Form St 04-20 - Recommendation For Disposition Page 8
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12had not imposed an excise tax on the salaries and the Internal Revenue Service would
apparently not be time-barred from imposing an excise tax now. If no excise tax is
imposed, it still does not indicate that the salaries are reasonable. Exemption from
federal taxes in not determinative of whether an organization is charitable under the
Illinois Constitution. The People ex rel.
County Collector v. Hopedale Medical
Foundation, 46 Ill. 2d 450 (1970). No financial statements for the Institute were offered
into evidence and without financial and other information on the Institute, I am unable to
conclude that the organization qualifies as a charity under Illinois law.
It is recognized that the employees of a charitable institution are not compelled to
perform free services in order that the institution may be charitable. Yates v. Board of
Review, 312 Ill. 367 (1924). “The payment of reasonable salaries to necessary employees
for services actually rendered does not convert a nonprofit enterprise into a business
enterprise.” 86 Ill. Admin. Code §130.2005(h). However, ABC’s salaries are significant
enough to raise questions as to whether its employees and officers are the primary
beneficiaries of ABC’s existence. ABC receives over 99% of its revenue from selling
blood related services and less than 1% from contributions. It is suggested that private
contributors would cease to be contributors if they perceived that their donations were
being used to pay such high salaries. No documentary evidence was presented as to how
ABC’s salaries compared to similar organizations.
There was testimony at the
evidentiary hearing that no employee of ABC receives compensation that is a “function
of the revenue or assets” of ABC. Tr. p. 56. This testimony alone is wholly inadequate
for me to conclude that the salaries paid to ABC’s officers and employees were
reasonable or that the revenue received by ABC does not inure to the benefit of these
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