In the closing days of the recently concluded May term, the Illinois Supreme Court handed down its decision in Marks v. Vanderventer, unanimously upholding the constitutionality of a statewide surcharge on the recording of deeds. Our report on the oral argument in Marks is here.
As enacted in 2005, the statute challenged in Marks required the recorders of deeds around the state to collect a $10 surcharge fom any individual seeking to record a real estate-related document. Nine dollars from each surcharge was to be remitted back to the state to fund the Rental Housing Support Program, a program designed to increase the stock of affordable housing around the state. Of the remaining dollar, fifty cents was allocated for the general revenue fund of the county which collected it and the remaining fifty cents was to reimburse the county for the costs of running the program.
The plaintiffs challenged the surcharge on multiple grounds, alleging that it created an unconstitutional fee office (a government office supported, in whole or in part, by fees collected from users – something expressly barred by the Illinois Constitution) and violated the uniformity, due process and equal protection clauses. The Circuit Court granted a partial summary judgment, holding that the statute created a fee office and was therefore facially unconstitutional. Because the lower court struck down a state statute, the appeal went straight to the Supreme Court, bypassing the Appellate Court.
In an opinion by Justice Burke, the Supreme Court reversed. To begin with, the Court explained, the statute was not a violation of the fee office clause. The office which collected the $1 – the recorder of deeds – neither retained the money itself, nor had discretion about how the money was spent; the funds went straight to the county treasurer. The fee office clause does not bar sharing state revenues with local governmental units in such ways, the Court explained.
The Court turned next to the uniformity clause challenge. The Illinois uniformity clause requires that any tax (other than property taxes) must be (1) based on a real and substantial difference between the people taxed and those not taxed; and (2) bear some reasonable relationship to the object of the legislation or to public policy. The plaintiffs had insisted below that they had no more to do with the evil of unaffordable or unavailable housing than anyone else in the general public, but the Court explained that it had never required perfect reciprocity between the group taxed and the evil sought to be remedied. The question, rather, was whether the benefit of the revenue and the burden of the tax had a reasonable relationship to each other. Since persons recording deeds – i.e., the owners of real estate – could be expected to either benefit or suffer according to the level and stability of property values, which depend in part upon the availability of affordable housing, the Court concluded that the relationship between tax and benefit was sufficiently close.
Turning next to the due process challenge, the Court found that the rational basis test applied. Given the analysis in connection with the uniformity clause, the due process challenge was a foregone conclusion. The Court held that given the impact of the problem of unaffordable housing on property values, there was a rational basis for taxing deed recordation in order to fund a program aimed at rental housing.
The Court briefly commented in closing that there was no need to reach the equal protection clause. The uniformity clause was a higher hurdle for the tax to surmount than the equal protection clause, so if the statute was constitutional under the uniformity clause, it necessarily passed muster under the equal protection clause.