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Administrative Court or Art Critic? Cook County’s Latest Attempt to Expand the Application of the Amusement Tax Ordinance
by: Samantha K. Breslow of Horwood Marcus & Berk Chartered  -  State & Local Tax (SALT)
Monday, October 17, 2016

It certainly is not the role of the Cook County Court of Administrative Hearings to play the role of legislator, but nonetheless, that is the responsibility it has assumed due to the inadequacy of the current Cook County Amusement Tax Ordinance ("Ordinance").

Under the Ordinance, a tax is imposed upon the patrons of every "amusement" which takes place within the County. Cook County Code of Ordinances, Part 1, Article XII, Ch. 74 Sec. 74-392(a). It is the duty of the owner, manager, and "operator of an amusement" to collect the amusement tax from each patron and to remit the tax to the Cook County Department of Revenue ("Department") monthly. Cook County Code of Ordinances, Part 1, Article XII, Ch. 74 Sec. 74-395(a). Under the Ordinance, an "amusement" means:

Any exhibition, performance, presentation or show for entertainment purposes, including, but not limited to, any theatrical, dramatic, musical or spectacular performance, promotional show, motion picture show, flower, poultry or animal show, animal act, circus, rodeo, athletic contest, sport, game or similar exhibition, such as boxing, wrestling, skating, dancing, swimming, riding on animals or vehicles, baseball, basketball, softball, soccer, football, tennis, golf, hockey, track and field games, bowling, or billiard and pool games.

However, the Ordinance provides a "Small Venue Exemption" for admission fees to witness live theatrical or live musical performances that take place in any auditorium, theater or other space in the County whose maximum capacity is not more than 750 persons. Cook County Code of Ordinances, Part 1, Article XII, Ch. 74 Sec, 74- 392(d)(1).

The irony here is that the size of the venue or "other space" is not the language of the exemption that has created a backlog cases at the County. Rather, the Ordinance has been under recent attack due to the ambiguity of the definition of "live musical, live theatrical or other live cultural performance". A "live theatrical, live musical or other live cultural performance" is defined by the Ordinance as a "live performance in any of the disciplines which are commonly regarded as part of the fine arts, such as live theater, music, opera, drama, comedy, ballet, modern or traditional dance, and book or poetry readings." Cook County Code of Ordinances, Part 1, Article XII, Ch. 74 Sec, 74-391. This ambiguity has created a crowd of cases at the Cook County Court of Administrative Hearings centering upon whether a disc jockey ("DJ") qualifies as a "live musical, live theatrical or other live cultural performance." For example, Beauty Bar and Evil Olive, two bars in the Noble Square neighborhood that commonly feature DJs, are currently challenging Notices of Tax Liability assessing Cook County amusement tax at the Cook County Court of Administrative Hearings.

There are two potential interpretations of a "live theatrical, live musical or other live cultural performance" qualifying under Small Venue Exemption: (1) the live performance must be in a discipline regarded as part of the fine arts, such as music; (2) if the live performance is a musical performance, the genre of music performed must be part of the fine arts. The former interpretation strictly follows the statutory language of the Ordinance; the latter is the Department's invention. Under the first interpretation, the Ordinance would only require the Cook County Court of Administrative Hearings to decide whether the performance is music, whereas the second, or the Department's current application, assigns the Department and the Cook County Court of Administrative Hearings the role of art critic, asking them to decide when a musical performance is truly up to par of a "fine art."

In the upcoming weeks, the Cook County Board of Commissioners ("Board"), who hold the authority to amend a County Ordinance, will decide whether they want to either allow the Cook County Department of Administrative Hearings to play the role of the legislature, which is clearly outside their assigned powers, or resolve the ambiguity by amending or clarifying the Ordinance. Cook County Commissioner John Fritchey announced in September his plans to amend the County Ordinance by October 17, 2016 to mirror the City's definition of a "live cultural performance", which includes a DJ's activities, provided several specific conditions are met. For example, City of Chicago Amusement Tax Ruling #4, which was issued in December 2006, clarifies that the activities of a DJ qualify as a live cultural performance if both the pre-recorded material used by the DJ was recorded by the DJ and the DJ is paid $2,000 or more for a single performance.

Not only is this level of clarity absent from the County's Ordinance, but even if Mr. Fritchey and the Board were to adopt comparable language at the County level, the amendment would not likely resolve the entire issue. For example, the Small Venue Exception is bound to affect a far greater crop of taxpayers than just those spinning records. Other modern forms of music, such as rap or dubstep, are likely the next victim of the County's misguided quest to test the turpitude of contemporary music genres. And here lies the greater problem: an Ordinance adopted in 1996 could not foresee the evolution of contemporary music and technology. As a result, the Board should avoid hastily placing a band-aid on an Ordinance woefully unprepared for the modernization of music and technology.  

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