Possible Impact of Illinois Senate Bill 009 (SB9) to Property Owners and Users

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Melissa Podolsky, Principal, Director of Property Management

In early 2017, Illinois Senator Toi Hutchison proposed Senate Bill 009 which originally was proposed as one of series of bills known as the “Grand Bargain” to increase State revenues, which would include new taxes on a variety of property related services.

The proposed bill, as it exists today, will commence taxing certain services which were not previously taxed. These services include but are not limited to landscaping, janitorial, painting, towing, laundry services, storage spaces, alarm and security services, pest control and many more. Those costs may need to be absorbed by the owner of a property or may be passed through to tenants, but will increase operating expenses and likely impact how leases are written going forward.

Since its first writing, this bill was been amended and many additional services have been added to the taxable list.  Currently the service tax is projected to be 6.25% but additional local, county or municipal taxes could also be applied increasing the proposed tax rate even higher. With the ability for municipalities to add their own tax, the true cost could be in excess of 8%.

Senate Bill 009 presents some significant risks to Owners, Managers and Vendors in the State of Illinois should it pass.   Originally Senate Bill 009 was part of the Grand Budget Plan; however, some in Springfield believe that because SB009 was so well written, it could be presented as a stand-alone bill.  As part of the grand plan or as a stand-alone bill, new taxes could begin as early as January 2018.

 

 

KEY POINTS:
  • Senate Bill 009 is part of a proposed grand budget plan to increase State revenues: The Bill would expand Illinois taxes to include certain property-related services effective January 1, 2018.
  • The proposed tax on services would be 6.25%: This rate could be even higher if additional local taxes are added, which would increase property operating expenses and change property operating budgets.
  • Whether or not the bill passes, it is important to remain aware of the potential impact: The proposed bill has great potential to increase operating expenses and shape the way future leases are written.