from Local Attorney, Michael H. Wasserman

Wednesday, April 9, 2008

City Council Bungled the Transfer Tax Rebate

Kudos to fellow lawyer / blogger Peter Olson for uncovering this nugget. He hit a home run on this one. I have been cry-giggling about it since I read his post last night Real Estate in Chicago: Chicago "CTA Portion" Transfer Tax Refund?

Yes, yes. City Transfer Tax increased effective April 1. Yes, yes, the City Council made a last minute switch so that Sellers are paying the increase, not buyers. Yes, yes, the revised tax declaration form may be the worst, most confused tax form ever. Yes, yes, in the short term many Buyers will be forced to pay the seller's share of the tax based on the contract language they agreed to months ago, before anyone ever considered the increase or the fee shift.

The absurdest cherry on top turns out to be the "CTA Portion Refund." Recall that refund, was proposed and passed as part of the original ordinance, in February, 2008, when the entire transfer tax was going to be borne by Purchasers. At that it made good political sense for the aldermen to jump onto Governor's populist "protect the seniors" bandwagon. They wouldn't have to pay for bus rides, or the tax increase to fund those rides (ok, transit worker pensions too).

But now, the tax increase will in almost all circumstances be paid for by sellers. If the seller is lucky enough to find a senior-citizen buyer (who will attest that they intend to live there for the first year after closing) and the purchase price is less than $250,000, that seller can apply for a refund of the new CTA portion.

Lets all say one that together to make sure we all get it: "Sell to a senior, get a tax refund".

What were those wacky aldermen thinking? Three possibilities:

  • Promote reverse ageism in the City by encouraging sellers to focus marketing efforts on seniors (to the detriment of young families and low income wage earners)
  • Encourage more seniors to move to Chicago to take advantage of free transit rides
  • Eliminate the tax revenue stream that was supposed to pay for all those free rides
Not surprisingly, my attempts to contact a couple of councilmen have gone unanswered. I'll follow up here if they do. In the mean time, I suppose we "in the trenches" are going to have to 'card" all the buyers when we are on the sale side, to see if we can recoup our seller's shares of those tax increases....