Chicago Real Estate Transfer-Tax Battle Heads to Illinois Supreme Court

Illinois Appellate Court Last Week Ruled That Votes on Proposed Changes Should Be Counted

According to Ryan Ori, "A legal fight over a proposed referendum on raising Chicago real estate transfer taxes to try to address homelessness is headed to the state’s Supreme Court after real estate trade groups filed notice to appeal a decision by Illinois appellate court judges that votes on the issue should be counted.

Lawyers for BOMA/Chicago and other real estate ownership and advocacy groups said they planned to appeal just days after the appellate court ruled that votes on the Bring Chicago Home initiative should be counted. That decision overturned a Cook County judge’s previous ruling that the referendum would remain on primary election ballots but that votes on the transfer-tax issue would not be counted.

Monday’s move by the plaintiffs adds another round to the courtroom fight just eight days before the election.

In appealing, BOMA/Chicago is reiterating its position that the three-pronged referendum question is illegally worded and confusing. It also questions an aspect of the appellate court judgment that said: “Courts are empowered to rule on the validity of legislative enactments only after they have been enacted.”

BOMA/Chicago Executive Director Farzin Parang said in a statement to CoStar News that if enacted, “this referendum would create a backdoor property tax for everyone in Chicago.”

“The Appellate Court's opinion implies that an illegal referendum cannot be challenged until after an election — after voters have already been harmed,” he said in the statement. “Given the importance of this topic, we will ask the Illinois Supreme Court to hear an appeal.”

Chicago’s City Council last year voted to create a referendum vote for the plan in which transfer taxes would be lowered on homes and commercial properties of less than $1 million, with an increase at levels above that amount and an additional increase — to 3%, quadruple the current city rate — on amounts above $1.5 million.

Opponents have questioned how the money would be spent, and backers of the plan, including Mayor Brandon Johnson and some progressive aldermen, have offered few specific details.

The BOMA-led group of real estate interests in January filed a lawsuit arguing that the referendum language is illegal because it combines a proposed tax cut and a proposed tax increase. The plaintiffs described it as an example of legislative log-rolling, or “bundling unpopular legislation with more palatable bills so that the well-received bills will carry the unpopular to passage.”

The county court agreed, ordering that votes on the issue should be stricken. The appellate court later said it had no position on the merits of the legislation, but added that: “That is a question wisely entrusted not to judges but to the people of the city of Chicago.”

Unless the latest appeal is quickly heard and the appellate court’s decision is overturned, votes still will be tallied March 19. Amid the legal jousting, both sides have urged early and mail-in voters to answer the referendum question."

If the legislation proposing an increase in Chicago real estate transfer taxes to address homelessness were to go through and be approved by the Illinois Supreme Court, taxpayers, particularly property owners, would likely feel the immediate financial ramifications. With the potential for transfer taxes to increase, property transactions, including both residential and commercial, could become more expensive, impacting individuals and businesses alike. Additionally, the proposed tax hike, especially the quadrupling of rates on properties exceeding $1.5 million, could disproportionately burden high-value property owners. Moreover, the lack of clarity regarding how the generated funds would be utilized raises concerns about transparency and accountability, leaving taxpayers uncertain about the effectiveness of the measures in addressing homelessness. Overall, if implemented, this legislation could significantly affect the financial landscape of property ownership in Chicago, potentially leading to broader economic implications for the city.