I’m not sure what it says about me that I am about to give an historically detailed answer to this question on a message board in the context of The Blues Brothers, but hey–it’s not every day that one gets the opportunity to discuss tax exemption laws with actual, you know, volunteers.
Each entity that wants to avoid paying taxes has to find and obtain an exemption for each tax–federal, state and local and income, property and sales. It is possible to be tax-exempt for federal income tax purposes but not local property tax purposes. To get these various exemptions, the entity has to meet various requirements. “Church properties” are not conveniently “owned” by a single entity or treated in the same way–each property needs its own exemption analysis.
Historically, before the bureaucrats got their acts organized and developed forms and policies, there were orphanages and Cook County more or less informally didn’t make them pay property taxes. Also historically, there were bunches of Catholic entities pursuing various more or less do-gooder type missions (or non-entities since not all of them bothered to formally create corporations).
Once the bureaucracy got up and running, these organizations would eventually be asked to file the proper paperwork for property tax exemption and would then be scrutinized for eligibility. (Again, historically, there was leeway (an assumtion of acceptability–but not one mandated by law) for Catholic charities that were listed in the Catholic Directory, a handy list since many organizations were not formally in existence as corporations (think Knights of Columbus St. Rita’s chapter, or an orphanage run by an order of nuns headquartered in Sienna, Italy that believes service is more important than paperwork).)
There is no requirement that the County property tax board grant a tax exemption if infromation and evidence of chartitable purpose is not provided, and any exemption granted is not permanent but may be reviewed annually (or on a rolling 3-4 year or similar basis depending on County rules). Indeed, given increasing pressure to generate tax revenues, Cook County has from time to time taken interesting aggressive action in this regard–I remember a dust-up over whether the Bishop’s lovely large Lincoln Park property should be subdivided in such a way so that the “empty” land (garden or park) surrounding the residence could be taxed–it was not being “used” for religious or charitable purposes, after all. Also recently various Illinois Counties have started demanding property taxes from tax-exempt hospitals given that they do not seem to provide a satisfactory amount of free care to patients.
In any event, an orphanage should be an acceptable tax-exempt use of property for Cook County tax exemption purposes, but it would not be unheard of for the exemption filing paperwork to have fallen through the cracks (or for the order of nuns with no legal expertise to have relied on the Bishop’s admin staff to handle it for them).
Dislaimers, etc., this is all from memory with no fresh confirmation. But, yeah, the premise is unlikely. OTOH, the movie (Aretha!) is still cool and it is still Chicago. My question is whether it is officially a musical.