Stahl v. Village of Hoffman Estates
Annotate this Case
Fourth Division
May 14, 1998
No. 1-97-3145
GARY STAHL AND CAROL STAHL, JAMES J. ) APPEAL FROM THE
FAUST, HARVEY SILVERBERG and SUSAN ) CIRCUIT COURT OF
SILVERBERG, ) COOK COUNTY.
)
Plaintiffs-Appellants, )
)
v. )
)
THE VILLAGE OF HOFFMAN ESTATES, an )
Illinois Municipal Corporation and )
DOUGLAS ELLSWORTH, Finance Director )
of the Village of Hoffman Estates, ) HONORABLE
) DOROTHY KINNAIRD,
Defendants-Appellees. ) JUDGE PRESIDING.
JUSTICE WOLFSON delivered the opinion of the court:
People who transfer title to real estate in the Village of
Hoffman Estates are required to pay a transfer tax. But, since
September 21, 1987, a grantor who lives on the property for a
year is exempted from paying the tax if he or she buys another
residence in the Village within a certain period of time.
The plaintiffs in this case--Gary and Carol Stahl, Harvey
and Susan Silverberg, and James Faust--have launched a wide
variety of constitutional attacks on the transfer tax and its
exemption. They claim violations of the United States
Constitution: the Commerce Clause, the Privileges and Immunities
Clause, the Due Process Clause, the Equal Protection Clause, and
the right to travel. They also contend the tax violates the
Illinois Constitution's uniformity of taxation and due process clauses.
1-97-3145
The trial court dismissed the plaintiffs' lawsuit against
the Village, finding no violations of the Federal or State
Constitutions. We agree with the trial court. We affirm.
FACTS
On September 21, 1987, the Village of Hoffman Estates
adopted ordinance 1884-1987:
"A tax is imposed on the privilege of transferring
title to real estate located within the corporate
limits of the Village as evidenced by the recordation
of a deed by any person and a tax is imposed on the
privilege of transferring the beneficial interest in
real estate located within the corporate limits of the
Village at the rate of One Dollar per One Thousand
Dollars of value for each transfer."
Under the ordinance, the grantor of a deed conveying Village
property would incur transfer tax liability. In 1990, the
Village raised this tax to $3 for every $1,000 valuation.
The ordinance also provided an exemption for:
"Transactions wherein one of the grantors has
continuously resided upon the property for the past one
year and has evidence of a contract for sale as a
purchaser for a residence within the Village, such
contract having closed within three months of the
exempt transaction or to close by contract within three
months after the exempt transaction."
2
The Village amended this exemption in 1993 to include
contracts closing six months before and after the exempt
transaction.
On June 5, 1992, Faust sold his home, moved to Hanover Park,
Illinois, and incurred a transfer tax liability of $606. On
December 20, 1993, the Stahls sold their home, moved to Crystal
Lake, Illinois, and incurred a transfer tax liability of $423.
On September 25, 1996, the Silverbergs sold their home, moved to
Collegeville, Pennsylvania, and incurred a transfer tax liability
of $444. Because they moved out of the Village after
transferring their property, none of the appellants received
resident exemptions, and all made their transfer tax payments.
On March 20, 1995, Faust filed this lawsuit against the
Village of Hoffman Estates to recover his allegedly
unconstitutional tax payments. On April 9, 1995, the Stahls
joined Faust's complaint; on November 19, 1995, the Silverbergs
joined Faust's complaint. The appellants' third amended
complaint requested legal and equitable relief from the Village's
"enforcement and collection of an unconstitutional real estate
transfer tax ***."
Specifically, this complaint alleged:
"*** [T]he Defendant Village of Hoffman Estates' real
estate transfer tax (i) violates the Commerce Clause,
the Privileges and Immunities Clause, and the Equal
Protection Clause of the United States Constitution;
(ii) violates Plaintiffs' due process rights under the
United States Constitution and Article I, Section II of
the Constitution of the State of Illinois; and (iii)
deprives Plaintiffs of their right to travel under the
United States Constitution. Through these violations
of Plaintiffs' civil rights under color of law,
Defendants have violated 42 U.S.C. 1983. Finally,
Defendant Village of Hoffman Estates' real estate
transfer tax does not uniformly tax the subjects and
objects of the tax in violation of Article IX, Section
2 of the Illinois Constitution."
Under the heading "COMMERCE CLAUSE," the complaint also alleged:
"The Village of Hoffman Estates Municipal Code, Article 13-5,
discriminates against interstate and intrastate commerce in
violation of Article I, 8 of the United States Constitution."
(Emphasis added.)
On October 16, 1995, the Village of Hoffman Estates adopted
ordinance 2768-1995, which said the exemption "shall be and is
hereby repealed." Both sides in this case believe the repeal
would not take effect unless the exemption were held invalid on
the final order of a court of competent jurisdiction. We do not
necessarily share that view, given the clear and specific words
of repeal, but there is no need to decide the question because
the answer would not affect the rights of the parties to this
appeal.
On April 16, 1997, the Village of Hoffman Estates filed a
motion to dismiss under section 2-615 of the Civil Practice Act.
See 735 ILCS 5/2-615(a) (West 1992). The trial court granted
this motion on July 19, 1997. The court found the appellants'
due process, equal protection, right to travel, and tax
uniformity claims foreclosed by Ball v. Village of Streamwood,
281 Ill. App. 3d 679, 665 N.E.2d 311 (1996). The court also
found the transfer tax had only an incidental effect on
interstate commerce and the tax did not deny the privileges or
immunities of Illinois residents to the appellants, who were
Illinois residents when they transferred their real estate. This
appeal followed.
DECISION
A motion to dismiss under section 2-615(a) of the Civil
Practice Act "tests the legal sufficiency of a pleading and a
court must accept all well-pleaded facts as true." Doe v.
Calumet City, 161 Ill. 2d 374, 381, 641 N.E.2d 498 (1994). On
appeal, the standard of review for a section 2-615 dismissal is
de novo. Hough v. Kalousek, 279 Ill. App. 3d 855, 665 N.E.2d 433
(1996).
The parties do not dispute the facts. The appellants
transferred property within the Village and moved out of the
Village. The appellants received no exemptions and paid their
transfer taxes under the ordinance. The question becomes: do
these undisputed facts give rise to the constitutional violations
alleged by the appellants?
Home rule municipalities retain the right to levy taxes.
Ill. Const. 1970, art. VII, 6(a). Home rule municipalities have
broad taxation powers and may exercise these powers unless
restricted by a constitutional provision or appropriate
legislation. Mulligan v. Dunne, 61 Ill. 2d 544, 338 N.E.2d 6
(1975). Home rule municipalities have authority to enact tax
ordinances for taxable events occurring within their territorial
limits. Forsberg v. City of Chicago, 151 Ill. App. 3d 354, 361,
502 N.E.2d 283 (1986). The Village of Hoffman Estates is a home
rule unit.
The appellants apparently attack both the transfer tax and
its resident exemption. But the transfer tax itself could not
offend any constitutional provisions: State and local governments
may impose real property taxes. A closer examination of the
appellants' contentions reveals they dispute only the resident
exemption. The appellants contend the transfer tax violates
assorted constitutional provisions because they sold their
property, relocated outside the Village, and thus did not receive
the resident exemption.
1. Commerce Clause
The Commerce Clause provides plenary power to Congress "[t]o
regulate Commerce among the several States" (U.S. Const., art. I,
8, cl. 3), and by implication imposes a limitation on State and
local regulation of interstate commerce (Oklahoma Tax Commission
v. Jefferson Lines, Inc., 514 U.S. 175, 179-80, 131 L. Ed. 2d 261, 268, 115 S. Ct. 1331, 1335 (1995)). See Gibbons v. Ogden,
22 U.S. (9 Wheat.) 1, 6 L. Ed. 2d 23 (1824)(per Marshall, C.J.).
In its "negative aspect" (Fulton Corp. v. Faulkner, 516 U.S. 325, 330, 133 L. Ed. 2d 796, 804, 116 S. Ct. 848, 853 (1996)),
the Commerce Clause prevents State or local governments from
engaging in economic isolationism by discriminating against out-
of-state business through regulation or taxation. C & A Carbone,
Inc. v. Clarkstown, 511 U.S. 383, 390, 128 L. Ed. 2d 399, 407,
114 S. Ct. 1677, 1682 (1994)(citing The Federalist No. 22 (A.
Hamilton) at 143-45 (C. Rossiter ed. 1961)).
Because the Commerce Clause presumes a national market for
Congress to regulate, a State or local government violates the
so-called dormant Commerce Clause by depriving out-of-state
business access to free trade in a local market. See Freeman v.
Hewit, 329 U.S. 249, 252, 91 L. Ed. 265, 272, 67 S. Ct. 274, 276
(1946).
The United States Supreme Court has formulated a two-stage
test for analyzing putative commerce clause violations.
First, the court must determine whether the State or local
regulation per se discriminates against interstate commerce. See
Fulton Corp., 516 U.S. at 331; C & A Carbone, 511 U.S. at 390.
"Discrimination" simply means differential treatment. Oregon
Waste Systems, Inc. v. Department of Environmental Quality, 511 U.S. 93, 99, 128 L. Ed. 2d 13, 21, 114 S. Ct. 1345, 1350 (1994).
"Once a state tax is found to discriminate against out-of-state
commerce, it is typically struck without further inquiry."
Chemical Waste Management, Inc. v. Hunt, 504 U.S. 334, 342, 119 L. Ed. 2d 121, 132, 112 S. Ct. 2009, 2014 (1992); National Paint
& Coatings, Inc. v. City of Chicago, 45 F.3d 1124, 1131 (7th Cir.
1995); DeHart v. Town of Austin, 39 F.3d 718, 723 (7th Cir.
1994). In other words, if the regulation fails the first stage,
our inquiry ends: the regulation violates the Constitution.
However, even if the regulation is not per se
discriminatory, it still faces the second stage. The court must
determine whether the State or local regulation imposes a burden
on interstate commerce which clearly outweighs its potential
benefits. See C & A Carbone, 511 U.S. at 390.
"If a legitimate local purpose is found, then the
question becomes one of degree. And the extent of the
burden that will be tolerated will of course depend on
the nature of the local interest involved and on
whether it could be promoted as well with a lesser
impact on interstate activities." Pike v. Bruce
Church, Inc., 397 U.S. 137, 142, 25 L. Ed. 2d 174, 178,
90 S. Ct. 844, 847 (1970).
The appellants concede the exemption does not substantially
burden interstate commerce. Instead, they rely on their claim
that the exemption facially, or per se, discriminates against
interstate commerce. Thus, we do not address the second stage of
the commerce clause test.
To support their per se discrimination argument, the
appellants rely on Oregon Waste and Chemical Waste. In Oregon
Waste and Chemical Waste, the Court invalidated state fees
imposed disproportionately on out-of-state solid waste. Here,
the Village's property tax exemption does not disproportionately
burden nonresidents. In fact, the exemption does not distinguish
between residents of Hoffman Estates, Illinois and residents of
another State. Instead, it segregates Hoffman Estates residents
who sell their homes and choose to repurchase a home in the
Village from Hoffman Estates residents who choose to sell their
homes and then purchase homes anywhere else.
Oregon Waste and Chemical Waste do not address property
taxes, although "[a] tax on real estate *** may impermissibly
burden interstate commerce." Camps Newfound/Owantonna, Inc. v.
Town of Harrison, ___ U.S. ___, ___, 137 L. Ed. 2d 852, 864, 117 S. Ct. 1590, 1597 (1997). In Camps Newfound, Maine's property
tax exemptions did not apply to charitable organizations
primarily serving out-of-state patrons. A summer camp provided
its services to mostly out-of-state campers, and thus did not
receive the exemption.
In invalidating these exemptions, the Court held a State
could not impose property taxes, or provide property tax
exemptions, in a manner that discriminated against interstate
commerce. Camps Newfound, ___ U.S. at ___, 137 L. Ed. 2d at 864,
117 S. Ct. at 1597. The Court found the exemptions benefited in-
state charities catering to in-state patrons and burdened in-
state charities catering to out-of-state persons. ___ U.S. at
___, 137 L. Ed. 2d at 864, 117 S. Ct. at 1598.
However, in Camps Newfound, the Court did not say real
estate was an article of interstate commerce. Instead, the Court
focused on the interstate commerce "product"--the service
provided by the summer camp--regardless of the mechanism for
burdening it. Camps Newfound, ___ U.S. at ___, 137 L. Ed. 2d at
865, 117 S. Ct. at 1598. In our case, the product--real estate
itself--cannot travel in interstate commerce.
"It is now well established *** that a State [or
municipality] may tax the owner of property 'having a
situs within its limits, whether [the property is]
employed in interstate commerce or not ***' [citation],
and whether the owner is a resident or not." Philco
Corp. v. Department of Revenue, 40 Ill. 2d 312, 322,
239 N.E.2d 805 (1968)(citing Helson v. Kentucky, 279 U.S. 245, 73 L. Ed. 2d 683, 49 S. Ct. 279 (1928);
Pullman's Palace Car Co. v. Pennsylvania, 141 U.S. 18,
35 L. Ed. 2d 613, 11 S. Ct. 846 (1891)).
See also 15 C.J.S. Commerce 103 ("The commerce clause *** does
not preclude the imposition by a state or municipality thereof of
property taxes on property of persons or corporations engaged in
interstate *** commerce, where such property has a taxable situs
within the borders of the taxing state.")
This court has held:
"[A] tax on an event occurring within the taxing body
is not a prohibited tax on interstate commerce.
[Citation.] A tax is valid upon things which are at
rest within the taxing body, notwithstanding the fact
that they might have been involved in interstate
transit before or after that time." Forsberg, 151 Ill.
App. 3d at 366.
In enacting the transfer tax, the Village merely exercised
its sovereign power to assess taxes against real property within
its jurisdiction. Here, the taxable event--the transfer of real
property--occurred entirely within the Village, and the transfer
tax itself applies only to residents. Unlike the in-state
businesses in Camps Newfound, the appellants do not complain that
some interstate commerce activity increased their tax burden.
The appellants also rely on C & A Carbone. In C & A
Carbone, an in-state solid waste processing company attempted to
move waste out of state for processing. A municipality blocked
this transfer under an ordinance which required any solid waste,
whether generated in-state or out-of-state, to be processed at a
local facility. The company challenged the ordinance, and the
Court invalidated it as per se discriminatory. C & A Carbone,
511 U.S. at 394.
The "local processing" cases like C & A Carbone stand for
the proposition that local goverments cannot burden interstate
commerce by regulations which geographically funnel in-state and
out-of-state demand for goods and services toward an in-state
supply. But our case differs from C & A Carbone and its
predecessors in an important respect.
Unlike the company in C & A Carbone, the appellants here
were not engaged in interstate commerce. Instead, the appellants
sold real estate with a taxable situs in the Village and incurred
the Village's property tax while they were Village residents.
The appellants simply cannot raise the Commerce Clause as a
constitutional ground for relief. See Ball, 281 Ill. App. 3d at
687 ("In order to have standing to raise a constitutional issue,
a plaintiff must bring himself within the class of persons to
whom the law is objectionable.")
Additionally, "the class protected by the commerce clause is
competitors, not consumers." (Emphasis in original.) Geja's
Cafe v. Metropolitan Pier & Exposition Authority, 153 Ill. 2d 239, 256, 606 N.E.2d 1212 (1992). "[T]he rationale of the
commerce clause was to create and foster the development of a
common market among the states, eradicating internal trade
barriers, and prohibiting the economic Balkanization of the
Union." 2 R. Rotunda & J. Nowak, Treatise on Constitutional Law
11.1, at 4 (2d ed. 1992).
In other words, the so-called dormant Commerce Clause seeks
to tear down State and local regulations which "discriminate
against" nonresidents. Terry v. Metropolitan Pier & Exposition
Authority. (Emphasis added.) 271 Ill. App. 3d 446, 455, 648 N.E.2d 1047 (1995). The Commerce Clause was not intended to
provide benefits to people or businesses who choose to move from
state to state.
The ordinance, with its exemption, does not impose a tax on
people who leave the Village. It rewards the people who stay.
In that way the Village promotes stability and continuity. That
is a legitimate local purpose. People make decisions about where
they want to live. We do not see how the decision to leave
Hoffman Estates, foregoing a tax exemption, can be said to offend
the Commerce Clause.
The Hoffman Estates' property tax exemption is not per se
discriminatory. The Hoffman Estates real estate transfer tax, as
applied to the appellants, does not violate the Commerce Clause.
2. Privileges and Immunities Clause
The Privileges and Immunities Clause provides that "the
Citizens of each State shall be entitled to all Privileges and
Immunities of Citizens in the several States." U.S. Const., art.
IV, 2. The Privileges and Immunities Clause bars:
"*** discrimination against citizens of other States
where there is no substantial reason for the
discrimination beyond the mere fact that they are
citizens of other states." Toomer v. Witsell, 334 U.S. 385, 396, 92 L. Ed. 1460, 1471, 68 S. Ct. 1156, 1162
(1948).
This constitutional protection extends to the right of
nonresidents "to carry on business in another [State] without
being subjected in property or person to taxes more onerous" than
residents. Shaffer v. Carter, 252 U.S. 37, 56, 64 L. Ed. 445,
458, 40 S. Ct. 221, 227 (1920). But it does not preclude taxes
which burden residents and nonresidents equally. Lunding v. N.Y.
Tax Appeals Tribunal, ___ U.S. ___, ___, 139 L. Ed. 2d 717, 729,
118 S. Ct. 766, 774 (1998).
Here, the transfer tax operates equally on nonresidents and
residents who chose to move out of the Village after selling
their property. Additionally, all of the appellants were Village
(and therefore Illinois) residents when they transferred their
property and incurred the tax. The Hoffman Estates transfer tax
does not violate the Privileges and Immunities Clause.
3. Plaintiffs' Other Constitutional Challenges
The appellants have brought a section 1983 claim for an
alleged violation of the uniformity and due process clauses of
the Illinois constitution. However, section 1983 provides a
vehicle for vindicating Federal constitutional and statutory
rights, not State rights, deprived under color of State law.
More importantly, the trial court correctly dismissed the
appellants' other constitutional claims pursuant to the recent
First District decision in Ball, 281 Ill. App. 3d 679.
In Ball, this court addressed multiple constitutional
challenges to an ordinance identical to the transfer tax
ordinance here. The taxpayers challenged the ordinance as
violative of the right to travel and the rights to uniformity,
equal protection, and due process. This court soundly rejected
these constitutional arguments, noting Streamwood's transfer tax
bore a reasonable relationship to the legitimate interest in
local neighborhood preservation, continuity, and stability.
Ball, 281 Ill. App. 3d at 684-85.
The appellants have presented no convincing arguments why
our decision on an identical ordinance should differ two years
after Ball. The Hoffman Estates transfer tax does not violate
the right to travel and the rights to uniformity, equal
protection, and due process.
CONCLUSION
The Hoffman Estates real estate transfer tax and the
exemption, as applied to the appellants, comports with Federal
and State constitutional provisions.
AFFIRMED.
McNAMARA and SOUTH, JJ., concur.
May 14, 1998
No. 1-97-3145
GARY STAHL AND CAROL STAHL, JAMES J. ) APPEAL FROM THE
FAUST, HARVEY SILVERBERG and SUSAN ) CIRCUIT COURT OF
SILVERBERG, ) COOK COUNTY.
)
Plaintiffs-Appellants, )
)
v. )
)
THE VILLAGE OF HOFFMAN ESTATES, an )
Illinois Municipal Corporation and )
DOUGLAS ELLSWORTH, Finance Director )
of the Village of Hoffman Estates, ) HONORABLE
) DOROTHY KINNAIRD,
Defendants-Appellees. ) JUDGE PRESIDING.
JUSTICE WOLFSON delivered the opinion of the court:
People who transfer title to real estate in the Village of
Hoffman Estates are required to pay a transfer tax. But, since
September 21, 1987, a grantor who lives on the property for a
year is exempted from paying the tax if he or she buys another
residence in the Village within a certain period of time.
The plaintiffs in this case--Gary and Carol Stahl, Harvey
and Susan Silverberg, and James Faust--have launched a wide
variety of constitutional attacks on the transfer tax and its
exemption. They claim violations of the United States
Constitution: the Commerce Clause, the Privileges and Immunities
Clause, the Due Process Clause, the Equal Protection Clause, and
the right to travel. They also contend the tax violates the
Illinois Constitution's uniformity of taxation and due process clauses.
1-97-3145
The trial court dismissed the plaintiffs' lawsuit against
the Village, finding no violations of the Federal or State
Constitutions. We agree with the trial court. We affirm.
FACTS
On September 21, 1987, the Village of Hoffman Estates
adopted ordinance 1884-1987:
"A tax is imposed on the privilege of transferring
title to real estate located within the corporate
limits of the Village as evidenced by the recordation
of a deed by any person and a tax is imposed on the
privilege of transferring the beneficial interest in
real estate located within the corporate limits of the
Village at the rate of One Dollar per One Thousand
Dollars of value for each transfer."
Under the ordinance, the grantor of a deed conveying Village
property would incur transfer tax liability. In 1990, the
Village raised this tax to $3 for every $1,000 valuation.
The ordinance also provided an exemption for:
"Transactions wherein one of the grantors has
continuously resided upon the property for the past one
year and has evidence of a contract for sale as a
purchaser for a residence within the Village, such
contract having closed within three months of the
exempt transaction or to close by contract within three
months after the exempt transaction."
2
The Village amended this exemption in 1993 to include
contracts closing six months before and after the exempt
transaction.
On June 5, 1992, Faust sold his home, moved to Hanover Park,
Illinois, and incurred a transfer tax liability of $606. On
December 20, 1993, the Stahls sold their home, moved to Crystal
Lake, Illinois, and incurred a transfer tax liability of $423.
On September 25, 1996, the Silverbergs sold their home, moved to
Collegeville, Pennsylvania, and incurred a transfer tax liability
of $444. Because they moved out of the Village after
transferring their property, none of the appellants received
resident exemptions, and all made their transfer tax payments.
On March 20, 1995, Faust filed this lawsuit against the
Village of Hoffman Estates to recover his allegedly
unconstitutional tax payments. On April 9, 1995, the Stahls
joined Faust's complaint; on November 19, 1995, the Silverbergs
joined Faust's complaint. The appellants' third amended
complaint requested legal and equitable relief from the Village's
"enforcement and collection of an unconstitutional real estate
transfer tax ***."
Specifically, this complaint alleged:
"*** [T]he Defendant Village of Hoffman Estates' real
estate transfer tax (i) violates the Commerce Clause,
the Privileges and Immunities Clause, and the Equal
Protection Clause of the United States Constitution;
(ii) violates Plaintiffs' due process rights under the
United States Constitution and Article I, Section II of
the Constitution of the State of Illinois; and (iii)
deprives Plaintiffs of their right to travel under the
United States Constitution. Through these violations
of Plaintiffs' civil rights under color of law,
Defendants have violated 42 U.S.C. 1983. Finally,
Defendant Village of Hoffman Estates' real estate
transfer tax does not uniformly tax the subjects and
objects of the tax in violation of Article IX, Section
2 of the Illinois Constitution."
Under the heading "COMMERCE CLAUSE," the complaint also alleged:
"The Village of Hoffman Estates Municipal Code, Article 13-5,
discriminates against interstate and intrastate commerce in
violation of Article I, 8 of the United States Constitution."
(Emphasis added.)
On October 16, 1995, the Village of Hoffman Estates adopted
ordinance 2768-1995, which said the exemption "shall be and is
hereby repealed." Both sides in this case believe the repeal
would not take effect unless the exemption were held invalid on
the final order of a court of competent jurisdiction. We do not
necessarily share that view, given the clear and specific words
of repeal, but there is no need to decide the question because
the answer would not affect the rights of the parties to this
appeal.
On April 16, 1997, the Village of Hoffman Estates filed a
motion to dismiss under section 2-615 of the Civil Practice Act.
See 735 ILCS 5/2-615(a) (West 1992). The trial court granted
this motion on July 19, 1997. The court found the appellants'
due process, equal protection, right to travel, and tax
uniformity claims foreclosed by Ball v. Village of Streamwood,
281 Ill. App. 3d 679, 665 N.E.2d 311 (1996). The court also
found the transfer tax had only an incidental effect on
interstate commerce and the tax did not deny the privileges or
immunities of Illinois residents to the appellants, who were
Illinois residents when they transferred their real estate. This
appeal followed.
DECISION
A motion to dismiss under section 2-615(a) of the Civil
Practice Act "tests the legal sufficiency of a pleading and a
court must accept all well-pleaded facts as true." Doe v.
Calumet City, 161 Ill. 2d 374, 381, 641 N.E.2d 498 (1994). On
appeal, the standard of review for a section 2-615 dismissal is
de novo. Hough v. Kalousek, 279 Ill. App. 3d 855, 665 N.E.2d 433
(1996).
The parties do not dispute the facts. The appellants
transferred property within the Village and moved out of the
Village. The appellants received no exemptions and paid their
transfer taxes under the ordinance. The question becomes: do
these undisputed facts give rise to the constitutional violations
alleged by the appellants?
Home rule municipalities retain the right to levy taxes.
Ill. Const. 1970, art. VII, 6(a). Home rule municipalities have
broad taxation powers and may exercise these powers unless
restricted by a constitutional provision or appropriate
legislation. Mulligan v. Dunne, 61 Ill. 2d 544, 338 N.E.2d 6
(1975). Home rule municipalities have authority to enact tax
ordinances for taxable events occurring within their territorial
limits. Forsberg v. City of Chicago, 151 Ill. App. 3d 354, 361,
502 N.E.2d 283 (1986). The Village of Hoffman Estates is a home
rule unit.
The appellants apparently attack both the transfer tax and
its resident exemption. But the transfer tax itself could not
offend any constitutional provisions: State and local governments
may impose real property taxes. A closer examination of the
appellants' contentions reveals they dispute only the resident
exemption. The appellants contend the transfer tax violates
assorted constitutional provisions because they sold their
property, relocated outside the Village, and thus did not receive
the resident exemption.
1. Commerce Clause
The Commerce Clause provides plenary power to Congress "[t]o
regulate Commerce among the several States" (U.S. Const., art. I,
8, cl. 3), and by implication imposes a limitation on State and
local regulation of interstate commerce (Oklahoma Tax Commission
v. Jefferson Lines, Inc., 514 U.S. 175, 179-80, 131 L. Ed. 2d 261, 268, 115 S. Ct. 1331, 1335 (1995)). See Gibbons v. Ogden,
22 U.S. (9 Wheat.) 1, 6 L. Ed. 2d 23 (1824)(per Marshall, C.J.).
In its "negative aspect" (Fulton Corp. v. Faulkner, 516 U.S. 325, 330, 133 L. Ed. 2d 796, 804, 116 S. Ct. 848, 853 (1996)),
the Commerce Clause prevents State or local governments from
engaging in economic isolationism by discriminating against out-
of-state business through regulation or taxation. C & A Carbone,
Inc. v. Clarkstown, 511 U.S. 383, 390, 128 L. Ed. 2d 399, 407,
114 S. Ct. 1677, 1682 (1994)(citing The Federalist No. 22 (A.
Hamilton) at 143-45 (C. Rossiter ed. 1961)).
Because the Commerce Clause presumes a national market for
Congress to regulate, a State or local government violates the
so-called dormant Commerce Clause by depriving out-of-state
business access to free trade in a local market. See Freeman v.
Hewit, 329 U.S. 249, 252, 91 L. Ed. 265, 272, 67 S. Ct. 274, 276
(1946).
The United States Supreme Court has formulated a two-stage
test for analyzing putative commerce clause violations.
First, the court must determine whether the State or local
regulation per se discriminates against interstate commerce. See
Fulton Corp., 516 U.S. at 331; C & A Carbone, 511 U.S. at 390.
"Discrimination" simply means differential treatment. Oregon
Waste Systems, Inc. v. Department of Environmental Quality, 511 U.S. 93, 99, 128 L. Ed. 2d 13, 21, 114 S. Ct. 1345, 1350 (1994).
"Once a state tax is found to discriminate against out-of-state
commerce, it is typically struck without further inquiry."
Chemical Waste Management, Inc. v. Hunt, 504 U.S. 334, 342, 119 L. Ed. 2d 121, 132, 112 S. Ct. 2009, 2014 (1992); National Paint
& Coatings, Inc. v. City of Chicago, 45 F.3d 1124, 1131 (7th Cir.
1995); DeHart v. Town of Austin, 39 F.3d 718, 723 (7th Cir.
1994). In other words, if the regulation fails the first stage,
our inquiry ends: the regulation violates the Constitution.
However, even if the regulation is not per se
discriminatory, it still faces the second stage. The court must
determine whether the State or local regulation imposes a burden
on interstate commerce which clearly outweighs its potential
benefits. See C & A Carbone, 511 U.S. at 390.
"If a legitimate local purpose is found, then the
question becomes one of degree. And the extent of the
burden that will be tolerated will of course depend on
the nature of the local interest involved and on
whether it could be promoted as well with a lesser
impact on interstate activities." Pike v. Bruce
Church, Inc., 397 U.S. 137, 142, 25 L. Ed. 2d 174, 178,
90 S. Ct. 844, 847 (1970).
The appellants concede the exemption does not substantially
burden interstate commerce. Instead, they rely on their claim
that the exemption facially, or per se, discriminates against
interstate commerce. Thus, we do not address the second stage of
the commerce clause test.
To support their per se discrimination argument, the
appellants rely on Oregon Waste and Chemical Waste. In Oregon
Waste and Chemical Waste, the Court invalidated state fees
imposed disproportionately on out-of-state solid waste. Here,
the Village's property tax exemption does not disproportionately
burden nonresidents. In fact, the exemption does not distinguish
between residents of Hoffman Estates, Illinois and residents of
another State. Instead, it segregates Hoffman Estates residents
who sell their homes and choose to repurchase a home in the
Village from Hoffman Estates residents who choose to sell their
homes and then purchase homes anywhere else.
Oregon Waste and Chemical Waste do not address property
taxes, although "[a] tax on real estate *** may impermissibly
burden interstate commerce." Camps Newfound/Owantonna, Inc. v.
Town of Harrison, ___ U.S. ___, ___, 137 L. Ed. 2d 852, 864, 117 S. Ct. 1590, 1597 (1997). In Camps Newfound, Maine's property
tax exemptions did not apply to charitable organizations
primarily serving out-of-state patrons. A summer camp provided
its services to mostly out-of-state campers, and thus did not
receive the exemption.
In invalidating these exemptions, the Court held a State
could not impose property taxes, or provide property tax
exemptions, in a manner that discriminated against interstate
commerce. Camps Newfound, ___ U.S. at ___, 137 L. Ed. 2d at 864,
117 S. Ct. at 1597. The Court found the exemptions benefited in-
state charities catering to in-state patrons and burdened in-
state charities catering to out-of-state persons. ___ U.S. at
___, 137 L. Ed. 2d at 864, 117 S. Ct. at 1598.
However, in Camps Newfound, the Court did not say real
estate was an article of interstate commerce. Instead, the Court
focused on the interstate commerce "product"--the service
provided by the summer camp--regardless of the mechanism for
burdening it. Camps Newfound, ___ U.S. at ___, 137 L. Ed. 2d at
865, 117 S. Ct. at 1598. In our case, the product--real estate
itself--cannot travel in interstate commerce.
"It is now well established *** that a State [or
municipality] may tax the owner of property 'having a
situs within its limits, whether [the property is]
employed in interstate commerce or not ***' [citation],
and whether the owner is a resident or not." Philco
Corp. v. Department of Revenue, 40 Ill. 2d 312, 322,
239 N.E.2d 805 (1968)(citing Helson v. Kentucky, 279 U.S. 245, 73 L. Ed. 2d 683, 49 S. Ct. 279 (1928);
Pullman's Palace Car Co. v. Pennsylvania, 141 U.S. 18,
35 L. Ed. 2d 613, 11 S. Ct. 846 (1891)).
See also 15 C.J.S. Commerce 103 ("The commerce clause *** does
not preclude the imposition by a state or municipality thereof of
property taxes on property of persons or corporations engaged in
interstate *** commerce, where such property has a taxable situs
within the borders of the taxing state.")
This court has held:
"[A] tax on an event occurring within the taxing body
is not a prohibited tax on interstate commerce.
[Citation.] A tax is valid upon things which are at
rest within the taxing body, notwithstanding the fact
that they might have been involved in interstate
transit before or after that time." Forsberg, 151 Ill.
App. 3d at 366.
In enacting the transfer tax, the Village merely exercised
its sovereign power to assess taxes against real property within
its jurisdiction. Here, the taxable event--the transfer of real
property--occurred entirely within the Village, and the transfer
tax itself applies only to residents. Unlike the in-state
businesses in Camps Newfound, the appellants do not complain that
some interstate commerce activity increased their tax burden.
The appellants also rely on C & A Carbone. In C & A
Carbone, an in-state solid waste processing company attempted to
move waste out of state for processing. A municipality blocked
this transfer under an ordinance which required any solid waste,
whether generated in-state or out-of-state, to be processed at a
local facility. The company challenged the ordinance, and the
Court invalidated it as per se discriminatory. C & A Carbone,
511 U.S. at 394.
The "local processing" cases like C & A Carbone stand for
the proposition that local goverments cannot burden interstate
commerce by regulations which geographically funnel in-state and
out-of-state demand for goods and services toward an in-state
supply. But our case differs from C & A Carbone and its
predecessors in an important respect.
Unlike the company in C & A Carbone, the appellants here
were not engaged in interstate commerce. Instead, the appellants
sold real estate with a taxable situs in the Village and incurred
the Village's property tax while they were Village residents.
The appellants simply cannot raise the Commerce Clause as a
constitutional ground for relief. See Ball, 281 Ill. App. 3d at
687 ("In order to have standing to raise a constitutional issue,
a plaintiff must bring himself within the class of persons to
whom the law is objectionable.")
Additionally, "the class protected by the commerce clause is
competitors, not consumers." (Emphasis in original.) Geja's
Cafe v. Metropolitan Pier & Exposition Authority, 153 Ill. 2d 239, 256, 606 N.E.2d 1212 (1992). "[T]he rationale of the
commerce clause was to create and foster the development of a
common market among the states, eradicating internal trade
barriers, and prohibiting the economic Balkanization of the
Union." 2 R. Rotunda & J. Nowak, Treatise on Constitutional Law
11.1, at 4 (2d ed. 1992).
In other words, the so-called dormant Commerce Clause seeks
to tear down State and local regulations which "discriminate
against" nonresidents. Terry v. Metropolitan Pier & Exposition
Authority. (Emphasis added.) 271 Ill. App. 3d 446, 455, 648 N.E.2d 1047 (1995). The Commerce Clause was not intended to
provide benefits to people or businesses who choose to move from
state to state.
The ordinance, with its exemption, does not impose a tax on
people who leave the Village. It rewards the people who stay.
In that way the Village promotes stability and continuity. That
is a legitimate local purpose. People make decisions about where
they want to live. We do not see how the decision to leave
Hoffman Estates, foregoing a tax exemption, can be said to offend
the Commerce Clause.
The Hoffman Estates' property tax exemption is not per se
discriminatory. The Hoffman Estates real estate transfer tax, as
applied to the appellants, does not violate the Commerce Clause.
2. Privileges and Immunities Clause
The Privileges and Immunities Clause provides that "the
Citizens of each State shall be entitled to all Privileges and
Immunities of Citizens in the several States." U.S. Const., art.
IV, 2. The Privileges and Immunities Clause bars:
"*** discrimination against citizens of other States
where there is no substantial reason for the
discrimination beyond the mere fact that they are
citizens of other states." Toomer v. Witsell, 334 U.S. 385, 396, 92 L. Ed. 1460, 1471, 68 S. Ct. 1156, 1162
(1948).
This constitutional protection extends to the right of
nonresidents "to carry on business in another [State] without
being subjected in property or person to taxes more onerous" than
residents. Shaffer v. Carter, 252 U.S. 37, 56, 64 L. Ed. 445,
458, 40 S. Ct. 221, 227 (1920). But it does not preclude taxes
which burden residents and nonresidents equally. Lunding v. N.Y.
Tax Appeals Tribunal, ___ U.S. ___, ___, 139 L. Ed. 2d 717, 729,
118 S. Ct. 766, 774 (1998).
Here, the transfer tax operates equally on nonresidents and
residents who chose to move out of the Village after selling
their property. Additionally, all of the appellants were Village
(and therefore Illinois) residents when they transferred their
property and incurred the tax. The Hoffman Estates transfer tax
does not violate the Privileges and Immunities Clause.
3. Plaintiffs' Other Constitutional Challenges
The appellants have brought a section 1983 claim for an
alleged violation of the uniformity and due process clauses of
the Illinois constitution. However, section 1983 provides a
vehicle for vindicating Federal constitutional and statutory
rights, not State rights, deprived under color of State law.
More importantly, the trial court correctly dismissed the
appellants' other constitutional claims pursuant to the recent
First District decision in Ball, 281 Ill. App. 3d 679.
In Ball, this court addressed multiple constitutional
challenges to an ordinance identical to the transfer tax
ordinance here. The taxpayers challenged the ordinance as
violative of the right to travel and the rights to uniformity,
equal protection, and due process. This court soundly rejected
these constitutional arguments, noting Streamwood's transfer tax
bore a reasonable relationship to the legitimate interest in
local neighborhood preservation, continuity, and stability.
Ball, 281 Ill. App. 3d at 684-85.
The appellants have presented no convincing arguments why
our decision on an identical ordinance should differ two years
after Ball. The Hoffman Estates transfer tax does not violate
the right to travel and the rights to uniformity, equal
protection, and due process.
CONCLUSION
The Hoffman Estates real estate transfer tax and the
exemption, as applied to the appellants, comports with Federal
and State constitutional provisions.
AFFIRMED.
McNAMARA and SOUTH, JJ., concur.
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