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Voters Reject Chicago’s Proposed ‘Mansion Tax’ for Residential and Commercial Properties

Date

April 3, 2024

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2 minutes

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Chicago will not be one of the handful of jurisdictions with a so-called “mansion tax.” On March 19, 2024, voters rejected a proposed change to the city’s real estate transfer tax that would have substantially increased the transfer tax on real estate acquisitions over $1 million.

Several states, counties, and municipalities have enacted similar real estate transfer taxes, but Chicago’s proposed “Bring Chicago Home” tax structure was unique in two notable ways. First, the tax would have been imposed on buyers of both residential and commercial properties. Second, the tax would have used a graduated approach with three different tiers. The new transfer tax would have imposed a 3.0% tax on property sales over $1.5 million – quadruple the current transfer tax rate.

The proposal had been litigated in the days before the March 19 vote, but days before the primary, the Illinois Supreme Court ruled that the proposed amendment could remain on the ballot.

The proposal, which was passed by the Chicago City Council and approved by Chicago mayor Brandon Johnson last year, aimed to provide funds to build affordable housing for Chicago’s unhoused. While homelessness remains a serious issue to be addressed, commercial real estate owners and developers consider the vote to be a significant victory. Commercial real estate experts predicted that the tax could have a chilling effect on an already struggling market, with commercial property transactions down 51% in the first half of 2023 compared to the same period in 2022. Industry experts also criticized the imposition of the tax on buyers, rather than sellers, of real estate.

For now, the transfer tax in Chicago remains $3.75 for each $500 of the purchase price (0.75% of the purchase price) for all buyers of real estate in Chicago. However, despite the loss, Mayor Johnson has vowed to keep fighting. It is unclear if future attempts will be made to revise the real estate transfer taxes or look for alternative sources of revenue.

Attorneys in LP’s Real Estate and Tax Planning Groups will continue to monitor any developments and provide updates as necessary. If you have any questions, please don’t hesitate to reach out.


Filed under: Real Estate, Tax Planning

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