes. Consequently .Scripture Press Foundation is not an exempt employer under the provisions of the Illinois Unemployment Compensation Act.
Scripture Press Foundation has placed its chief reliance for exemption upon the case of Congregational Sunday School and Publishing Society v. Board of Review,
Scripture Press Foundation also cites and relies upon Trinidad v. Sagrada Orden,
In People ex rel. Marsters v. Saletyni Missionaries, Inc.,
In the Lamson case certain property used in publishing was held exempt from property taxes. The publication was the Christian Science Monitor, owned and operated by the Christian Science Organization, the net earnings of which were all paid over in their entirety to the First Church of Christ Scientist, and used for the promotion and extension of the religion of Christian Science. The holding in substance was that the property was a part of the church and its primary religious purposes and therefore exempt.
In view of our holding that Scripture Press Foundation was not organized and operated exclusively for religious purposes and therefore not entitled to exemption from the provisions of the Unemployment Compensation Act, we consider it unnecessary to consider other assignments of error.
The order and judgment of the circuit court of Cook County are reversed.
Judgment reversed.