Cook County’s chief financial officer claims the government agency never sought to define what art or music is, nor has it tried to tax small venues accordingly.
The comments from Cook County CFO Ivan Samstein come after a hearing officer appointed by the county’s Department of Administrative Hearings claimed last week that DJ sets, rock, rap, and country performances music do not constitute “fine art” under the county’s code and therefore small music venues would be hard-pressed to argue that they should be exempt from a 3 percent county amusement tax on ticket and cover charges for those types of shows.
Samstein now says, however, that the county has never collected amusement taxes from venues on the basis of what type of performances they book. He disagrees with the hearing officer’s interpretation that only those genres traditionally considered “fine art”—such as chamber orchestras, symphony orchestras, and opera—are exempt from paying the tax.
“We have never applied the tax different for different genres of music,” he says. “Fine arts is a relative discussion. I don’t think anyone [in the county] is in the business of saying what is and what is not fine arts.”
Like the city of Chicago, Samstein says the county draws a distinction between DJ sets composed purely of prerecorded music and performances that include significant manipulation or modification of prerecorded music. The former would be subject to the amusement tax, while the latter would not, he says.
For example, he says, no one in the county would dispute that a live set by famed Chicago DJ Frankie Knuckles constitutes a performance of original music, and the show would be exempt from the amusement tax so long as it occurred in a small venue.
Several small Chicago music venues, including Beauty Bar and Evil Olive, are disputing claims made by the county that they owe approximately $200,000 each in back amusement taxes and penalties. Hearing officer Anita Richardson said during an August 22 administrative hearing between the county and attorneys for the venues that the businesses would need to successfully argue the live music they book constitutes “fine art” in order to prove they are exempt from the county’s amusement tax.
Venues with a capacity of 750 or fewer are not subject to the 3 percent tax as long as any cover charges or admission fees are for “in person, live theatrical, live musical or other live cultural performances,” according to the county code. A separate section of the code defines live music and live cultural performances as “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.”
Richardson’s comments angered many in the music community in Chicago and beyond. Her statements and the county’s pursuit of the tax revenue also spurred fears that the venues would be forced to shutter due to the sudden financial burden. The issue has spawned online petitions, including one signed by Chance the Rapper.
In the wake of the controversy, Cook County commissioner John Fritchey announced today that he would introduce an amendment to the county’s amusement-tax ordinance at the board’s next meeting on September 14. He says the amendment models the city’s amusement-tax ordinance and was crafted in collaboration with industry representatives to “have a rational view of ‘music’ while still providing safeguards to prevent businesses from avoiding legitimately owed taxes.”
Samstein and Cook County Department of Revenue public information officer Ted Nelson declined to comment on the specifics of the Beauty Bar and Evil Olive cases.
Asked why county officials have not corrected the hearing officer’s interpretation of the code or withdrawn their case against the venues, Samstein says the county has no desire to influence court proceedings.
“Otherwise, if we start telling them what they can or cannot say . . . that effectively undermines a concept of an impartial system,” he says. He adds that venues are welcome to pursue their cases in the circuit court system if the hearing officer hands down a ruling they disgree with.
Bruce Finkelman and Victor David Giron of 16″ on Center, the development company that owns Beauty Bar, have said that the process of challenging the taxes is still damaging to their business because it necessitates spending large amounts of money on lawyers versus a more worthy cause like artist development.
Generally speaking, Samstein says, if businesses register as taxpayers with the county, file taxes, and respond to auditor requests in a timely manner, they won’t find themselves in a dispute with the county over taxes owed. He claims the vast majority of county businesses are compliant with the agency’s taxation policies.
Pat Doerr, president of the Hospitality Business Association of Chicago, says about half a dozen venues his organization represents have also been asked to pay back taxes in the sum of six figures. (Most of those venues have declined to speak on the record about their cases.)
But Samstein says that any notice from the county of back taxes owed should come as no surprise to these businesses. “You don’t see any situations where a taxpayer suddenly finds themselves in an administrative hearing,” he says. In most situations “auditors have been trying to solicit information for the better part of two years.”
In a letter to Cook County Board president Toni Preckwinkle, Fritchey asks the county’s top official to direct the Department of Revenue not to seek back taxes on venues that are considered compliant with the city’s amusement tax ordinance. He writes that the owners of the small venues he’s spoken to believed in good faith that they were complying with all county taxes.
Fritchey says he’s confident he’ll get the necessary support from his colleagues on the board to pass the amendment.
“It appears the statements of the hearing officer greatly exceeded the issues before her,” he says. “But at the end of the day, it gives us an opportunity to clarify the county’s regulations and allow venue operators to operate with a sense of certainty while at the same time recognizing the county should not be the arbiter of what does and doesn’t constitute music.”
When asked whether he thinks Preckwinkle will honor the request and direct the county to stop its pursuit of back taxes on those venues considered compliant under city standards, Fritchey says he’s “cautiously optimistic that this situation has put a spotlight on the fact that these businesses need to be treated fairly and consistently by both the city and the county.”
Samstein declined to respond to Fritchey’s request.
“I spoke with the commissioner last week,” he says. “I need to see an actual proposal to be able to react.”