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Split appeals panel: Chicago Bears owe county $4M in delinquent amusement taxes

By Bethany Krajelis | Aug 7, 2014

The Chicago Bears owe slightly more than $4 million to the county in amusement taxes that the team didn’t properly pay on club-level seats and luxury suites, a split appeals panel held Wednesday.

In reversing a Cook County judge’s ruling, the majority of the First District Appellate Court affirmed the holding of an Administrative Law Judge, who in 2011 threw a flag on the team’s five-year-play of only paying the county’s amusement tax on the value of the premium seats, and not all of the amenities and privileges that come along with them.

“The absurdity of excluding the vast majority of ticket revenues from the amusement tax when the generation of those revenues is driven by fans' desire for the ‘privileges’ associated with premium seats renders the Bears' position untenable,” Justice Mary Anne Mason wrote for the majority.

The Bears, the opinion states, basically split the value of club seats and luxury suites sold between 2002 and 2007 between the “ticket price” and the “club privilege fee,” the latter of which covers amenities like access to the club, special parking privileges, a wider selection of food and the ability to purchase tickets before the general public, among others.

Because it characterized the amenities provided with its premium seats as “non-amusement services,” the Bears only paid Cook County’s 3 percent amusement tax on the listed “ticket price” and not on the “club privilege fee.”

The county’s department of revenue, however, argued that the amenities should be subject to the amusement tax because they are the reason why fans pay more for the club seats and luxury suites.

In 2011, the ALJ agreed, finding the word ‘amusement’ in the county ordinance was ambiguous and the amenities associated with premium seats should be included in amusement tax calculations because they were part of the “game day experience.”

The judge said club seats should be taxed on 100 percent of the ticket price and luxury seats should be taxed on 60 percent of the annual license fee since some non-amusement charges, like food, beverages and parking, were included in that price.

As such, the AJL said the Bears owed slightly more than $4 million in delinquent amusement taxes.

In 2012, Cook County Circuit Judge Margaret Ann Brennan reversed the ALJ’s decision, spurring the county’s successful appeal.

The majority of the First District agreed with the ALJ in its Wednesday opinion, which included a detailed breakdown of Solider Field’s seating and all the privileges that come with premium seats, including the fact there are "144 flat screen, high-definition televisions" and "two 20-foot jumbo screens" in the club lounge.

Although they affirmed the ALJ’s decision, the majority said it disagreed “that the word ‘amusement’ in the Ordinance is ambiguous or that we need to resort to the concept of the ‘game day experience’ touted by the Bears in their promotional materials in order to find the price paid by club seat ticket holders and luxury suite licensees taxable.”

The majority was made up of Mason and Justice Michael Hyman. Justice Aurelia Pucinski dissented.

Because "[t]he parties agree that a football game is an ‘amusement,’ the majority said "the only question is whether the prices paid for club seats and luxury suites constitute ‘admission fees or other charges paid for the privilege to enter witness or view such amusement.’”

The majority determined the answer to that question is rather simple: “fans who want to witness a Bears home game from a club seat or a luxury suite cannot get to a seat where they can watch the game without paying the price attendant to those seats. Thus, it is impossible to separate these other charges’ from the fee paid to enter the stadium.”

In her dissent, Pucinski said she believes “[t]axing the Bears for the club privilege fee which is separately stated on the face of the club seat tickets violates the ordinance.”

“[T]here is no requirement anywhere in the ordinance for any kind of permission from, or agreement with, the County, regarding setting the admission ticket prices that are separately stated on the face of the tickets,” she wrote. “I am unwilling to effectively rewrite the ordinance to say what the County wants it to say.”

Unlike the majority, Pucinski said the appellate court’s recent ruling in Stasko v. City of Chicago is distinguishable from this case.

That case dealt with a challenge brought by Bears’ season ticket holders over the city’s amusement tax on personal seat licenses (PSL), which allow license holders to buy a season ticket for a specific seat to home games.

Although a PSL isn’t needed to get into Solider Field, the court in Stasko determined that purchasing the license is “a prerequisite to viewing the game from a seat covered by a PSL” and as such, is subject to the city’s amusement tax.

The majority applied the reasoning of Stasko to reach its ruling, but Pucinski said Stasko is different than the case before panel because it focused on the city’s ordinance, which contains a definition a “special seating area’ and allows for the taxation of such an area.

“The County ordinance does not,” she wrote in her dissent, later adding, “The County has the example of the city ordinance if it wishes to tax the Bears for the special seating areas in Soldier Field, and it can amend the ordinance.”

Saying the “county amusement tax ordinance provides no guidance to the taxpayer,” Pucinski wrote that “when the County disagrees with the taxpayer’s application of the ordinance the County penalizes the taxpayer. This sort of ‘gotcha’ taxation should not be tolerated.”

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