Opinion ID: 2708638
Heading Depth: 2
Heading Rank: 2

Heading: The Demolition Tax

Text: The next question is whether, under the new Empress Ca‐ sino standard, the Demolition Tax is a tax. It clearly is. First, in disagreeing with the panel’s original decision in Kathrein, the en banc majority indicated that the Demolition Tax, as de‐ scribed by the panel decision, was a tax. “The tax would de‐ ter demolitions and the modest fund generated by it … would be used to subsidize those poor people” who were in danger of losing their homes. Id. at 730. The Empress Casino majority concluded that “[t]axes that seek both to deter and to collect revenue when deterrence fails … are common‐ place,” and that the Evanston ordinance was an example of a “sin tax.” Id. Even had the en banc court not already explicitly catego‐ rized the Demolition Tax, we would still hold that the new rule squarely describes the exaction here as a tax. The Em‐ press Casino decision divided exactions into three categories: fines, fees, and taxes. It noted that a fine is “designed … to punish,” and that fees “compensate for a service that the state provides to the person or firms on whom … the exac‐ tion falls.” Id. at 728. The Demolition Tax is not designed to punish property owners for demolishing buildings, nor was it enacted with “the hope … that the punishment [would] deter” its citizens from tearing down houses and essentially cease all demolition of residential buildings. Id. The practice of demolishing residences is not “completely forbidden.” Id. 10 No. 12‐2958 at 729. The City of Evanston obviously expects and hopes that houses requiring demolition will continue to be torn down in the future, albeit perhaps at a slower rate. Nor is the ordinance a fee. It does not compensate for a state‐provided service offered to homeowners who demolish a residential unit. Paying the tax gives the owner permission to demolish a structure, but a grant of permission is not a service. In fact, the exaction applies to those who perform the demolitions themselves, without utilizing any of the City’s resources. The ordinance therefore imposes a tax. The Kathreins respond that the ordinance does not im‐ pose a tax because the property owner can be exempt from paying—for instance, one who has owned and occupied a residence for three years, and who, following the demolition of that residence, lives in the new dwelling for three years following the demolition. See Evanston, Ill., Code § 4‐18‐ 4(A), D(1). However, tax laws commonly carve out exemp‐ tions. See, e.g., 26 U.S.C. §§ 151, 501(c)(3). The existence of exemptions has no bearing on the bright‐line rule an‐ nounced in Empress Casino. The Kathreins also note that rev‐ enue for the tax is directed toward a separate fund rather than the general treasury. But that, too, is a distinction with‐ out a difference. The court in Empress Casino observed that a tax “earmarked for a particular purpose is hardly unusual” and dealt with just such a tax in that case. Empress Casino, 651 F.3d at 731. The purposes of the exaction in this case, as the en banc court observed, are 1) to slow the rate of demolitions through a financial disincentive, and 2) to use the revenue from the demolitions to support poor homeowners. This du‐ No. 12‐2958 11 al motive clearly places the exaction in the category of a tax under Empress Casino’s bright‐line test.