Real Estate Taxes
As Re-printed from the CBA Record – January, 2004
What Every Attorney Should Know About Appealing Their Client’s Real Estate Taxes
Although there are many issues, concerns and concepts which cannot be detailed in a brief article about the real estate tax assessment area, we will attempt to outline several basic concerns for the majority of attorneys who should be sensitive to protecting their clients well-being and advising their clients pertaining to real estate taxes in general.
Whether you are a real estate practitioner involved in transactional work or closings, an in-house counsel or corporate attorney for a company that holds real estate assets, or an estates and trusts attorney, viewing your clients’ legal objectives too narrowly within the constraints of your own practice area and without considering real estate tax implications is to tread precarious waters unnecessarily.
1. Understanding the Basics of the Tax Assessment Process
There are 102 counties in the State of Illinois with Cook County being the largest. Outside of Cook County, a Supervisor of Assessments reassesses property on a quadrennial basis (every four years) with an opportunity to appeal the assessment at the County Board of Review. Pursuant to statute, and unlike in Cook County, real property is assessed at one-third of its fair cash value.
Cook County is the only county that classifies property into many different categories depending on its use (i.e. unimproved land, residential, commercial, industrial, etc.) or whether it qualifies for any type of special assessment incentive. Consequently, property may be assessed as low as 16% of market value, or as high as 38% of market value depending on its assessment classification.
The Cook County Assessor is responsible for determining the assessments of more than 1,300,000 parcels of property during a three-year assessment cycle. These parcels are located within 38 Townships that are reassessed every three years. The county is divided into three reassessment districts consisting of the following:
|AREACity of Chicago
North and Northwest Suburbs
South and Western Suburbs
|REASSESSMENT YEARS2003 and 2006
2004 and 2007
2005 and 2008
During a reassessment year, the Assessor determines the property’s new assessment based on the most current market valuation data. This process disregards any tax relief previously obtained and, because most property is appreciating in value, usually results in significant assessment increases. In recent years, these increases have been considerable as taxing districts struggle to fund their programs despite the general downturn in the economy.
2. Basis on Which to Appeal an Assessment
Should a taxpayer or property owner consider their assessment and corresponding market value to be improper, Illinois law requires that a Complainant, in its presentation before the Assessor and/or Board of Review (hereafter, the Board), prove by reliable evidence that the assessment established by the Assessor or Supervisor of Assessments is incorrect or illegal. Formulating the basis for contesting an assessment can be wide-ranging, varied and complex. Arguments can be as simple as correcting information as to a property’s characteristics on the Assessor’s property record card, or as complex as utilizing an income capitalization approach to value to determine the fair cash value of an income producing property. Sometimes the relief sought is temporary as in the circumstance where a building suffers from a period of sustained vacancy. Other times, the relief sought is permanent such as when seeking an exemption for a property used for an exempt purpose. Many times, the most effective way to establish a property’s Fair Cash Value is to utilize an appraiser who can provide expert testimony as to his or her opinion of value as of a certain date. An appraiser relies on one or more of the three standard approaches to value: the Cost Approach, the Income Approach, and the Sales Comparison or Market Approach. Appraisal evidence is usually necessary in instances where the property is owner-occupied. Legal arguments may also prove to be a basis for appeal. Most notably, a uniformity approach to value can be utilized to compare the subject property to other similar properties in the same general vicinity as the subject.
3. Where and When to Appeal Your Assessment
Appealing a real estate tax assessment occurs at four different venues, both administratively and in Circuit Court. Typically, the administrative appeal process begins with the filing of a Complaint at the Assessor’s Office. Since there is no formal hearing procedure, only documentary evidence of valuation is submitted within a prescribed time period. The attorney should contact the Assessor’s Office (www.cookcountyassessor.com) for specific filing deadlines, as these dates will vary from year to year depending upon the township in which the property is located.
If no relief is granted, or if the relief granted is inadequate, the appeal process can continue at the Board. Here, valuation evidence is again presented and a hearing on the merits may be requested. There is no requirement that an appeal first be made to the Assessor before filing at the Board. In addition, Rule 1 of the Board’s published rules state that practice before the Board constitutes the “practice of law”, and a person who is not an attorney may not represent a taxpayer before the Board. The rules also require that an attorney represent a corporation or other business entity who wishes to file an appeal at the Board. Also, because filing deadlines are strictly enforced, all complaints must be filed on or before the official closing date for the township in which the subject property is located. Again, the attorney should consult the Official Rules of the Board of Review as to these and other policies which govern practice before the Board.
At the final stage of the appeal process, and only after the exhaustion of administrative remedies through a filing at the Board, there is a third opportunity to have an assessment reviewed. A complaint may either be filed with the Illinois Property Tax Appeal Board (PTAB), or in Circuit Court as a Tax Objection Complaint. Deciding on which venue is appropriate depends on careful consideration of the evidence, facts and circumstances of each case. The attorney should closely examine both the Official Rules of PTAB (www.state.il.us/agency/ptab) and the pertinent sections of the Property Tax Code (35 ILCS 200/23-5, et. al.) which govern the procedure of Tax Objection Complaints. These resources provide the rules that govern when, where and how to file a complaint. It is also imperative to understand the significant difference in the burden of proof between an action before the PTAB and the Circuit Court, as well as the role a taxing district may play as an intervenor in a PTAB proceeding.
4. The Impact of Recent Case Law
Changes in the law are commonplace in this area of practice and consequently, the attorney must stay abreast of the constant evolution in both substance and procedure. Important issues are pending in the Appellate Court, First District, including, 1) Whether discovery upon non-parties in a Tax Objection proceeding is appropriate; 2) What constitutes PTAB’s de novo review of a Board of Review’s action and 3) Whether PTAB is correct in finding that industrial and commercial assessments in Cook County are in violation of the ratio requirements of the Illinois Constitution.
One case of significant importance that has been recently decided is Cook County Board of Review vs. Bosch, et.al., 791 N.E. 2d 8 (1st District 2002). The impact of Bosch is far reaching and significantly restricts the Illinois PTAB’s authority. Prior to Bosch, PTAB determined the assessment of a property by debasing the market value with a median (de facto) level of assessment derived from the Illinois Department of Revenue’s annual sales ratio studies rather than the ordinance (de jure) level of assessment. Now, this authority has been severely limited. Bosch further infers that new evidence cannot be considered and that its de novo hearing is limited to the record made before the Board of Review. This decision could greatly alter how and what types of evidence will be presented to the Board in the future.
5. How an Attorney Can Help Their Client
Other than offering some basic information to your client as it pertains to their property’s real estate tax concerns, consultation with an attorney that concentrates in the area of real estate taxation is essential. Make no mistake, the practice of real estate taxation, in its many venues, constitutes the practice of law. It is complex as to its legal arguments and in its procedures before the various administrative agencies and in Circuit Court. However, without a full understanding of when, where and how to file an appeal, the various approaches to value, what will provide the best supporting evidence, and the recent trends in the law, your client’s real estate tax obligations may be significantly and permanently jeopardized.