A special "open space" provision in the Illinois Property Tax Code designed to preserve the environment by limiting development means certain taxpayers, like golf course owners and operators,can enjoy the benefits of artificially low property assessments.

By James W. Chipman

When lawmakers passed the open space assessment law over 40 years ago, their intent was to give a limited number of property owners a tax incentive to maintain tracts of green space threatened by encroaching urban growth. Some wanted only to ease the tax burden on country clubs and golf courses, which often bear the burden of higher assessments based on values that represent potential highest and best use as development sites rather than lower values based on their continued present use.

Rules of the game

Under the law*, private landowners may apply for open space designation if they have used more than 10 acres of land for purposes such as maintaining natural and scenic resources, conserving landscaped areas, or promoting soil conservation for at least three years. Residential property is excluded. Taxpayers must submit an application to the chief county assessment officer, then if approved, the property’s taxes are significantly reduced from their estimated market value to a special or current use value. However, changing the use of the property from open space to another purpose triggers a three-year rollback of taxes based on the land’s highest and best use.

Lost ball?

Having an open space class of property for landowners provides communities with a host of environmental benefits. The downside is that since the law’s criteria are so general and relatively easy to meet, assessors have had a hard time denying applications. Meant to reduce taxes on tracts of land like parks and country clubs, the law has been expanded to include office campuses, sportsmen's clubs, airports, and shopping malls, simply because a portion of the land associated with these enterprises meets the “open space” definition.

Hitting the fairway

Golf courses have been the subject of several interesting court challenges:

• The first reported appellate decision held that while golf courses are entitled to open space classification, additional ground improvements on the course, such as greens, fairways and tees, can’t be assessed separately.** The court said that when non-structural improvements promote an open space purpose their value must be included in the open space value.
• Another decision held that the law calls for a uniform valuation for all open space property, regardless of its use.*** In other words, sales of wetlands and marshes can be used to determine an open space value for a golf course.
• A third court held that land, even if it is improved, may be granted open space status as long as it “directly relate[s] to and facilitate[s] the existence of the golf course”.****

Improving your game

Preservation of open space land benefits society. The open space assessment program is an attractive alternative for individual landowners and businesses that might otherwise be forced to sell their land for development because of rising taxes. If you believe your property may qualify for open space designation, the property tax team at Golan Christie Taglia is ready to help. Please reach out to Jim at jwchipman@gctspringfield.law or 217.280.5518.

Sources:
*35 ILCS 200/10-155 thru 165
**Knox Co. Board of Review v. Illinois Property Tax Appeal Board, 185 Ill.App.3d 530(1989)
***Lake County Board of Review v. Property Tax Appeal Board, 192 Ill.App.3d 605(1989)
****Onwentsia Club v. Illinois PTAB et al., 2011 IL App (2d) 100388; PTAB remand decision: Lake County Board of Review v. Illinois Property Tax Appeal Board, 2013 IL App (2d) 120429

The best case that over-assessed taxpayers can make in an assessment appeal is providing evidence of their property’s fair market value. But what is “fair market value” and how do you prove it?

By James W. Chipman

Fair market value (or fair cash value) is the gold standard in property tax assessment law. It’s generally understood to mean the price a property would bring in the open market between disinterested parties acting independently of each other and without compulsion.*

Fair market value can be proven four different ways, but each one has its drawbacks.

1. Recent sales: Was it fair and square?

When a property sells, the key is how proximate the sale was to the assessment date in question and whether it was an “arm’s length transaction” – this term refers to the conditions surrounding the sale. A recent arm’s length sale of property in Illinois is considered the best evidence of its fair market value**. However, determining what constitutes an arm’s length transaction and an appropriate time frame are thorny issues. With any sale, expect assessing officials to scrutinize the buyer-seller relationship and to look at market changes since the transaction date. Also, taxpayers should never assume that a stated purchase price is a good indication of fair market value without considering whether other factors like special financing or personal property affected the price.

2. Recent construction costs: Are they all legit?

The costs to construct an improvement and the price paid for the land can also establish a property’s fair market value. Construction costs, however, are often sketchy and fraught with errors. Thus, cost data is usually considered suspect unless there is compelling evidence that all direct and indirect costs associated with the project are accounted for and that the costs are representative of the market area. That’s why some boards of review require a sworn affidavit from the contractor to support the contention***.

3. Appraisal: How experienced is your appraiser?

Taxpayers can submit a professional fee appraisal of their property. But let the buyer beware for two reason: a) the cost of an appraisal should always be weighed against any potential tax savings; and b) an appraisal provides a best estimate of value, not an actual one. In addition, remember that an appraisal is only as good as the person who prepared it. Selecting the right appraiser is critical because not everyone has the same qualifications and experience to appraise residential, commercial, and industrial properties or has the ability to consider the inherent complexities and peculiarities they each possess. (Golan Christie Taglia maintains a list of qualified appraisers and can make recommendations regardless of your location and specific property type.)

4. Comparable sales: Are they peas from the same pod?

Under this method, recent selling prices of similar properties are used to help determine the fair market value of a subject property with the assumption that the property will sell at a price near the comparable properties. The operative word, of course, is “similar.” Unfortunately, there are no uniform standards that apply regarding how closely properties should resemble one another for comparison purposes and how any differences between the properties should be adjusted in order to prove the claim.

If you need expert advice on preparing an appeal that involves the complex challenge of proving your property’s fair market value, the property tax team at Golan Christie Taglia is ready to help. Contact Jim at JWChipman@GCTSpringfield.law)or 217.280.5518.

Sources:
*35 ILCS 200/1-50
**Walsh v. Property Tax Appeal Board, 181 Ill. 2d 228(1998)
***Kane County Board of Review 2018 Rules & Procedures, Sec. D(8)(c)

The state’s Property Tax Appeal Board and the circuit court both offer taxpayers recourse after an unsuccessful board of review appeal. However, picking the wrong forum could have serious consequences!

By James W. Chipman

Taxpayers may believe they have two equally viable appeal options in the Property Tax Appeal Board (PTAB) and the circuit court when challenging a board of review appeal. However, each venue has its pros and cons -- choosing one over the other depends on the facts of each individual case.

Here are eight factors that taxpayers should take into consideration:

Jurisdiction

The PTAB is limited to hearing arguments about assessments while the circuit court has much broader authority to determine assessments, taxes, and levies.

Burden of proof

The circuit court presumes that assessments are correct and legal and taxpayers may only overcome that burden by presenting clear and convincing evidence.* PTAB decisions are made based on “equity and the weight of evidence”.** In appeals where market value is being challenged, the burden of proof is a mere preponderance of the evidence*** but where uniformity of assessments is contested, it’s clear and convincing evidence.****

Payment of taxes

While the PTAB doesn’t require the payment of taxes before filing an appeal taxpayers are still obligated to pay them when they come due whether or not the PTAB has issued its decision. Taxes must be paid in full before going to circuit court. If taxpayers prevail in either forum, over payments will be refunded with interest.

Resolution time

PTAB appeals must be filed months before circuit court cases but that doesn’t mean taxpayers get quicker resolutions from the state agency. Since the PTAB is dependent on legislative appropriations each year, budget and staffing restraints impact its turnaround time.

Increased assessments

Both forums can raise assessments on their own initiative, but it’s most likely to occur at the PTAB because of taxing body participation.

Formality and fees

The PTAB has always fashioned itself as a “poor man’s court” where rules of pleading, practice and evidence are relaxed where practicable, and filing fees aren’t required. That’s not the case in circuit court where upfront filing fees can run hundreds of dollars and taxpayers must abide by strict procedural rules.

Taxing body participation

Taxing bodies can intervene in PTAB taxpayer initiated appeals and even file appeals on their own behalf if they have “a revenue interest in the decision of the board of review.”***** Once a taxing body becomes a 3rd party in a PTAB appeal, it can submit evidence, seek increased assessments, and block settlement agreements reached by taxpayers and boards of review.

Prior rulings

Circuit court and PTAB precedent may differ on how a case with the same facts gets decided. One forum may favor a certain taxpayer position that the other one opposes.

Bottom line: When it comes to choosing your next appeal option, you can’t just flip a coin or roll the dice! It’s best to weigh the pros and cons of a multitude of factors.

For advice on determining whether the PTAB or the circuit court best suits your specific needs, contact Jim at JWChipman@GCTSpringfield.law or 217.280.5518.

Sources:
*35 ILCS 200/23-15(b)(2)
** 35 ILCS 200/16-185
*** Winnebago County Board of Review v. Property Tax Appeal Board, 313 Ill.App.179(2d Dist. 2000)
**** Kankakee County Board of Review v. Property Tax Appeal Board, 131 Ill.2d 1(1989).
***** 86 ILL. ADMIN. CODE tit 86, §1910.60(b)&(d)(1)

A board of review decision can also be appealed directly to a circuit court. It’s an option that taxpayers often overlook!

By James W. Chipman

Boards of review don’t have the final say about property tax assessments, however they’re a necessary stop in the appeal process. Taxpayers who are unhappy with their board decision have two options: appeal to the state Property Tax Appeal Board (PTAB) as described in my Aug. 24, Sept. 12 and Nov. 27 blogs; or, file a tax objection complaint in the circuit court. You cannot file appeals in both venues. The good news is that taxpayers who miss the 30-day filing deadline for taking an appeal to the PTAB still have time to pursue the tax objection remedy.

Filing a tax objection complaint, the lesser known of the two alternatives, involves a formalized legal process that’s full of conditions, requirements and deadlines that make it a potential minefield for inexperienced taxpayers or attorneys. While tax objection cases are more common in Cook County than elsewhere in the state, here’s what a taxpayer can expect if they choose this remedy.

Before going to court

Prior to filing a tax objection complaint, the taxpayer must pay the entire tax due on the property* on time and have filed an appeal with the board of review at the appropriate time**. Once these requirements are met and a complaint is filed, 100% of the taxes are considered paid under protest.

The court process

The process begins when a complaint is filed in the circuit court of the county where the property is located. The complaint must specify the reasons why the assessment is excessive. Any number of factual and legal arguments can be made, but in most cases, it’s about whether the fair market value of the property is accurate. The county collector or treasurer is named as a defendant but is not required to file a response to the complaint. The state’s attorney, who acts as legal counsel for the county, generally represents the collector. A tax objection case is subject to rules of practice and procedure, including discovery. This means each party can subpoena documents and witnesses.

Taxpayers face an uphill battle. When a case goes to trial, there’s a rebuttable presumption that the property assessment is correct and legal and taxpayers must overcome this presumed correctness by clear and convincing evidence.*** That’s the highest burden of proof in a civil matter. A judge sitting without a jury hears the case de novo, or anew, and will make one of the following rulings:

• Confirm the assessment.

• Grant a reduction and order a refund, in which case the taxpayer is entitled to interest.

• Or, in certain instances, increase an assessment if it’s felt the evidence tendered by the taxing body is superior to that filed by the taxpayer.

After the court’s ruling

The taxpayer or the collector can appeal an adverse ruling through the court system just like in any other civil matter.**** However, with any court appeal, there are strict time limits and procedural rules that govern the process.

Taxpayers have choices when it comes to appealing their property tax assessments. Going to court is one worth considering as it can actually result in a faster decision being made than if the case had been appealed to the PTAB.

If you want to learn whether filing a tax objection complaint may be your best alternative, please contact Jim at JWChipman@GCTSpringfield.law or 217.280.5518.

Sources:
*35 ILCS 200/23-5 (The process is different in Cook County – see 35 ILCS 200/23-5 & 23-10)
**35 ILCS 200/23-10
***35 ILCS 200/23-15(b)(2)
****35 ILCS 200/23-15(c)

By James W. Chipman

There’s a remedy for correcting errors or mistakes in a property tax assessment even after the deadline for appealing to the board of review has passed.

Mistakes happen. If a mistake occurs in the property tax process, it could be costly if not corrected. Fortunately, some errors are fixable -- even those that may have occurred in a previous year or years -- thanks to what is known as a Certificate of Error, or in property tax parlance, a C of E. When an assessment error is discovered, taxpayers can seek relief by filing a C of E with local assessing officials. However, be advised that the granting of a C of E by an assessing authority is discretionary, not mandatory.

DEFINING WHAT IS WRONG TO MAKE IT RIGHT

A Certificate of Error is a written acknowledgement by either the county supervisor of assessments (chief county assessment officer) or the board of review that something is wrong with your assessment. The C of E law can be used to correct problems such as mathematical errors, incorrect descriptions of property, duplicate assessments, and improvements that have been damaged or destroyed. It also can apply to cases where an exemption for which a property was eligible, but the exemption was not applied to the tax bill.

There are some instances that cannot be remedied by a C of E, including “errors of judgment as to the valuation of the property.”* Ordinary valuation disputes about market value or lack of uniformity can only be resolved by filing an appeal with the board or review and the state Property Tax Appeal Board (PTAB).

C OF E PROCESS AND PROCEDURE

In Illinois counties outside of Cook County, the C of E process is initiated whenever the supervisor of assessments or the board of review discovers an error, or upon the taxpayer’s initiative. A C of E requires the approval of the supervisor of assessments and a majority of the board of review. It is then forwarded to the county clerk and treasurer.

Interestingly, a taxpayer isn’t entitled to notice and an opportunity to be heard. In fact, local assessing officials can fix a mistake without the taxpayer’s knowledge or input. Should the county treasurer refund money because of a C of E, the taxpayer is entitled to 0.5% interest per month.**

LIMITATIONS AND THE NEED FOR AN ANNUAL REVIEW

Generally, a C of E can be issued “at any time before judgment or order of sale is entered” in a proceeding to collect unpaid taxes on a property.*** The term “judgment” refers to the annual tax sale that typically takes place within 60 days after the second installment of taxes is due.

While local assessing officials must act before the annual application for judgment, a 1977 Illinois Attorney General opinion added a further limitation finding that the period in which a C of E may be issued expires when a taxpayer files an appeal with the PTAB or when the PTAB renders a decision.****

Like it or not, the property tax process is prone to mistakes. That’s why an annual review of your property assessment and tax bill for accuracy is time well spent.

If you find an error or mistake on either of your documents, contact Jim at JWChipman@GCTSpringfield.law or 217.280.5518 for advice on whether a C of E is the best way to remedy your situation.

Sources:
*35 ILCS 200/14-20 (The certificate of error process differs in Cook County – see 35 ILCS 200/14-10 & 200/14-15)
**35 ILCS 200/20-178
***35 ILCS 200/14-20
****IL Atty. Gen. Op. No. S-1307 (1977)

By James W. Chipman

Wind energy devices have proliferated across the central Illinois landscape in recent years. Get wind of how the assessment process works by talking to a property tax attorney.

Illinois is home to both the Windy City and a very flat, windy prairie. When the state’s first wind turbine went online in rural Lee County in 2003, no one could have guessed that 15 years later over 2,600 of these devices would be operational and account for 6.2% of all in-state electrical production.*

Wind turbines convert the wind’s kinetic energy into electrical energy for commercial sale. Most turbines are located in rural settings where land is rented from the property owner, usually a farmer. The company that installed the turbine pays the taxes, and the farmer receives an annual royalty. One individual “wind farm” typically occupies about an acre of land.

TWISTING IN THE WIND

Because wind turbines have both real and personal property components, assessment criteria varied from county to county based on a jurisdiction’s treatment of classifying property prior to 1979. (Real and personal property classification is still unsettled law.) Inconsistent and confusing assessments were frequently the subject of appeals before boards of review and the state’s Property Tax Appeal Board.** Eventually, it became clear that the wind farm valuation process needed a legislative solution.

WINDS OF CHANGE

A 2007 change in Illinois law made the state even more attractive to wind developers when a uniform system of tax assessment was finally adopted.*** The “market value” of a turbine is $360,000 per megawatt of capacity adjusted annually for inflation by a trending factor. An amount for physical depreciation is then deducted from the “trended real property cost” to determine the assessed value [($360,000 x trending factor) – depreciation = assessed value]. Wind turbine operators must have a surveyor prepare a plat that includes a metes and bounds description of the area surrounding the turbine over which the owner exercises exclusive control.

Although wind turbine assessments are now computed annually under the state formula, assessments can be challenged if the turbine is affected by what appraisers call “functional and external obsolescence.” These two forms of depreciation differ from physical depreciation, which is deterioration of property due to age and wear. Functional obsolescence occurs when conditions exist within the property—such as an outdated design feature—that cannot be easily changed, as opposed to external or economic obsolescence, which is due to negative influences outside the property and are usually not fixable.

Don’t throw caution to the wind. If you have questions about a wind farm assessment, call a property tax attorney for answers.

Learn more about wind farm assessments by contacting Jim at JWChipman@GCTSpringfield.law or 217.280.5518.

Sources:
*“Wind Energy in Illinois” U.S. Wind Energy State Facts. American Wind Energy Association (2017)
**Property Tax Appeal Board decision (#06-2736.001-C-2: Pike Co.), Feb. 23, 2010
***35 ILCS 200/10-600 et seq.