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)