BOMA/Chicago Files Lawsuit Opposing Transfer Tax Referendum

BOMA/Chicago filed a lawsuit against the Chicago Board of Election Commissioners. The suit seeks an injunction prohibiting the Commissioners from certifying and placing the proposed Transfer Tax Referendum question on the March 19, 2024, Primary Election ballot.

BOMA/Chicago, along with a broad cross-section of associations and companies representing contractors, developers, investors, commercial office, multi-family and retail industries, and the other plaintiffs, contend that the three-part question being posed to voters violates the Illinois Municipal Code and Illinois Constitution:

a real estate transfer tax decrease of 20% to establish a new transfer tax rate of $3 for every $500 of transfer price, or fraction thereof, for that part of the transfer price below $1,000,000 to be paid by the buyer of the real estate transferred unless the buyer is exempt from the tax solely by the operation of state law, in which case the tax is to be paid by the seller; AND

a real estate transfer tax increase of 166.67% to establish a new transfer tax rate of $10 for every $500 of transfer price, or fraction thereof, for that part of the transfer price between $1,000,000 and $1,500,000 (inclusive) to be paid by the buyer of the real estate transferred unless the buyer is exempt from the tax solely by the operation of state law, in which case the tax is to be paid by the seller; AND

a real estate transfer tax increase of 300% to establish a new transfer tax rate of $15 for every $500 of transfer price, or fraction thereof, for that part of the transfer price exceeding $1,500,000 to be paid by the buyer of the real estate transferred unless the buyer is exempt from the tax solely by the operation of state law, in which case the tax is to be paid by the seller?

The binding referendum would force voters to approve or reject three separate policies in one question, including a tax decrease, to manipulate voters into approving two separate tax increases.

The Illinois State Constitution guarantees “free and equal elections,” and the coalition contends that it is unconstitutional to include more than one question in the referendum because it prohibits residents from voting on the three individual policy points.

Further, the coalition contends that it is unlawful for the tax decrease to be included in the referendum at all. Illinois Statute Section 8-13-19 requires a referendum for the City Council to only impose a new transfer tax or increase an existing transfer tax. This law was created specifically to prevent the practice of legislative logrolling, or “bundling unpopular legislation with more palatable bills so that the well-received bills will carry the unpopular to passage.”

Additionally, Illinois Supreme Court precedent established that referendum questions must be self-executing (a question must “stand on its own”). A binding referendum that “leaves gaps to be filled by the legislature or municipal body” makes it uncertain as to what voters are to approve. According to the referendum, the revenue from the tax increases would be committed to address homelessness. As of today, however, the City has not published a detailed plan that addresses public questions about the fund, instead promising a new advisory board to make recommendations and establish goals for the fund after its approval.

“Homelessness is a critical issue in our city that should be addressed with a serious plan involving all stakeholders. These important public policy questions should be presented to voters with fairness, detail, and transparency. Instead, this referendum is playing politics.”

- Executive Director, Farzin Parang

What If It's Passed?

If passed, the ripple effects of the proposed tax increase, which would triple transfer taxes on properties valued between $1 million and $1.5 million and quadruple transfer taxes on properties valued more than $1.5 million, will be detrimental to every neighborhood in the city. Chicago already has the highest commercial property tax in the country, and if these increases take effect, Chicago will also have one of the highest transfer taxes among cities it competes with for investment (14 states do not even impose transfer taxes). At a time when commercial real estate markets are in immense turmoil, homeowners and neighborhoods throughout the city would be hit hard.

Property taxes for residential property are heavily subsidized by downtown office buildings, which are in a crisis and estimated to have lost 40-80% of their value. By exacerbating this crisis through quadrupled transfer taxes, homeowners and renters throughout the city will see higher increases in their personal property taxes
The impact on Chicago’s ability to attract investment will impede union job creation and the growth of our tax base or schools, public safety, and more
It will be harder to attract and keep grocers, healthcare facilities, and small businesses in our neighborhoods
The tax increase will impede the development and maintenance of affordable and market-rate rental apartments
Renters will see rents rise as the costs to purchase units increase and the obstacles to developing new housing impact supply

The coalition seeks to have the misleading referendum stricken from the ballot.

BOMA/Chicago Files Lawsuit Opposing Transfer Tax Referendum

“Homelessness is a critical issue in our city that should be addressed with a serious plan involving all stakeholders. These important public policy questions should be presented to voters with fairness, detail, and transparency. Instead, this referendum is playing politics.”

What If It's Passed?

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