United States: Chicago City Council Approves Budget Significantly Raising Property Taxes

On October 28, 2015, the Chicago City Council approved Mayor Rahm Emanuel's spending plan and proposed revenue package for the 2016 fiscal year that runs from January 1 through December 31, 2016.1 The $7.84 billion budget provides a substantial increase in property taxes and "revenue enhancements" that include new or increased fees on rideshare providers and taxis, a solid waste removal fee, a tax on e-cigarettes and increases to numerous building permit fees.2 Also, the budget amends the city's personal property lease transaction tax and amusement tax that apply to certain cloud computing transactions.3

Property Tax Increase

In his budget proposal, Mayor Emanuel cited raising city property taxes as a "last resort" to emphasize the severity of the pension challenges the city faces.4 In a 36-14 vote, the City Council followed the lead of the Mayor and swiftly approved a historic property tax increase of $543 million that will be phased in over four years. There has been no significant increase in the Chicago property tax since 2008.5 The plan frontloads much of the revenue estimated to be generated by the city, with a planned tax increase of $318 million in 2015, $109 million in 2016, $53 million in 2017 and $63 million in 2018.6 Increased property taxes will be used to cover state-mandated increases to the pension funds of city police and firefighters.7 However, the budget does not address pension funds for municipal workers and laborers, which issue is the subject of litigation set for oral argument in the Illinois Supreme Court on November 17, 2015.8 Also included is a $45 million property tax increase which will benefit Chicago Public Schools' capital projects.9

As a means to ameliorate some of the property tax increase for lower-valued properties, Mayor Emanuel is urging the Illinois legislature to enact legislation that would expand the homeowners' exemption so that homes valued at $250,000 or less would not be subject to the property tax increase.10 However, this legislation would require action by the legislature as well as approval by the governor, an outcome that currently is uncertain on both fronts. As an alternative to state legislation, Chicago could consider fashioning a targeted rebate program in order to provide relief to low-income and senior households.

Additional Taxes and Fees

The budget includes revenue enhancements that are projected to produce over $125 million in revenue for the city.11 Under these provisions, various fees on rideshare providers and taxis are imposed or increased.12 Also, a monthly solid waste removal fee of $9.50 will be imposed on over 600,000 residents that receive waste removal collection from the city.13 Furthermore, Chicago will become the first major city in the United States to tax e-cigarettes.14 Specifically, a tax is imposed on the retail sale of liquid nicotine products in the city at a rate of $1.25 per product unit, plus an additional $.025 per fluid milliliter of consumable liquid, gel or other solution contained in the product.15 Also, numerous building permit fees have been increased.16

Cloud Computing Tax

On June 9, 2015, the Chicago Department of Finance issued two rulings that expanded the city's ability to tax cloud-based products and services.17 First, an amusement tax ruling extended the tax to electronically delivered entertainment.18 Also, a personal property lease transaction tax (lease tax) ruling extended the tax to certain specified computer products and services.19 Both tax rulings originally were effective July 1, 2015, but the Department agreed to limit the effect of the rulings to periods on and after September 1, 2015 to allow businesses sufficient time to make required system changes.20 However, on August 7, 2015, the city announced that it would postpone the effective date of the lease tax ruling from September 1, 2015 to January 1, 2016. Effective January 1, 2015, the amusement tax and lease tax both are imposed at a rate of 9 percent.21

The budget includes amendments to the lease tax.22 An exemption from the tax is provided for nonpossessory computer leases of small new businesses (those with less than $25 million in annual sales and that have been in operation for fewer than 60 months).23 Also, the tax rate is reduced from 9 percent to 5.25 percent for the nonpossessory lease of a computer primarily for the purpose of allowing a customer to use the provider's computer and software to input, modify or retrieve data or information that is supplied by the customer.24 In the case of a nonpossessory computer lease where the user accesses the provider's computer from a mobile device, the rules provided in the Illinois Mobile Telecommunications Sourcing Conformity Act25 may be used to determine which customers and charges are subject to the tax.26 If these rules indicate that the tax applies, it is presumed that the tax applies unless the contrary is established by books, records or other documentary evidence.

The amusement tax also has been amended.27 In the case of amusements that are delivered electronically to mobile devices, as in the case of video streaming, audio streaming and online games, the rules provided by the Illinois Mobile Telecommunications Sourcing Conformity Act28 may be used to determine which customers and charges are subject to the tax. Similar to the amendment to the lease tax, if these rules indicate that the tax applies, it is presumed that the tax applies unless the contrary is established by books, records or other documentary evidence.


The 2016 budget is designed to address Chicago's substantial pension liability. Although Mayor Emanuel's budget included a historic property tax hike as well as other tax and fee increases, the Chicago City Council approved the budget by a large margin due to the city's severe financial situation. The budget followed feedback received in conferences initiated by Mayor Emanuel with city aldermen and residents as well as three town hall meetings held throughout August and September. As a result of the large pension liabilities, credit agencies have reduced the ratings of Chicago's bonds. This increases the interest that must be paid when Chicago borrows money. Due to the fact that the state of Illinois also has its own substantial unfunded pension liability and has been operating without a budget since July 1, 2015, Chicago is unlikely to receive any assistance from the state.

The cloud computing taxes have received considerable attention as well as criticism from the business community. As noted above, the lease transaction tax on cloud computing transactions was previously delayed to January 1, 2016. The amendments made to the lease transaction tax provide some relief by exempting small new businesses and lowering the tax rate for data provided by the customer. Also, the amendments to the sourcing provisions of both the amusement and lease taxes conform to the rulings issued by the Department of Finance. The amendment to the amusement tax also is designed to conform the municipal code to the ruling by specifically referencing video streaming, audio streaming and online games. Undoubtedly, further guidance will be issued concerning the imposition of these taxes to cloud computing transactions.


1 City of Chicago 2016 Budget Overview, Chicago Mayor Rahm Emanuel.

2 Chicago Ordinance SO2015-7403, approved by Mayor Rahm Emanuel on Nov. 2, 2015.

3 Id.

4 Chicago Mayor Rahm Emanuel's 2016 Budget Address, Sep. 22, 2015.

5 City of Chicago FY 2016 Proposed Budget: Analysis and Recommendations, Civic Federation, p. 7. However, the Civic Federation notes that the city has increased the tax to widen its umbrella to cover expiring tax increment financing (TIF) and new property since FY 2011.

6 Chicago Mayor Rahm Emanuel's 2016 Budget Address, Sep. 22, 2015.

7 See Public Act 96-1495 (2010).

8 Jones v. Municipal Employees' Annuity and Benefit Fund of Chicago, Illinois Supreme Court, Nos. 119618, 119620, 119638, 119639, 119644.

9 Chicago Board of Education Resolution 15-0826-RS4; Chicago Ordinance SO2015-7403, Art. X, § 1.

10 Chicago Mayor Rahm Emanuel's 2016 Budget Address, Sep. 22, 2015.

11 City of Chicago 2016 Budget Overview, p. 17; Chicago Ordinance SO2015-7403.

12 City of Chicago 2016 Budget Overview, p. 25; Chicago Mun. Code §§ 3-46-020; 3-46-030; 3-46- 065; 9-112-150; 9-112-230; 9-112-430; 9-112-600; 9-115-140.

13 City of Chicago 2016 Budget Overview, p. 27; Chicago Mayor Rahm Emanuel's 2016 Budget Address, Sep. 22, 2015; Chicago Mun. Code § 7-28-235.

14 City of Chicago 2016 Budget Overview, p. 12; Chicago Mun. Code §§ 3-47-010--3-47-150.

15 Chicago Mun. Code § 3-47-030.

16 Chicago Mun. Code §§ 13-32-300; 13-32-310.

17 For further discussion of these taxes, see GT SALT Alert: Chicago Department of Finance Addresses Sales Taxation of Cloud Computing Transactions.

18 Amusement Tax Ruling #5, City of Chicago Department of Finance, June 9, 2015.

19 Personal Property Lease Transaction Tax Ruling #12, City of Chicago Department of Finance, June 9, 2015.

20 However, this does not release or otherwise affect the liability of any business that failed to comply with existing law prior to July 1, 2015.

21 On November 19, 2014, the City of Chicago raised the rate of the amusement tax and lease tax from 8 percent to 9 percent effective January 1, 2015. Chicago Mun. Code §§ 3-32-030(B); 4-156- 020(A).

22 Ordinance SO2015-7403.

23 Chicago Mun. Code § 3-32-050(A)(13).

24 Chicago Mun. Code § 3-32-030(B)(1).

25 35 ILL. COMP. STAT. 638.

26 Chicago Mun. Code § 3-32-020(I).

27 Chicago Mun. Code § 4-156-020(G)(1).

28 35 ILL. COMP. STAT. 638.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.