Commercial Nat. Bank of Chicago v. City of Chicago
| Decision Date | 25 January 1982 |
| Docket Number | No. 55457,55457 |
| Citation | 89 Ill.2d 45,432 N.E.2d 227 |
| Parties | , 59 Ill.Dec. 643 COMMERCIAL NATIONAL BANK OF CHICAGO et al., Appellants, v. The CITY OF CHICAGO et al., Appellees. |
| Court | Illinois Supreme Court |
Don S. Harnack, Wilber H. Boies, Richard A. Hanson, and John E. Gaggini, of McDermott Will & Emery, Chicago, and Carleen S. Davis and Gregory Palmer, law students, for appellant Commercial Nat. Bank of Chicago.
Stanley Garber, Corp. Counsel, Chicago (Daniel Pascale, Robert R. Retke, Philip L. Bronstein, and Jerome A. Siegan, Asst. Corp. Counsel, Chicago, of counsel), for appellees.
John F. McCarthy, of McCarthy & Levin, and Richard J. Phelan, of Phelan, Pope & John, Ltd., Chicago (Robert T. Fasic, Malcolm S. Kamin, of Arvey, Hodes, Costello & Burman, Roseann Oliver, of Phelan, Pope & John, Ltd., John J. Jiganti, of Harris, Burman, Sinars & Jiganti, and Lawrence S. Wick, of Leydig, Voit, Osann, Mayer & Holt, Ltd., Chicago, of counsel), for appellants Chicago Bar Ass'n, et al.
Henry L. Pitts, Alan S. Ganz, and Marc A. Primack, of Rooks, Pitts, Fullagar & Poust, Chicago (Howard H. Braverman, of the Illinois State Bar Ass'n, Springfield, of counsel), for appellants Illinois State Bar Ass'n, John J. Cassidy, Jr., and Thomas S. Johnson.
Melvin A. Brandt, Chicago, for amicus curiae Illinois Small Businessman's Ass'n.
Clifford L. Weaver and Susan B. Harmon, of Ross, Hardies, O'Keefe, Babcock & Parsons, Chicago, for amicus curiae Chicago Ass'n of Commerce and Industry.
Concannon, Dillon, Snook & Morton, Chicago (William R. Dillon, John B. Dillon, and Barry C. Kessler, Chicago, of counsel), for amicus curiae Corporate Fiduciaries Ass'n of Illinois.
The Chicago service-tax ordinance was adopted on July 20, 1981. (Municipal Code of Chicago § 200.5-1 et seq. (1981).) These consolidated appeals involve several challenges to the constitutionality of the ordinance. Separate suits were originally filed in the circuit court of Cook County by (1) the Commercial National Bank of Chicago and various business entities; (2) the Illinois State Bar Association, representing attorneys throughout the State of Illinois; and (3) the Chicago Bar Association, its officials and certain members, and various other professional societies and members. Defendants in one or more of the suits are the city of Chicago and officials of the city. In addition, the Corporate Fiduciaries Association of Illinois, the Chicago Association of Commerce and Industry, and the Illinois Small Businessmen's Association subsequently filed amicus briefs.
Plaintiffs, prior to filing the circuit court actions, had sought leave to file similar complaints as original actions in this court pursuant to our Rule 381(a) (81 Ill.2d R. 381(a)). We denied leave, but directed that, in the event the suits were filed in the circuit court of Cook County, the court hear the cases expeditiously with a view toward their disposition prior to August 31, 1981. Plaintiffs thereafter proceeded in the circuit court, seeking a declaratory judgment holding the service-tax ordinance invalid, and injunctive relief. The cases were consolidated, and the circuit court granted plaintiffs' motion for a preliminary injunction enjoining defendants from enforcing the penalty provisions of the ordinance and requiring defendants to retain in escrow any amounts collected pending a final determination of the constitutionality of the tax. Defendants appealed to the appellate court from the preliminary injunction, and we allowed their motion to transfer that appeal directly here, taking the matter under advisement and denying the motion to vacate or stay the preliminary injunction. Defendants thereafter moved in the circuit court to dismiss the complaint for failure to state a cause of action. After consideration of extensive memoranda and oral arguments, the court, in a comprehensive opinion, granted the motion to dismiss, holding that the ordinance was not unconstitutional either in whole or in part for any of the reasons alleged in the complaints and dissolving its preliminary injunction.
The plaintiffs appealed to the appellate court and we again granted their motion to transfer the appeal to this court pursuant to our Rule 302(b) (73 Ill.2d R. 302(b)), and reinstated the injunction. To avoid unnecessarily complicating the city's fiscal planning, and to accommodate the city and the litigants, we departed from our customary procedure and on November 16, 1981, issued a brief decision declaring the Chicago service-tax ordinance to be unconstitutional, with a written opinion to follow. In this opinion we set forth the reasons for that decision. A majority of the court, as one basis for the decision, finds that the service-tax ordinance adopted by the city of Chicago is unconstitutional as an attempt to impose a tax upon occupations without authorization by the General Assembly, contrary to article VII, section 6(e), of the 1970 Illinois Constitution.
Under the 1870 Constitution, Illinois municipalities had only those powers which the State, through the General Assembly, conferred. (7 Record of Proceedings, Sixth Illinois Constitutional Convention 2727 (hereinafter cited as Proceedings).) After the adoption of the 1970 Constitution, which created home rule units of local government in this State, any county which has an elected chief executive officer, any municipality which has a population of more than 25,000, and any other municipality which elects to become a home rule unit by referendum may exercise home rule powers as provided in the Constitution. (Ill.Const.1970, art. VII, § 6(a).) The Constitution defines the powers of home rule units as follows:
"Except as limited by this Section, a home rule unit may exercise any power and perform any function pertaining to its government and affairs including, but not limited to, the power to regulate for the protection of the public health, safety, morals and welfare; to license; to tax ; and to incur debt." (Emphasis added.) (Ill.Const.1970, art. VII, § 6(a).)
Thus, any limitation on the power of a home rule unit to tax must be found within section 6 of article VII of the Constitution. We find such a limitation in section 6(e) of that article, which provides:
"A home rule unit shall have only the power that the General Assembly may provide by law (1) to punish by imprisonment for more than six months or (2) to license for revenue or impose taxes upon or measured by income or earnings or upon occupations." (Emphasis added.) (Ill.Const.1970, art. VII, § 6(e).)
The effect of this constitutional limitation is to place home rule units in the same position with respect to licensing for revenue and imposing taxes upon or measured by income or earnings or upon occupations that all units of local government were in prior to 1970. That is, home rule units have only the power in these methods of raising revenue conferred by the General Assembly. The power to raise revenue in the enumerated methods stems not from home rule powers but from legislative grant of authority. (7 Proceedings 1670.) For home rule units generally, the role of the General Assembly was significantly narrowed by the Constitution; however, the intent of this section of the Constitution is that the legislature exercise "maximum supervisory power" in these enumerated areas. 7 Proceedings 1672.
The Chicago service-tax ordinance was adopted by the city council pursuant to its home rule powers conferred by the 1970 Constitution (Ill.Const.1970, art. VII, § 6(a)). It imposes a tax on "each purchaser who purchases service in the City after July 31, 1981, at the rate of 1% of the purchase price of such service." (Municipal Code of Chicago, § 200.5-3 (1981).) The tax is expressly imposed on the purchaser, but collection and remittance duties are placed on the seller, who is also liable for uncollected taxes.
The service-tax ordinance is challenged, inter alia, on the ground that it is a tax "upon occupations" enacted without legislative authorization in contravention of the 1970 Constitution. Since the adoption of the 1970 Constitution, this court has had several occasions to rule on similar challenges to various taxing ordinances enacted by home rule units. In those cases, which will be discussed later, it was noted that section 6(m) of article VII of the Constitution requires that the powers and functions of home rule units shall be liberally construed. In those cases, in upholding taxing ordinances, this court "liberally construed" the powers of home rule units to enact taxing ordinances under the 1970 Constitution. We are urged to do so once again and to uphold the Chicago service-tax ordinance. We cannot uphold the ordinance without violating the clear limitation of article VII, section 6(e), of the Constitution, which requires authorization by the General Assembly before a home rule unit can impose a tax upon occupations.
In the instant case, the tax which the city of Chicago seeks to impose falls within the area of taxation the delegates to the sixth constitutional convention intended to limit by denying home rule units the power to "license for revenue or impose taxes upon or measured by income or earnings or upon occupations," unless authorized by the General Assembly (Ill.Const.1970, art. VII, § 6(e)). This restriction now found in section 6(e) was presented to the convention in paragraph 4.4 of the proposal of the majority of the Committee on Local Government of the constitutional convention. The explanation of this restriction on the authority of a home rule unit to impose taxes upon occupations is contained in the report of that committee, which states:
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