Oak Lawn seeks to close corporate transfer tax loophole

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Oak Lawn officials want to close a loophole in their property tax transfer tax, but they need voter approval.

Oak Lawn has had a property transfer tax for decades, but it was only recently that what they describe as a loophole allowed at least one commercial property to avoid paying the village a transfer tax of more than $250,000.

In general, the way the village tax is written, it only applies to the sale or transfer of properties by deed, both commercial and residential, said village manager Thomas Phelan.

Unlike the Illinois and Cook County transfer taxes, the Oak Lawn tax does not apply to the transfer of controlling interests in real estate, such as through the sale of shares of a corporation.

Such was the case when the Stony Creek Promenade development on the northwest corner of 111th and Cicero Avenue was sold in December. The 158,000 square foot mall has Mariano’s, TJ Maxx and HomeGoods as major tenants.

When MEPT Stony Creek LLC sold the mall to BCORE Stony Creek LLC, the seller paid transfer taxes to Illinois and Cook County, but not Oak Lawn, Phelan said.

Adam Metz, the village’s chief financial officer, estimates that the sale price of $51,571,000 would have generated $257,860 in revenue for the village.

Commercial properties, if not exempt, pay the same property transfer rate as residential property owners, $5 for every $1,000 of property assessment.

Metz and Phelan are unaware of other large corporate real estate sales similarly exempt from transfer tax.

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For example, when the Oak Lawn Commons mall at 95th and Pulaski Avenue was sold for about $76 million, the seller paid the village a transfer tax of $380,000, Metz said.

Revenue helps pay for a variety of services provided by the village, Phelan said. The village council wants to revise its ordinance to ensure that no further sales of large business property are exempt.

“I just think it’s long overdue,” village administrator James Pembroke said at a public hearing on Tuesday.

No member of the public spoke during the hearing. However, Oak Lawn residents must authorize the change by referendum.

The Village Council voted Aug. 16 to hold a binding referendum on the Nov. 8 ballot asking voters whether the Village should add a real estate transfer tax on the transfer of controlling interests in real estate entities owning property in Oak Lawn. The exact wording has yet to be decided.

“Generally the public needs to grasp the concept that they are paying the tax, but some corporations are not paying the tax,” Mayor Terry Vorderer said. “The wording has to be right.”

Kimberly Fornek is a freelance journalist for the Daily Southtown.

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