When Illinois officials were looking for revenue to finance a capital works plan, much of the focus was on a doubling of the gasoline tax to pay for road construction and expanding gambling to pay for buildings and other projects.
In the end, lawmakers raised a number of other taxes to pay for projects, including a tax on many parking spaces that will go into effect on Jan. 1.
The scope of the tax is so broad even people near the Illinois State Fairgrounds who park cars for a fee during the fair may have to collect the tax and pay it to the state. That is, they’ll have to collect it if they let more than three cars park on their property.
“That’s the kind of stuff that I think we’re obviously going to have to take a look at,” said Rep. Tim Butler, R-Springfield, whose district includes the fairgrounds. “This is what happens when you pass these things. There’s always going to be examples that come up that we need to take a look at. That’s going to be a very hard one to enforce I would think.”
Butler said he was not previously aware that even parking on private properties around the fairgrounds would be affected.
It clearly would be, though, according to rules filed by the Department of Revenue to flesh out how it plans to collect the tax and who must pay it. The department has filed 23 pages of proposed rules for the tax that include many examples of who is affected. Among the examples is this one:
“Every year a fair comes to a town. The owners of property near the fairground sell parking spaces on their property for $10 per day. If an owner of property makes available for use more than 3 parking spaces, the owner is liable for collecting and remitting the tax.”
The rules are pending before a bi-partisan panel of lawmakers. That panel will not be able to act on them before Jan. 1, when the parking excise tax goes into effect. However, courts have rules that the tax can go into effect even before the rules are formally adopted.
Any revenue received from parking around the fairgrounds is only a tiny part of what the state hopes to collect. Gov. J.B. Pritzker’s administration estimates the tax will bring in $60 million a year. Money from the tax will be dedicated to paying for non-transportation public works projects that are dubbed “vertical” projects by lawmakers.
The parking tax is just one component of $460 million in revenue for vertical projects the state expects to get that also includes higher taxes on cigarettes, vehicle trade-ins and new rules for collection of online sales taxes. The state expects another $350 million annually for vertical projects from expanded gambling, not to mention hundreds of millions from licensing fees.
Tony Leone, who runs the Pasfield House Inn, also owns some parking lots near the Department of Revenue that he rents to state employees. His lots will be subject to the new tax.
“This parking tax, this is unbelievable,” he said. “I pay property taxes. They’re heavy. I pay income tax on the income I get. But now they want to charge a tax per parking space. It’s not small.”
Under the new law, the tax is 9% on spaces that are rented by the month or by the year. If a person paid $60 a month to rent a parking space, the excise tax would add another $5.40 a month to the bill.
A tax of 6% is applied to spaces that are paid for on an hourly, daily or weekly basis.
There are a number of exemptions to the tax. Significantly, there is no tax on public spaces with on-street meters, nor parking lots and garages operated by cities, the federal government, state universities, counties and other units of local government.
Depending on the circumstances, parking may or may not be taxed at apartment complexes or at property rented to businesses. For example, if off-street parking is provided by a rental complex for tenants that is covered by a lease, it is exempt from the tax. Parking spaces owned by hospitals that are provided for their employees is also exempt.
The complexity of the tax is evidenced by Revenue providing example after example of when the tax applies and when it doesn’t in its proposed rules. One constant, though, is that if three or fewer spaces are involved, they are not taxed. An information bulletin that explains some of the ins and outs of the tax can be found on the Department of Revenue website: tax.illinois.gov.
While the proposed rules exempt municipal lots from the tax, Sen. Cristina Castro, D-Elgin, wants to take it a step further. She introduced a bill in late October that puts into law an exemption from the tax for municipal lots. The bill has not been assigned to a committee. Castro could not be reached for comment.
Butler said some other changes might need to be considered. He thinks parking lots at Regional Transportation Authority facilities that are used by commuters should be taxed.
“That is a potential huge source of income,” he said. “If we’re going to put the tax on mom and pop operations parking cars around the fairgrounds, we certainly need to look at the RTA.”