Tuesday, November 19, 2019    

Last week, we reported on draft legislation to amend the new parking excise tax statute that would make it clear that municipalities and other units of government are exempt from the excise tax – an issue that many local governments had raised since the initial legislation was enacted. Unfortunately, the legislative “fix” has not yet been enacted and it’s getting closer and closer to the January 1st effective date of the parking tax.
Last Friday, the Illinois Department of Revenue issued draft rules on implementation of the parking excise tax that may address some local government concerns.
The IDOR issued a Notice of Proposed Rules that included draft rules relating to implementation of the parking excise tax.  You can read the rules here. The important language for local governments is contained on page 13243 of the draft rules, which states as follows:

Any person, except the federal government, the State, municipalities, counties, and special districts, who engages in the business of operating a parking area or garage for consideration, or who, directly or through an agreement or arrangement with another party, collects the consideration for parking or storage of motor vehicles, recreational vehicles, or other self-propelled vehicles, at that parking palace, must collect and remit the tax imposed on the purchaser of the parking space. If the federal government, the State, municipalities, counties or special districts enter into an agreement with a third-party to operate the parking area or garage, the third-party must collect and remit the tax. Persons that operate 3 or fewer parking spaces are exempt from collecting the tax.

As you can see, the language of the “exemption” in the IDOR’s draft rules is different than the exemption contained in the draft legislative “fix.” In the draft rules, municipalities are exempt from the parking tax regardless of the amount of the parking fee imposed, where the legislative fix would only exempt parking fees that were at or below the legislative threshold. And in the draft rules, the tax would apply to municipal parking areas or garages where the municipality has an agreement with a third-party to operate the parking area or garage. The draft rules include an example that might assist municipalities trying to understand the scope of the “third party” operator agreement “exemption from the exemption” – see below:

EXAMPLE 5: A municipality owns and operates a parking area. It retains a company to install machines on the lot that accept electronic payments. The company also provides a mobile application that permits a person to pay for parking electronically. All payments made by a customer either by using the machine on the lot or the mobile application are paid to the municipality. The municipality pays the company a fee for its services. The municipality is the operator of the lot and, pursuant to Section 195.115(b), is not required to collect and remit the tax.

It remains to be seen how the two different exemption schemes can be reconciled but as we’ve said before, we will keep you posted.