Editor's note: This article has been revised to correct errors in its initial published version regarding the identities of the judges whose cases were respectively reversed and affirmed in this case.
CHICAGO — A state appeals panel says a Chicago parking lot company can’t escape the city's tax collectors by claiming to be only the owner and not operator of several parking lots.
The Illinois First District Appellate Court issued an opinion in December, in consolidated actions pitting Chicago against Mid-City Parking and William Sommerfeld, Mid-City's president and responsible officer. After an audit, the city assessed more than $460,000 in unpaid taxes, interest and late fees on two of the eight lots Mid-City manages, as well as a separate assessment of more than $462,000 against Sommerfeld.
Mid-City protested its assessment, claiming it is not a parking lot operator as defined in city code, meaning it wasn’t required to collect and remit taxes on money it collected for the use of two lots.
Cook County Circuit Court Judge Daniel Kubasiak reversed the decision of the city's administrative law officer, overturning the tax assessments. The city then appealed.
In a separate proceeding, Sommerfeld said he wasn’t properly notified of his assessment. The administrative law officer agreed, but County Judge James McGing reversed that decision as “clearly erroneous,” prompting Sommerfeld’s appeal.
The two appeals in the related cases were consolidated by the appellate court.
Justice Cynthia Cobbs wrote the panel’s opinion. Justice James Fitzgerald Smith and Aurelia Pucinski concurred.
Records associated with the 2011 audit show Mid-City rented the lots on Broadway and Ohio streets to valet services, restaurants and other businesses. Mid-City didn’t dispute the amount assessed, only its tax liability. When the matter reached Kubasiak in 2016, he determined the city’s audit methodology was improper because it didn’t follow internal rules requiring a representative sample, instead of a single month.
Cobbs noted the panel’s review wasn’t focused on Kubasiak’s ruling, but the initial law officer’s decision. Cobbs said, at the hearing, “no evidence was presented to show that the rental income was not from parking.” Although the panel agreed with Mid-City’s position that the ordinance puts the ultimate liability for paying the tax on the person whose car occupies a space, Cobbs wrote the code “also imposes an obligation upon the ‘operator’ to collect and remit such taxes” to the city.
The payment, Cobbs continued, was between the renters and Mid-City, not the vehicle owners and the businesses that rented the lots. As such, Mid-City should’ve secured the taxes from its clients when collecting rent.
Regarding the nature of taxes subject to administrative hearings, Cobbs said city code is clear that a “protesting party bears the burden to then prove that the assessment is incorrect with evidence.” She further wrote Mid-City didn’t object to the city’s methodology while it was conducting the audit, nor did it produce additional records. The panel also said Mid-City waived its argument of a due process violation by failing to raise it in its initial written protest.
Cobbs said Sommerfeld was procedurally barred from challenging his personal assessment because the city hadn’t finished litigating its assessment against his business, noting that isn’t one of three defenses allowed under city code.
The panel also determined the city properly notified Sommerfeld of his assessment, even though it used express mail, rather than certified, and sent one notice to Mid-City’s business address instead of Sommerfeld’s business address at his home in suburban Western Springs.
“The city proffered a ‘track and confirm’ receipt” showing at least one notice was delivered, Cobbs wrote. She said the city satisified the law by sending a notice to a responsible officer at a business address, “which he provided on the taxpayer information form."
The panel reversed Kubasiak’s decision against the city of Chicago, and affirmed McGIng’s decision, against Sommerfeld.
Sommerfeld was represented by attorney Jeffrey Javors.
The city was represented by its Department of Law.