Chi. Bears Football Club v. Cook Cnty. Dep't of Revenue

• Decision Date: 06 August 2014
• Docket Number: No. 1–12–2892.,1–12–2892.
• Citation: 16 N.E.3d 827
• Parties: CHICAGO BEARS FOOTBALL CLUB, Plaintiff–Appellee, v. The COOK COUNTY DEPARTMENT OF REVENUE, Defendant–Appellant.
• Court: United States Appellate Court of Illinois

16 N.E.3d 827

CHICAGO BEARS FOOTBALL CLUB, Plaintiff–Appellee

v.The COOK COUNTY DEPARTMENT OF REVENUE, Defendant–Appellant.

No. 1–12–2892.

Appellate Court of Illinois, First District, Third Division.

Aug. 6, 2014.

Anita M. Alvarez, State's Attorney, of Chicago (Patrick T. Driscoll, Jr., Cristin Duffy, and Alvin Portis, Assistant State's Attorneys, of counsel), for appellant.

Schiff Hardin, LLP, of Chicago (James P. Gaughan and Larry Jacobson, of counsel), for appellee.

OPINION

Justice MASON

delivered the judgment of the court, with opinion.

¶ 1 Section 74–392(a) of the Cook County Amusement Tax Ordinance imposes an “amusement tax” of “three percent of the admission fees or other charges paid for the privilege to enter, to witness or to view such amusement.” Cook County Ordinance No. 99–O–15, § 3 (approved Apr. 6, 1999). From February 2002 through April 2007, the Chicago Bears Football Club calculated and paid the amusement tax on the value of a seat for home football games, exclusive of other amenities available to the ticket holder and which are charged to the ticket holder as part of the ticket price. The Cook County department of revenue contends that the value of such amenities is subject to the amusement tax and issued an assessment charging the Bears with a tax deficiency. An administrative law judge (ALJ) agreed with the County and assessed delinquent amusement taxes and interest in the total amount of $4,135,184.68. On review in the circuit court, the administrative decision was reversed. We agree with the ALJ, reverse the circuit court and confirm the administrative decision.

¶ 2 BACKGROUND

¶ 3 The facts relevant to this dispute are largely stipulated.

¶ 4 All of the home games played by the Bears were played at the renovated Soldier Field during the tax periods at issue, with the exception of the 2002 season and two preseason games in 2003, which were played in Champaign, Illinois, while the stadium renovations were completed. Soldier Field has approximately 62,000 seats divided into three seating sections: regular seats, club level seats and luxury suites.

¶ 5 Regular seats are the majority of seats in Soldier Field. Regular seat tickets entitle each ticket holder to witness the football games. Regular ticket holders purchase food and beverages on concourses on the perimeter of the stadium or from vendors who periodically come to seating areas. Public restrooms are available for regular ticket holders. No other amenities are included in the ticket price.

¶ 6 The second seating section is located on the east side of Soldier Field and is comprised of approximately 8,600 seats called “club seats.” Club I ticket holders sit on the 50–yard line and receive one parking pass for every two season tickets. Club II ticket holders sit between the 40–and 5–yard lines and receive one parking pass for every three season tickets. Club III ticket holders sit between five-yard line and into the end zones and receive one parking pass for every four season tickets.

¶ 7 The holder of a club seat ticket is also entitled to a wide variety of privileges and amenities that are not included in the price of a regular ticket. These amenities include access to the “club lounge,” a heated and air conditioned enclosed lounge adjoining the club seats for use before, during and after a football game. The club lounge can only be accessed by individuals who hold seating privileges in the club seat sections or the luxury suites. Club seats cannot be accessed except through the club lounge.

¶ 8 The club lounge opens two hours prior to kickoff and remains open for approximately two hours after the game. The lounge has a buffet area, bar areas, better and more varied food options not available in the regular seating areas and restrooms available only to club or luxury suite ticket holders. Food and beverages are not included in the price of a club ticket. There are 144 flat screen, high-definition televisions in the club lounge that on game days carry both Bears games and other NFL games. There are also two 20–foot jumbo screens at either end of the lounge that broadcast the Bears game in progress. The club lounge has private seating areas that can be used on days of Bears' home games and other nongame days. It is not possible to view the entire field of play from the club lounge.

¶ 9 Holders of club seat tickets are entitled to the following additional amenities and privileges: year-round membership in a club that provides the exclusive right to purchase tickets to non-Bears game events at Soldier Field prior to sales to the general public; the ability to purchase tickets for playoff games before the general public; special parking privileges; exclusive invitations to autograph sessions and merchandise giveaways; free gameday programs and media guides; and invitations to appreciation events year-round.

¶ 10 The last seating area is comprised of 133 luxury suites, referred to by the Bears as “Executive Suites,” and a “Skyline Suite.” (The parties refer to both types of suites as “luxury suites.”) Executive Suites are located above the club seating section on the east side of Soldier Field. The suites are licensed for a period of years in a contract between the Bears and licensees who pay license fees annually. For the 2007 season, Executive Suite annual fees ranged from $72,720 to $300,000. Each suite contains a private enclosed area where the licensee of the suite is entitled to bring up to 20 guests. The suites have seating areas away from the field of play and a variety of amenities, including individual controls for heat and air conditioning, private bathrooms, high-definition televisions and space to consume food and drink. Windows in the Executive Suites open if desired. The sight lines of Executive Suites are comparable to the sight lines of certain of the regular seats on the 400 level of the west side of the stadium, which span the entire playing field. Seating in Executive Suites is tiered so that all guests can view the field while seated.

¶ 11 There is also a Skyline Suite. The Skyline Suite is shared among 183 licensees. The Skyline Suite license agreement provides that the licensee is granted: “(a) the non-exclusive license and privilege to use the Skyline Suite located in the Executive Suite Area of Soldier Field (‘Stadium’) * * * and (b) the exclusive license and privilege to use the Suite Spectator Seats in the Skyline Suite designated above (the ‘Spectator Seats').” Spectator Seats are located outside immediately below the Skyline Suite and can only be accessed by Skyline Suite licensees and their guests. Food and beverages are included as part of the Skyline Suite annual fee.

¶ 12 The luxury suite licenses include many other amenities and privileges not available to either regular or club seat ticket holders, including first option to use the luxury suite for most non-Bears events held at Soldier Field, travel arranged by the Bears for certain games outside Chicago, invitations to non-football-game events exclusively for licensees during the year, participation in game-day drawings for special prizes (such as autographed memorabilia), a certain number of free parking spaces, special recognition in Bears publications, better and wider selection of food for purchase and invitations to other appreciation events year-round. With the exception of the Skyline Suite, luxury suite licenses do not generally include food or beverages as part of the license fee.

¶ 13 Regular and club tickets have assigned seat numbers. Tickets for luxury suites state only the level area, the suite number and the ticket number, but do not have an assigned seat. On the face of club seat tickets, the Bears bifurcate the price between an amount for the “ticket price” and what is labeled the “club privilege fee.” The Bears assign the same ticket price to every club seat ticket regardless of whether the seat is on the 50–yard line or in the end zone; only the club privilege fee changes according to the location of the ticket—the better the location, the higher the club privilege fee. The Bears pay the amusement tax on the stated admission price, but not on the club privilege fee. Neither the luxury suite licenses nor the face of the admission tickets to luxury suites lists a value for either the seat or the privileges included with the ticket. Rather, the Bears internally assign a value to the seat portion of the ticket equal to the highest price for a regular seat (e.g. , $104 in 2007) and calculate the amusement tax on only that portion of the ticket.

¶ 14 Separate ticket prices for both the club seat and the luxury suites are listed in NFL box offices statements prepared pursuant to a revenue sharing agreement among NFL teams, which provides for league members to share a percentage of the admission fees for football games. In accordance with NFL rules, the ticket admission prices for luxury suites are set at the highest ticket price for the stadium. As reflected in box office statements prepared by the Bears for 2003 through 2007, club seats were valued at their face amounts, which, by way of example, were $235, $295 and $340 in 2007, while luxury suite seats were valued at $104. Karen Murphy, the Bears' treasurer, testified at the administrative hearing that despite the listing of the face amount of club seat tickets in the box office statements, the Bears actually used the “ticket price” (e.g ., $77.27) printed on the face of the ticket for purposes of revenue sharing.

¶ 15 The Bears produced two luxury suite contracts out of 133 contracts that also offer food and beverages as part of the license fee. The County's decision to impose the amusement tax on 60% of the annual license fee for luxury suites was based on the assumption that all luxury suite licenses included food and beverages, which are not subject to the amusement tax because they are tangible goods and are separately taxed. Although based on the evidence presented at the administrative hearing the...