                                   2019 IL App (1st) 181502
                                  Opinion filed: June 21, 2019

                                                                               FIRST DISTRICT
                                                                                  Fifth Division
No. 1-18-1502

 PETERSON PLAZA PRESERVATION, L.P.;                          )             Appeal from the
 RELATED BLOOMINGDALE, L.L.C.;                               )             Circuit Court of
 MARSHALL FIELD PRESERVATION, L.P.;                          )             Cook County.
 RELATED VAN BUREN, L.L.C.,                                  )
                                                             )             2017 L 050922
         Plaintiffs-Appellants,                              )             2017 L 05092
                                                             )             2017 L 050924
 v.                                                          )             2017 L 050925, cons.
                                                             )
 THE CITY OF CHICAGO DEPARTMENT OF                           )             Honorable
 FINANCE and THE CITY OF CHICAGO                             )             Carl Anthony Walker,
 DEPARTMENT OF ADMINISTRATIVE                                )             Judge, presiding.
 HEARINGS,                                                   )
                                                             )
         Defendants-Appellees.                               )
                                                             )

       PRESIDING JUSTICE ROCHFORD delivered the judgment of the court, with opinion.
       Justices Hoffman and Hall concurred in the judgment and opinion.

                                           OPINION

¶1     Plaintiffs, Peterson Plaza Preservation, L.P. (Peterson Plaza), Related Bloomingdale,

L.L.C. (Bloomingdale), Marshall Field Preservation, L.P. (Marshall Field), and Related Van

Buren, L.L.C. (Van Buren), appeal from an order of the circuit court on administrative review

upholding the determination of defendants, City of Chicago Department of Finance and City of

Chicago Department of Administrative Hearings, that plaintiffs were not entitled to real property

transfer tax exemptions under section 3-33-060(L) of the Chicago Municipal Code (Chicago

Municipal Code § 3-33-060(L) (amended May 8, 2013)) for the transfer of title to certain

federally funded residential apartment buildings inside of enterprise zones. On appeal, plaintiffs

argue that they were entitled to the exemptions because they satisfied all the conditions necessary

to qualify therefor. We affirm.
No. 1-18-1502

¶2                                       I. Relevant Law

¶3     Chapter 3-33 of the Chicago Municipal Code (Municipal Code) imposes the Chicago real

property transfer tax (transfer tax) on “the privilege of transferring title to, or beneficial interest

in, real property located in the city.” Chicago Municipal Code § 3-33-030(A) (amended Nov. 11,

2011). The buyer of the property must pay the tax, which is $3.75 per $500 of the transfer price

of the property. Id. The Municipal Code provides an exemption for “[t]ransfers of title to, or

beneficial interest in, real property used primarily for commercial or industrial purposes located

in an enterprise zone, as defined in Chapter 16-12 of this Code.” Chicago Municipal Code § 3-

33-060(L) (amended May 8, 2013). An enterprise zone is a depressed area of the city that has

been designated a “proposed enterprise zone” by the city council and approved and certified by

the proper state or federal authorities as an enterprise zone. Chicago Municipal Code § 16-12-

020 (amended Nov. 26, 2013).

¶4     In December 1998, the Chicago Department of Revenue issued Real Property Transfer

Tax Ruling No. 2, section 5 and section 7, effective January 4, 1999, 1 which defines when a

property is used primarily for commercial purposes in an enterprise zone so as to qualify for a

tax exemption under section 3-33-060(L) of the Municipal Code:

                “Section 5. Property which is used primarily for commercial purposes is property

       used primarily for buying or selling of goods and services, or for otherwise providing

       goods and services, including any real estate used for hotel or motel purposes.

       [Citation.]”

           ***




                 1
                     Tax Ruling No. 2 was subsequently amended, effective June 1, 2004.

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                Section 7. For property to be ‘primarily used for commercial or industrial

       purposes,’ more than 50 percent of the property must be used for either commercial or

       industrial purposes.” Chicago Department of Revenue Real Property Transfer Tax Ruling

       No. 2, §§ 5, 7 (eff. June 1, 2004), https://www.chicago.gov/content/dam/city/depts/rev/

       supp_info/TaxRulingsandRegulations/RPTTRuling2.pdf [https://perma.cc/ZTU5-6RKU]

       (hereinafter Tax Ruling No. 2).



¶5                                        II. Background Facts

¶6     Plaintiffs each purchased a property in a Chicago enterprise zone with the intent to

continue operating it as affordable housing under section 8 of the United States Housing Act of

1937 (42 U.S.C. § 1437f (2012)) (hereinafter Section 8 program). Under the Section 8 program,

tenants pay no more than 30% of their income toward rent; the United States Department of

Housing and Urban Development (HUD) compensates the developer for the remaining balance.

See id. §§ 1437a(a), 1437f(c). Following their acquisition of the properties, plaintiffs each paid

thousands of dollars in transfer taxes.

¶7     Specifically, with respect to each individual plaintiff: Peterson Plaza purchased a

federally funded housing complex consisting of 189 units located at 5969 North Ravenswood

Avenue in Chicago, for which it paid $161,250 in transfer taxes; Bloomingdale purchased a 111-

unit complex located at 1755 North Keystone Avenue, for which it paid $52,500 in transfer

taxes; Marshall Field purchased a 628-unit complex located at 1448 North Sedgwick Street, for

which it paid $648,750 in transfer taxes; and Van Buren purchased a 299-unit complex located at

2045 West Jackson Boulevard, for which it paid $135,750 in transfer taxes.




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¶8       After each of the acquisitions, plaintiffs continued to rent units in the properties to

qualifying tenants under the Section 8 program. Between 87% and 100% of each of the

properties was used for tenant living space. Plaintiffs performed extensive renovations at each of

the properties, employed management and maintenance staff at each of the properties, and

offered various services to the tenants such as general equivalency diploma (GED) classes,

literacy programs, health screenings, and job training. All of the services are free to the tenants

and are not available to the general public.

¶9       On November 12, 2015, plaintiffs filed with the Department of Finance (Department)

claims for refunds of the transfer taxes based on the exemption in Municipal Code section 3-33-

060(L) for transfers of title to real property used primarily for commercial purposes in an

enterprise zone. On November 20, 2015, the Department denied all four refund claims because it

determined that the properties were not being used for commercial purposes within the enterprise

zones.

¶ 10     On December 28, 2015, plaintiffs filed petitions with the Department protesting the

denial of their refunds and requesting administrative hearings thereon. The parties submitted

cross-motions for summary judgment, and hearings were held on the motions before an

administrative law judge (ALJ). On September 20, 2017, the ALJ issued decisions granting

summary judgment in favor of the Department in all four cases, upholding the denial of

plaintiffs’ refunds based on their failure to qualify for the transfer tax exemption.

¶ 11     Plaintiffs filed complaints for administrative review in the circuit court. On the

Department’s motion, the court consolidated the cases. On June 14, 2018, the circuit court

confirmed the administrative decisions, again upholding the denial of plaintiffs’ refunds.

Plaintiffs filed this timely appeal on July 12, 2018.


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¶ 12                                   III. Analysis

¶ 13   In reviewing the final decision under the Administrative Review Law (735 ILCS 5/3-101

et seq. (West 2016)) in this case, we review the administrative decision granting the

Department’s summary judgment motions and not the circuit court’s judgment. West Belmont,

L.L.C. v. City of Chicago, 349 Ill. App. 3d 46, 49 (2004). Summary judgment is appropriate

where the pleadings, depositions, and admissions on file together with any affidavits, when

viewed in the light most favorable to the nonmoving party, show that there is no genuine issue of

material fact and that the moving party is entitled to judgment as a matter of law. Pielet v. Pielet,

2012 IL 112064, ¶ 29. Review is de novo. Id. ¶ 30. Where, as here, parties file cross-motions for

summary judgment, they agree that only a question of law is involved and invite the court to

decide the issues based on the record. Id. ¶ 28.

¶ 14   Here, plaintiffs contend that they are exempt from paying the transfer tax because they

satisfied all the conditions in section 3-33-060(L) of the Municipal Code to qualify for the

exemption. Specifically, plaintiffs argue that they obtained a transfer of title to the properties, the

properties were used primarily for commercial purposes after the transfer, and each of the

properties was located in an enterprise zone. Defendants concede that each of the properties was

located in an enterprise zone but argue that they were used for residential purposes for low-

income families under the Section 8 program, not for commercial purposes, and therefore their

transfers are not exempt from taxation under section 3-33-060(L).

¶ 15   A taxpayer bears the burden of proving by clear and convincing evidence that he is

entitled to an exemption. Metro Developers, LLC v. City of Chicago Department of Revenue, 377

Ill. App. 3d 395, 397 (2007); Streeterville Corp. v. Department of Revenue, 186 Ill. 2d 534, 538-

39 (1999). The burden is a challenging one because municipal ordinances exempting the transfer


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of property from taxation are to be strictly construed in favor of taxation (Metro Developers,

LLC, 377 Ill. App. 3d at 397), and all debatable questions are resolved in favor of taxation. Ford

Motor Co. v. Chicago Department of Revenue, 2014 IL App (1st) 130597, ¶ 14.

¶ 16   At issue here is the Department’s interpretation of a municipal ordinance, section 3-33-

060(L), and of Tax Ruling No. 2. The rules for interpreting municipal ordinances are the same as

those that apply to statutory interpretation. Hayenga v. City of Rockford, 2014 IL App (2d)

131261, ¶ 17. The primary objective of statutory interpretation is to ascertain and give effect to

the intent of the legislature. Id. The best indication of the legislative intent is the statutory

language, given its plain and ordinary meaning. Id. A statute must be viewed as a whole,

interpreting the words and phrases in light of the other relevant provisions of the statute.

Crittenden v. Cook County Comm’n on Human Rights, 2012 IL App (1st) 112437, ¶ 81.

¶ 17   The Department’s interpretation of a municipal ordinance is a question of law that we

review de novo. Metro Developers, LLC, 377 Ill. App. 3d at 397. Although our review is

de novo, our supreme court instructs that “a court will give substantial weight and deference to

an interpretation of an ambiguous statute by the agency charged with the administration and

enforcement of the statute. Such an interpretation expresses an informed source for ascertaining

the legislative intent. A significant reason for this deference is that an agency can make informed

judgments upon the issues, based on its experience and expertise.” Bonaguro v. County Officers

Electoral Board, 158 Ill. 2d 391, 398 (1994).

¶ 18   Thus, we must initially determine whether the municipal ordinance that we are

interpreting, section 3-33-060(L), is ambiguous such that we should give substantial weight and

deference to the interpretation accorded it by the department of revenue under Tax Ruling No. 2.




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An ordinance is ambiguous if it is subject to two or more reasonable interpretations. West

Belmont, 349 Ill. App. 3d at 50.

¶ 19   Section 3-33-060(L) provides for the exemption from transfer taxes for transfers of title

to “real property used primarily for commercial or industrial purposes located in an enterprise

zone.” Chicago Municipal Code, § 3-33-060(L) (amended Nov. 16, 2011). The issue here is how

to interpret the term “commercial purposes” so as to decide whether plaintiffs’ use of the

properties met the definition of that term. Section 3-33-060(L) does not define the term

“commercial purposes,” and plaintiffs look to the dictionary definition of “commercial” as

“viewed with regard to profit.” Merriam-WebsterOnlineDictionary, http://www.merriam-

webster.com/dictionary/commercial (last visited June 12, 2019) [https://perma.cc/3Q2J-W82L].

Plaintiffs contend that they are using the properties for a commercial purpose, as the properties

are meant to generate a profit for them, and therefore the transfer of the properties is exempt

from transfer taxes. However, defendants interpret the term “commercial purposes” differently

than plaintiffs, contending that there is a “clear distinction” between commercial and residential

properties, such that plaintiffs’ use of the properties to provide residential housing does not fall

within the exemption. Given that the term “commercial purposes” is not defined in section 3-33-

060(L) and is subject to multiple interpretations, we find an ambiguity. Accordingly, although

our review here is de novo, we give substantial deference to Tax Ruling No. 2, as it is an

interpretation of the ambiguous ordinance by the agency charged with its administration and

enforcement.

¶ 20   We begin our analysis by considering West Belmont, which addressed section 3-33-

060(L) by looking to the interpretation accorded it by the department of revenue under Tax

Ruling No. 2, as well as to the legislative purpose underlying the Illinois Enterprise Zone Act (20


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ILCS 655/1 et seq. (West 2002)), which authorized the establishment of enterprise zones. Then

we consider Metro Developers, LLC, which largely adopted the West Belmont analysis.

¶ 21    In West Belmont, West Belmont purchased property in a Chicago enterprise zone that had

been previously occupied by a furniture retailer, wholesaler, and rental company. West Belmont,

349 Ill. App. 3d at 47. Following the purchase, West Belmont demolished the furniture store and

began selling and constructing residential townhomes on the property. Id. West Belmont sought

an exemption from transfer taxes under section 3-33-060(L), claiming it had purchased real

property used primarily for commercial purposes in the enterprise zone. Id. The Department of

Revenue disallowed the exemption, finding that the properties were being developed to build

townhomes, which was not a commercial purpose. Id. On administrative review, the circuit court

affirmed the disallowance of the exemption. Id. at 48.

¶ 22    On appeal, West Belmont again argued that it was exempt from the transfer tax because it

had purchased real property “ ‘used primarily for commercial or industrial purposes located in an

enterprise zone.’ ” Id. at 47 (quoting Chicago Municipal Code § 3-33-060(L) (amended Dec. 15,

1992))). West Belmont contended that the word “used” in the phrase “used primarily for

commercial or industrial purposes” refers only to the historical use of the subject property at the

time of the transfer. Id. at 49. West Belmont argued that it met the exemption’s requirement

because the property had been used by the furniture wholesaler for commercial purposes before

the transfer to West Belmont. Id. The appellate court disagreed, holding that the “purpose of the

exemption is to encourage commercial or industrial use of property located in an enterprise zone.

It looks to the post transfer future, not to the past.” Id. at 51. The appellate court concluded that

“the exemption turns on the use the buyer intends to make of the property.” (Emphasis added.)

Id. at 52.


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¶ 23    West Belmont next argued that the use it intended to make of the property (constructing

and selling residential townhomes) was a commercial one. In addressing West Belmont’s

argument, the appellate court looked to Tax Ruling No. 2, section 5, which provided:

                “5. Property which is used primarily for commercial purposes is property used

        primarily for buying or selling of goods and services, or for otherwise providing goods

        and services, including any real estate used for hotel or motel purposes.” Id. at 53

        (quoting Tax Ruling No. 2, § 5 (eff. Jan. 4, 1999)).

¶ 24    The appellate court found that

        “West Belmont’s use of the property was not primarily ‘commercial’ within the meaning

        of the exemption. While the sale of real estate might be included in a general definition of

        commerce as the ‘exchange of property of any kind,’ we do not believe West Belmont’s

        intended use of the land furthered the purpose of the exemption. *** [West Belmont]

        purchased the property to convert it into residential use. Whatever ‘commerce’ that might

        have been involved would come to an end when the homes were built and sold.” Id. at 53.

¶ 25    West Belmont argued, though, that it also sold the buyers personal property such as

appliances, which constituted “goods and services” within the meaning of the tax ruling. Id. at

53-54. The appellate court disagreed, noting that “[a]ny sale of goods or services was subsidiary

to West Belmont’s primary purpose of building and selling townhomes and was not included in

the tax ruling’s definition.” Id. at 54.

¶ 26    West Belmont also argued that its use of the property fulfilled the stated goals of the

Illinois Enterprise Zone Act (Act) (20 ILCS 655/1 et seq. (West 2002)), which is the enabling act

authorizing the establishment of enterprise zones. The Act states in pertinent part:




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       “The General Assembly finds and declares that the health, safety and welfare of the

       people of this State are dependent upon a healthy economy and vibrant communities; that

       the continual encouragement, development, growth and expansion of the private sector

       within the State requires a cooperative and continuous partnership between government

       and the private sector; and that there are certain depressed areas in this State that need the

       particular attention of government, business, labor and the citizens of Illinois to help

       attract private sector investment into these areas and directly aid the local community and

       its residents. Therefore, it is declared to be the purpose of this Act to explore ways and

       means of stimulating business and industrial growth and retention in depressed areas and

       stimulating neighborhood revitalization of depressed areas of the State by means of

       relaxed government controls and tax incentives in those areas.” 20 ILCS 655/2 (West

       2002).

¶ 27   West Belmont argued that its replacing a vacant commercial building with a residential

development served the Act’s purpose of “stimulating neighborhood revitalization.” West

Belmont, 349 Ill. App. 3d at 54. The appellate court disagreed, holding that “the exemption is

intended to subsidize only commercial and industrial projects, rather than all forms of

revitalization. Using scarce enterprise zone property for residential purposes limits the

availability of land for commercial and industrial use.” Id. The appellate court concluded that

West Belmont was not entitled to the transfer tax exemption. Id. at 56.

¶ 28   In Metro Developers, LLC, Metro Developers purchased real property in Chicago from

AP&P Manufacturing, Inc., which manufactured and distributed paper products at that location.

Metro Developers, LLC, 377 Ill. App. 3d at 396. Metro Developers purchased the property




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intending to convert the building located thereon into residential condominiums. Id. Metro

Developers subsequently developed the property into 175 residential condominiums. Id at 397.

¶ 29   Metro Developers sought a transfer tax exemption under section 3-33-060(L), contending

that the property was used primarily for commercial or industrial purposes and was located in an

enterprise zone. Id. at 396. The City of Chicago Department of Administrative Hearings denied

Metro Developers’ request for an exemption, and on administrative review the circuit court

affirmed. Id. at 397.

¶ 30   On appeal, the appellate court cited West Belmont’s holding that the construction and sale

of residential townhomes in an enterprise zone did not qualify for a transfer tax exemption under

section 3-33-060(L) because the taxpayer was no longer using the property primarily for

commercial or industrial purposes. Id. at 398 (citing West Belmont, 349 Ill. App. 3d at 51). In

accordance with West Belmont, the appellate court held that the residential condominiums, which

Metro Developers was developing and selling inside the enterprise zone, did not qualify for a

transfer tax exemption under section 3-33-060(L) because Metro Developers was using them to

provide residential housing instead of for commercial or industrial purposes. Id. at 398.

¶ 31   In the present case, in arguing for the transfer tax exemption, plaintiffs contend that they

used the properties inside the enterprise zones exclusively for the commercial purpose of

generating profits from rents received in exchange for the right of occupancy and for providing

various other (free) services to the tenants, such as GED classes, literacy programs, health

screenings, and job training. Plaintiffs argue that their use of the property for residential leasing

and for the provision of free services to the tenants falls within the “otherwise providing goods

and services” clause of section 5 of Tax Ruling No. 2. See Tax Ruling No. 2, § 5 (eff. June 1,

2004), which provides that property is used primarily for commercial purposes when it is used


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“primarily for buying or selling of goods and services, or for otherwise providing goods and

services, including any real estate used for hotel or motel purposes.” (Emphasis added.)

¶ 32   However, plaintiffs’ argument runs counter to West Belmont and Metro Developers, LLC,

which held that the profits the taxpayers received from selling the townhouses (in West Belmont)

and the residential condominiums (in Metro Developers, LLC), as well as from the services

provided pursuant thereto, did not qualify them for the section 3-33-060(L) exemption where the

properties were primarily used to provide residential housing inside of the enterprise zones.

Similar to West Belmont and Metro Developers, LLC, plaintiffs primarily used the properties at

issue here inside the enterprise zones to provide residential housing. Specifically, plaintiffs

operated each of their properties as affordable housing under the Section 8 program, which is

designed “[f]or the purpose of aiding low-income families in obtaining a decent place to live and

of promoting economically mixed housing.” 42 U.S.C. § 1437f(a) (2012).

¶ 33   Plaintiffs’ argument also runs counter to section 7 of Tax Ruling No. 2, which provides

that for property to be primarily used for commercial purposes, “more than 50 percent of the

property” must be used therefor. Tax Ruling No. 2, § 7 (eff. Jan. 4, 1999). Pursuant to the

Section 8 program, plaintiffs dedicated between 87% to 100% of each of their properties to

tenant living space. As plaintiffs used close to 100% of the properties for tenant living space

instead of for the sale or provision of goods and services, they have failed to meet their burden of

proving by clear and convincing evidence that they are entitled to the section 3-33-060(L)

exemption for transfer taxes.

¶ 34   Plaintiffs argue that West Belmont is distinguishable because, in the course of its analysis

that the transfer tax exemption did not apply there, the appellate court noted that “West Belmont

did not intend to set up a real estate sales office from which it would continue to sell townhomes


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indefinitely.” 349 Ill. App. 3d at 53. Contrary to West Belmont, plaintiffs here contend that the

transfer tax exemption applies because their intent was to establish on-site leasing offices from

which they would conduct the business of owning, leasing, managing, improving, and

maintaining the residential apartments for low-income families. Plaintiffs’ argument is

unavailing, though, as a careful examination of West Belmont reveals that the focus of its

analysis was not on the presence or absence of a real estate sales office but rather on the fact that

West Belmont was primarily using the property to provide residential townhomes inside the

enterprise zone and, therefore, the property transfer was not subject to the transfer tax exemption

under section 3-33-060(L). Id. at 53-56 (holding that residential real estate development within

the enterprise zone does not constitute property used primarily for commercial purposes within

the meaning of the exemption). Here, as discussed, plaintiffs primarily use the rental properties

to provide residential housing for low-income families in the enterprise zones pursuant to the

Section 8 program, and as such, the property transfers do not fall within the section 3-33-060(L)

exemption.

¶ 35   Plaintiffs’ argument also runs afoul of Metro Developers, LLC. Metro Developers

constructed a sales office for the purpose of selling residential condominiums on the property it

purchased inside the enterprise zone, but the appellate court (applying West Belmont) held that

because Metro Developers was primarily using the condominiums to provide residential housing,

the section 3-33-060(L) transfer tax exemption did not apply. See Metro Developers, LLC, 377

Ill. App. 3d at 398. Similarly, here, regardless of any construction of a sales/leasing office,

plaintiffs have failed to prove by clear and convincing evidence that the section 3-33-060(L)

exemption applies, where plaintiffs primarily use the rental units inside the enterprise zones to

provide residential housing for low-income families pursuant to the Section 8 program.


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¶ 36   Plaintiffs also argue that the ALJ’s decision denying them an exemption under section 3-

33-060(L) runs counter to the Act’s stated goals of stimulating “neighborhood revitalization of

depressed areas” and directly aiding the “local community and its residents.” 20 ILCS 655/2

(West 2016). Plaintiffs contend that, by operating the rental properties inside the enterprise zones

in a manner that permits lower income residents to live, work, and spend money in their local

communities, they are fulfilling the Act’s goals of neighborhood revitalization and providing aid

to local communities and therefore the transfer of the properties should be found to be exempt

from the transfer tax.

¶ 37   We disagree. Section 5 of the Act provides a process for municipalities to designate

enterprise zones pursuant to an initiating ordinance and provides the minimum requirements for

ordinances designating such areas. Id. § 5. One requirement is that the ordinance set forth

“provisions for any tax incentives or reimbursement for taxes, which pursuant to state and

federal law apply to business enterprises within the zone at the election of the designating county

or municipality, and which are not applicable throughout the county or municipality.” Id.

§ 5(c)(iii). Section 5(d) further specifies that nothing in the Act shall “prohibit a municipality or

county from extending additional tax incentives or reimbursement for business enterprises in

Enterprise Zones or throughout their territory by separate ordinance.” Id. § 5(d). There is no

provision in the Act precluding the City from adopting, as it did here in section 3-33-060(L), a

tax exemption narrowly drawn to exempt only transfers of title to “real property used primarily

for commercial or industrial purposes located in an enterprise zone” as opposed to property

designated for residential use. As the properties at issue here are being primarily used by

plaintiffs to provide residential housing for low-income families inside of enterprise zones,




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instead of for use primarily for commercial or industrial purposes, the ALJ committed no error in

finding that the property transfers do not fall within the section 3-33-060(L) exemption.

¶ 38   We further note that in West Belmont, 349 Ill. App. 3d at 54, the appellate court held that

the Act’s primary concern is stimulating business and industrial growth inside enterprise zones

and that the development of real property that is primarily used for residential housing does not

further the Act’s goals and is not exempt from taxation. Pursuant to West Belmont, the ALJ did

not err in finding that plaintiffs’ use of the properties to provide residential housing for low-

income families inside the enterprise zones does not further the Act’s goals and is not exempt

from taxation under section 3-33-060(L).

¶ 39   Finally, plaintiffs make two as-applied constitutional challenges on appeal: (1) that Tax

Ruling No. 2 is unconstitutionally vague and (2) that Tax Ruling No. 2 violates the uniformity

clause of the Illinois Constitution. A party bringing an as-applied constitutional challenge bears

the burden of showing that a constitutional violation arises from the application of the law to a

specific set of facts and circumstances. People ex rel. Hartrich v. 2010 Harley-Davidson, 2018

IL 121636, ¶ 12.

¶ 40   Plaintiffs forfeited review by failing to raise these constitutional challenges either in the

administrative hearing or in the circuit court. See Cinkus v. Village of Stickney Municipal

Officers Electoral Board, 228 Ill. 2d 200, 212-14 (2008).

¶ 41   Addressing the issue on the merits, we find that plaintiffs’ constitutional arguments are

unavailing. Ordinances are presumed to be constitutional. Carter v. City of Alton, 2015 IL App

(5th) 130544, ¶ 18. The challenging party bears the burden of overcoming that presumption and

demonstrating that the ordinance is a clear constitutional violation. Id. The agency charged with

the administration of a municipal ordinance has the authority to adopt interpretative rules to


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guide those involved in the assessment procedure and to ensure uniform enforcement of the

ordinance. O’Connor v. A&P Enterprises, 81 Ill. 2d 260, 269 (1980). Administrative rules, like

ordinances, are presumed constitutional and, if reasonably possible, will be construed to uphold

constitutionality. Jackson v. City of Chicago, 2012 IL App (1st) 111044, ¶ 20; People v. Molnar,

222 Ill. 2d 495, 508 (2006).

¶ 42   Plaintiffs here argue that Tax Ruling No. 2, section 7, which provides that more than 50%

of the property in the enterprise zone must be used for commercial purposes so as to be exempt

from transfer taxation under section 3-33-060(L), is unconstitutionally vague as applied to them.

To succeed on their vagueness challenge, plaintiffs must show that people of ordinary

intelligence must guess at the meaning of Tax Ruling No. 2, section 7. Campuzano v. Peritz, 376

Ill. App. 3d 485, 490 (2007).

¶ 43   Plaintiffs rely on U.S.G. Italian Marketcaffe, L.L.C. v. City of Chicago, 332 Ill. App. 3d

1008 (2002). In U.S.G. Italian Marketcaffe, the appellate court reviewed the constitutionality of

the City’s litter tax ordinance, which imposed a tax of 0.5% of the selling price of carry-out food

but exempted food that is not carry-out food and is sold for consumption at the place for eating.

Id. at 1010-11. Carry-out food was defined by the ordinance as “ ‘food that is wrapped or

enclosed in a disposable paper, plastic, metal or other disposable container which permits the

purchaser or patron to carry out and consume the food at a location away from the retailer’s

establishment, whether or not the purchaser or patron in fact carries out and consumes the food at

a location away from the retailer’s establishment.’ ” Id. at 1011 (quoting Chicago Municipal

Code § 3-43-010(A)(1) (adopted at Chi. City Clerk J. Proc. 17491 (Nov. 17, 1999))). The

definition further provided that such a determination is made at the time the food is tendered to

the patron and does not apply to “leftovers” that are subsequently transferred to a disposable


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container and removed from the premises. Id. (citing § 3-43-010(A)(1)(a) (adopted at Chi. City

Clerk J. Proc. 17491 (Nov. 17, 1999))). The pertinent regulations provided:

       “ ‘A meal or other order consists ‘primarily’ of food that is not carry-out food in either of

       the two situations:

                (1) more than fifty per cent of the items making up the meal or other order consist

       of food that is not carry-out food or

                (2) more than fifty per cent of the selling price of the meal or other order is

       attributable to food that is not carry-out food.’ ” Id. at 1018 (quoting Chicago Tax

       Regulations § 3-43-030 (2000)).

¶ 44   The following examples were provided:

                “ ‘(a) In a cafeteria, a customer is served a hamburger and french fries on china

       plates, but a side order of coleslaw is enclosed in a disposable cup. The exemption [from

       taxation] applies because the food makes up a meal that consists primarily of food that is

       not carry-out food, and it is sold for consumption at the place for eating.

       (b) In a cafeteria, a customer is served a hamburger and french fries wrapped in

       disposable materials, but a cup of coffee is served in a china cup. The exemption [from

       taxation] does not apply because the food makes up a meal that consists primarily of food

       that is carry-out food.’ ” Id. (quoting Chicago Tax Regulations § 3-43-030 (2000)).

¶ 45   The appellate court concluded that the ordinance was unconstitutionally vague because

“the same product with the same packaging sold at the same restaurant may be taxed differently

and *** every individual sale must be studied by the server or cashier in order to determine

whether the [o]rdinance applies.” Id. at 1018-19.




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¶ 46   Unlike U.S.G. Italian Marketcaffe, the amount of space devoted to residential versus

commercial use in the properties at issue has already been quantified. The undisputed facts show

that each of plaintiffs’ properties allocates between 87% and 100% of its space to residential use

for low-income families. Those figures are not close to the threshold 50% of the properties that

must be used for commercial purposes in order to qualify for the transfer tax exemption under

Tax Ruling No. 2, section 7. Accordingly, plaintiffs’ as-applied vagueness challenge fails, as

plaintiffs need not guess at the meaning of Tax Ruling No. 2, section 7, in order to determine that

the tax exemption does not apply to them.

¶ 47   Plaintiffs also argue that, as applied to them, Tax Ruling No. 2, section 5, violates the

uniformity clause of the Illinois Constitution, which provides:

                “In any law classifying the subjects or objects of non-property taxes or fees, the

       classes shall be reasonable and the subjects and objects within each class shall be taxed

       uniformly.” Ill. Const. 1970, art. IX, § 2.

¶ 48   The court reviews challenges on uniformity grounds narrowly, and “broad latitude is

afforded to legislative classifications for taxing purposes.” Geja’s Café v. Metropolitan Pier &

Exposition Authority, 153 Ill. 2d 239, 248 (1992). To survive scrutiny under the uniformity

clause, the tax classification must satisfy a two-prong test: the classification must “(1) be based

on a real and substantial difference between the people taxed and those not taxed, and (2) bear

some reasonable relationship to the object of the legislation or to public policy.” Arangold Corp.

v. Zehnder, 204 Ill. 2d 142, 153 (2003).

¶ 49   Plaintiffs note that under Tax Ruling No. 2, section 5, hotels/motels are classified as

properties primarily used for commercial purposes, thereby exempting their transfer from

taxation, whereas the federally funded residential apartment buildings at issue here are not so


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No. 1-18-1502

classified and therefore are not subject to the exemption. Plaintiffs’ argument is that there is no

reasonable distinction, under the uniformity clause, between hotels/motels and the federally

subsidized residential apartment buildings that justify the different tax classifications.

Defendants counter that hotels and motels draw a constant influx of visitors in need of temporary

housing, including tourists and out-of-town guests, while residential housing developments,

which serve as permanent domiciles, do not. Such a distinction supports different taxes and fees

under the uniformity clause. See, e.g., Northern Illinois Home Builders Ass’n v. County of

Du Page, 165 Ill. 2d 25, 45 (1995) (rejecting a challenge under the uniformity clause to

transportation impact fees targeting new development, while excluding existing development,

because there is “a real and substantial difference between new development which generates

additional traffic, and existing development which does not”). Defendants further argue that the

distinction between hotels/motels and residential apartments for tax purposes reasonably relates

to the Act’s goal of stimulating business growth inside of the enterprise zones. Specifically,

defendants contend that the transfer tax exemption for the transfers of hotels/motels inside an

enterprise zone encourages their development therein, which in turn generates additional traffic

and visitors that patronize businesses and inject money into the local economy. In response to

defendants’ argument, plaintiffs have provided no evidence that their federally funded housing

developments for low-income residents inside the enterprise zones will have the same direct

impacts on business growth and the local economy. As the challenging party, plaintiffs bear the

burden of persuading the court that the taxing body’s explanation is insufficient as a matter of

law or unsupported by the facts. Arangold Corp., 204 Ill. 2d at 153. Plaintiffs have failed to meet

their burden.

¶ 50    For all the foregoing reasons, we affirm the circuit court.


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¶ 51   Affirmed.




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