Jenner v. Ill. Dep't of Commerce & Econ. Opportunity

59 N.E.3d 204

405 Ill.Dec. 911

Christopher JENNER, Laurel Jenner, Thomas Klingner, Adam Liebmann, Kelly Liebmann, Michelle Mathia, Kristina Rasmussen, Jeffrey Tucek, Mark Weyermuller, and Judi Willard, Plaintiffs–Appellants,

v.The ILLINOIS DEPARTMENT OF COMMERCE AND ECONOMIC OPPORTUNITY, Defendant–Appellee.

No. 4–15–0522.

Appellate Court of Illinois, Fourth District.

Aug. 2, 2016.

Jacob H. Huebert (argued) and Jeffrey M. Schwab, both of Liberty Justice Center, Chicago, for appellants.

Lisa Madigan, Attorney General, Chicago (Carolyn E. Shapiro (argued), Solicitor General, of counsel), for appellee.

OPINION

Justice APPLETON delivered the judgment of the court, with opinion.

¶ 1 Plaintiffs are a group of Illinois taxpayers: Christopher Jenner, Laurel Jenner, Thomas Klingner, Adam Liebmann, Kelly Liebmann, Michelle Mathia, Kristina Rasmussen, Jeffrey Tucek, Mark Weyermuller, and Judi Willard. They brought this action in Sangamon County circuit court for declaratory and injunctive relief against defendant, the Illinois Department of Commerce and Economic Opportunity, alleging that defendant had promulgated a regulation allowing tax credits greater than those allowed by statute. Defendant moved for the dismissal of the complaint on the ground that plaintiffs lacked standing (735 ILCS 5/2–619(a)(9) (West 2014)), and the trial court granted the motion, dismissing the complaint with prejudice. Plaintiffs appeal. We reverse the trial court's judgment and remand this case for further proceedings, because taxpayers have standing to seek an injunction against the use of public funds to administer an allegedly illegal tax regulation.

¶ 2 I. BACKGROUND

¶ 3 The Economic Development for a Growing Economy Tax Credit Act (Act) (35 ILCS 10/5–1 to 999–1 (West 2014)) authorizes defendant to award a tax credit to “[a] person that proposes a project to create new jobs in Illinois” and that “enter[s] into an Agreement with [defendant] for the Credit under this Act” (35 ILCS 10/5–15(b) (West 2014)). The “Agreement” must include, among other things, “[a] specific method for determining the number of New Employees employed during a taxable year” (35 ILCS 10/5–50(5) (West 2014)) as well as a requirement that the taxpayer “annually report to [defendant] the number of New Employees, the Incremental Income Tax withheld in connection with the New Employees, and any other information [defendant] needs to perform the Director's duties under this Act” (35 ILCS 10/5–50(6) (West 2014)).

¶ 4 The amount of tax credit under the Act “shall not exceed the Incremental Income Tax attributable to the project that is the subject of the Agreement.” 35 ILCS 10/5–15(d) (West 2014). The Act defines the “ ‘Incremental Income Tax’ ” as “the total amount withheld during the taxable year from the compensation of New Employees[,] under Article 7 of the Illinois Income Tax Act [ (35 ILCS 5/701 et seq. (West 2014)),] arising from employment at a project that is the subject of an Agreement.” 35 ILCS 10/5–5 (West 2014). The Act defines “ ‘New Employee’ ” as “[a] Full-time Employee first employed by a Taxpayer in the project that is the subject of an Agreement and who is hired after the Taxpayer enters into the tax credit Agreement.” (Emphasis added.) 35 ILCS 10/5–5(b) (West 2014).

¶ 5 The Illinois General Assembly empowered defendant to promulgate regulations implementing the Act (35 ILCS 10/5–10(a) (West 2014)), and, according to the complaint, defendant has promulgated regulations allowing tax credits greater than those the Act allows. Under defendant's regulations, it can award a tax credit no greater than “the incremental payroll attributable to the applicant's project.” 14 Ill. Adm. Code 527.20 (2008) (definition of “ ‘Credit’ ”). So far, so good, but further down in section 527.20, defendant defines “ ‘Incremental payroll’ ” as “the total amount withheld by the taxpayer during the taxable year from the compensation of new employees and retained employees under Article 7 of the Illinois Income Tax Act [citation] arising from such employees' employment at a project that is the subject of an Agreement.” (Emphasis added.) Id. Defendant in turn defines “ ‘Retained employee’ ” as follows: “ ‘Retained employee’ means a full-time employee employed by a taxpayer during the term of the agreement whose job duties are directly and substantially-related to the project. For purposes of this definition, ‘directly and substantially-related to the project’ means at least two-thirds of the employee's job duties must be directly related to the project and the employee must devote at least two-thirds of his or her time to the project.” Id.

¶ 6 Those regulatory definitions are, in plaintiffs' view, unlawful because they allow businesses to receive a larger tax credit than the Act permits. Instead of limiting the tax credit to the amount of the income tax withheld from new employees' paychecks, as section 5–15(d) of the Act requires, defendant's regulations would award businesses a tax credit up to the amount of the income tax withheld from paychecks of both new and retained employees who work on a project that is the subject of an “Agreement.” Plaintiffs allege that these excessive tax credits, unauthorized by statute, deplete public funds and that taxpayers such as themselves could end up having to replenish the deficiency. Also, apart from their liability to replenish a deficiency in the general revenues, plaintiffs argue that defendant's use of their tax dollars to administer illegal regulations is, in and of itself, an injury to them, the taxpayers, just as a trustee's illegal use of the trust corpus is, in itself, an injury to the beneficial owners of the corpus.

¶ 7 This two-pronged argument was unsuccessful below. The trial court regarded the State as the only real party in interest and was unconvinced that by granting tax credits pursuant to its regulations, defendant would cause any injury to plaintiffs as taxpayers. In the court's view, taxpayers had standing only when they challenged tax statutes as unconstitutional or otherwise illegal; they did not have standing when challenging how a statute “[got] interpreted” or “the judgment of policy, expenditures[,] or allocations of funds.” Consequently, the court granted defendant's motion, dismissing the complaint with prejudice.

¶ 8 This appeal followed.

¶ 9 II. ANALYSIS

¶ 10 A. Defendant's Motion To Strike a Portion of Plaintiffs' Brief

¶ 11 Before addressing the merits of this appeal, we note that defendant urges us to strike part III of the statement of facts in plaintiffs' brief on the ground that part III contains argumentative matter. See Ill. S. Ct. R. 341(h)(6) (eff. Feb. 6, 2013) (“Statement of Facts, which shall contain the facts necessary to an understanding of the case, stated accurately and fairly without argument or comment * * *.”). Part III could come across as argumentative in that it says, for example: “[Defendant's] regulations allow a business to receive a larger tax credit than [the] Act permits.” But judging from the accompanying citations to the complaint, we infer that, in part III of their statement of facts, plaintiffs mean to summarize their complaint rather than to make an argument. Thus, we decline to strike part III.

¶ 12 B. The Concept of Standing

¶ 13 The doctrine of standing saves the courts from becoming “mired in abstract questions, moot issues, or cases brought on behalf of parties who do not desire judicial aid.” In re Estate of Zivin, 2015 IL App (1st) 150606, ¶ 14, 399 Ill.Dec. 583, 46 N.E.3d 902. The doctrine weeds out academic disputes brought by the “merely curious or concerned.” Id. It does so by asking whether the plaintiff has suffered an injury to a legally cognizable interest or, if the plaintiff has not yet suffered such an injury, whether the plaintiff is in real danger of such an injury (Greer v. Illinois Housing Development Authority, 122 Ill.2d 462, 492–93, 120 Ill.Dec. 531, 524 N.E.2d 561 (1988) ). This actual or threatened injury must be “(1) distinct and palpable [citation]; (2) fairly traceable to the defendant's actions [citation]; and (3) substantially likely to be prevented or redressed by the grant of the requested relief [citation].” (Internal quotation marks omitted.) Id.

¶ 14 C. The Lack of Standing as an Affirmative Defense

¶ 15 Under section 2–619(a)(9) of the Code of Civil Procedure ( 735 ILCS 5/2–619(a)(9) (West 2014)), the defendant “may, within the time for pleading, file a motion for dismissal of the action” on the ground that “the claim asserted against defendant is barred by * * * affirmative matter avoiding the legal effect of or defeating the claim.” A motion for dismissal under this section admits the legal sufficiency of the complaint but raises “a defense outside the complaint,” an “affirmative matter,” that defeats the action. Patrick Engineering, Inc. v. City of Naperville, 2012 IL 113148, ¶ 31, 364 Ill.Dec. 40, 976 N.E.2d 318. Lack of standing is one such affirmative matter. Estate of Zivin, 2015 IL App (1st) 150606, ¶ 13, 399 Ill.Dec. 583, 46 N.E.3d 902.

¶ 16 When moving for the dismissal of the action on the ground of the plaintiff's lack of standing, the defendant may argue that the plaintiff's lack of standing is apparent from the face of the complaint, or, alternatively, the defendant may file an affidavit proving the plaintiff's lack of standing. “If the grounds do not appear on the face of the pleading attacked[,] the motion shall be supported by affidavit,” as section 2–619 says. 735 ILCS 5/2–619 (West 2014) ; see also Illinois Graphics Co. v. Nickum, 159 Ill.2d 469, 486, 203 Ill.Dec. 463, 639 N.E.2d 1282 (1994). In the present case, defendant submitted no affidavit in support of its motion for dismissal, and therefore we will decide whether it is apparent, from the face of the complaint, that plaintiffs lack standing. We will make that decision de novo, taking the well-pleaded facts of the complaint to be true and drawing from those facts all...