School Prevails Against Village in Tax Waiver Case
In a lengthy opinion, an Illinois Appellate Court ruled against a municipality in a case involving an alleged breach of an agreement between the municipality and a Montessori School that waived the school's right to a tax exemption for the school property. Keystone Montessori School v. Village of River Forest.
In 1998, Keystone Montessori School wanted to operate a private school on property zoned for commercial uses. The commercial zoning did not allow schools as a permitted or special use. The Village and Keystone entered into a number of agreements as a condition to the Village granting planned development approvals to allow Keystone to operate a school on the property. One of these agreements provided that Keystone would not apply for a tax exemption on its property. Over the years, Keystone attempted to amend the tax agreement but the parties did not agree to any amendment. According to Keystone, it had paid over $1 million in property taxes on the property over the years. In 2018, notwithstanding its agreement with the Village, Keystone applied for a tax exemption for its property, which was granted in 2018.
Keystone subsequently filed a lawsuit against the Village asking the court to invalidate the tax agreement on the basis that it was unconstitutional and unenforceable, among other claims. Specifically, Keystone claimed that requiring the school to waive its right to a tax exemption that was allowed by right under the Illinois constitution and state statute was contrary to public policy and rendered the tax agreement void and unenforceable. The Village responded that a school can agree to waive its rights, which Keystone did in exchange for the zoning relief necessary to operate its school on this property.
The trial court ruled in Keystone's favor, finding the tax agreement to be void and unenforceable. However, the court did not grant Keystone's request for reimbursement for the 20 years of taxes the school had paid over the years, finding that Keystone could have filed for a tax exemption earlier so its claim for reimbursement was not timely.
The appellate court upheld the trial court's ruling in favor of Keystone, rejecting the Village's argument that Keystone could legally waive its tax exemption rights. The appellate court determined that the Village "usurped for itself" the power to decide whether Keystone should receive the exemption that was authorized by the Illinois constitution and provided for in the Illinois Tax Code. The court also held that Keystone could not legally waive its exemption through the tax agreement because the tax exemption was intended to benefit the public as a whole and not just the school itself.
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