Illinois Property Taxes

Real estate appraisals and valuations are foundational to the property tax assessment process. They ensure that property owners pay taxes that are commensurate with the value of their property, and they provide a mechanism for addressing discrepancies or changes in property value over time. Here's how they impact property tax assessments:

• Basis for Taxation: Property taxes are typically based on the assessed value of a property. Local tax authorities rely on appraisals to determine this value. The higher the appraised value, the higher the property tax will be, and vice versa.

• Frequency of Reappraisal: Some jurisdictions conduct property reappraisals periodically (e.g., every three or five years) to ensure that property tax assessments reflect current market conditions. If property values have increased in the area since the last appraisal, this could result in higher property taxes.

• Fair Market Value: Appraisals aim to determine the fair market value of a property, which is the price at which a property would sell under normal conditions. This value serves as the basis for property tax assessments in many jurisdictions.

• Appeals and Disputes: If a property owner believes that their property has been overvalued by the tax assessor, they can appeal the assessment. In such cases, an independent appraisal can provide evidence to support the property owner's claim. If the appeal is successful, it can lead to a reduction in property taxes.

• Improvements and Renovations: Significant improvements or renovations to a property can increase its value. If these changes are reported or detected by the tax authority, it could trigger a new appraisal. As a result, the property tax assessment may increase to reflect the property's higher value.

• Inconsistencies in Appraisals: Not all appraisals are created equal. Different appraisers might arrive at slightly different valuations for the same property due to varying methodologies, perspectives, or market data. This can lead to inconsistencies in property tax assessments, especially if different properties in the same area are appraised by different individuals or firms.

• Economic Factors: External economic factors, such as a recession or a booming real estate market, can influence property values. Appraisals take these factors into account, which can subsequently impact property tax assessments.

• Special Assessments: In some cases, special assessments may be levied on properties that benefit from certain public improvements, such as new roads or sewer systems. While these are separate from regular property tax assessments, they are still based on property valuations.

• Exemptions and Abatements: Some jurisdictions offer tax exemptions or abatements for certain types of properties or for specific groups of property owners (e.g., senior citizens, veterans). The value determined by the appraisal can impact eligibility and the extent of these benefits.

**2025 Real Estate Valuation Reforms**

Significant reforms may be coming to Illinois in 2025 or 2026 as a result of mandated reporting in 2024 by the Illinois Real Estate Valuation Task Force, which was established by Public Act 102-934. In summary, the task force is tasked with (i) reviewing historical and ongoing disparities in real estate valuations, especially those rooted in racial and ethnic biases, and (ii) providing recommendations by January 1, 2025 to harmonize valuation standards, address disparities, and ensure fairness in the real estate appraisal process in Illinois.

Property tax exemptions play a significant role in the calculation of property tax assessments. In summary, property tax exemptions provide relief to eligible property owners by reducing their property's taxable value. While they can significantly reduce a property owner's tax liability, they also impact the revenue collected by local governments, which can have broader implications for the community's budget and services. Here's how they impact the process:

• Reduction in Assessed Value: A property tax exemption effectively reduces the assessed value of a property. When an exemption is applied, it lowers the taxable value of the property, which in turn reduces the amount of property tax owed by the property owner.

• Types of Exemptions: There are various types of property tax exemptions, each designed to provide tax relief to specific groups of property owners or for specific types of properties. Common exemptions include homestead exemptions, senior citizen exemptions, veterans' exemptions, and exemptions for persons with disabilities, among others.

• Caps and Limits: Some exemptions have caps or limits whereby the exemption might reduce the taxable value of a property up to a certain amount. Anything above that amount would be taxed at the regular rate.

• Special Exemptions: Some exemptions are designed for specific purposes, such as agricultural or conservation exemptions. These exemptions might reduce taxes for properties used for farming or properties that meet certain environmental conservation criteria.

• Application and Renewal: Property owners typically need to apply for exemptions. Some exemptions, once granted, are automatically renewed each year, while others require annual reapplication. Failure to apply or reapply can result in the loss of the exemption.

• Impact on Revenue for Local Governments: Exemptions reduce the taxable base of a community. While they provide relief to property owners, they also mean that local governments collect less in property taxes. To compensate, some local governments might increase the tax rate, which could impact properties that don't qualify for exemptions.

• Appeals and Disputes: If a property owner believes they've been wrongly denied an exemption or if there's an error in the application of an exemption, they typically have the right to appeal the decision. The appeals process varies by jurisdiction but often involves submitting documentation and possibly attending a hearing.

In Illinois, the county assessor (often referred to as the township assessor in some counties) plays a pivotal role in the process of real estate valuations and property tax assessments. They ensure properties are fairly and accurately assessed, administer tax exemptions, handle appeals, and maintain transparency through public records, which directly impacts the amount of property tax that homeowners and businesses pay each year. Here's a breakdown of their role:

Property Valuation

• • The primary responsibility of the county assessor is to determine the fair market value of properties within their jurisdiction. This valuation is based on various factors, including the property's size, location, quality, condition, and recent sales of comparable properties.

  • The assessor uses a combination of methods, such as the sales comparison approach, the cost approach, and the income approach, to arrive at a property's value.

Annual Assessments

• • In Illinois, properties are reassessed every year. However, a full, on-site reassessment typically occurs every four years, known as the "general assessment" year. In between these general assessments, the assessor may adjust property values based on market trends and other factors.

Property Tax Calculation

• • While the assessor determines the value of the property, they do not set the tax rate. Instead, they provide the assessed value to the county clerk, who then calculates the property tax based on levies set by various taxing bodies (e.g., school districts, municipalities, and special districts).

  • The assessor's valuation is crucial because the property tax amount is a percentage of the property's assessed value.

Exemptions and Reductions

• • The county assessor's office is also responsible for administering various property tax exemptions and reductions available to eligible property owners. These might include homestead exemptions, senior citizen exemptions, and exemptions for veterans or persons with disabilities.

  • Property owners must often apply for these exemptions through the assessor's office.

Appeals and Reviews

• • If property owners disagree with the assessed value of their property, they have the right to appeal the assessment. The initial appeal is typically filed with the county assessor's office.

  • The assessor reviews the appeal, and if they agree with the property owner's argument, they can adjust the assessment. If not, the property owner can escalate the appeal to the county's board of review or another higher authority.

Public Records and Transparency

• • The assessor's office maintains public records of property assessments, which are available for review by property owners and the general public. This ensures transparency in the assessment process.

  • They also provide information and resources to help property owners understand the assessment process, their property's value, and any available exemptions or reductions.

Collaboration with Other Entities

• • The assessor collaborates with other county departments, such as the county clerk and treasurer, to ensure the smooth functioning of the property tax system.

  • They also work with local municipalities, school districts, and other taxing bodies to gather data and insights that can influence property assessments.

In Illinois, a contentious legal battle is unfolding over the practice of selling properties due to unpaid taxes. This issue, particularly prevalent in Cook County, has drawn significant attention and sparked litigation aimed at reforming or halting the current system.

The Current System and Its Criticisms

In Illinois, counties have the authority to sell properties if the owners fall behind on their property taxes. The county typically auctions off a lien on the property, allowing investors to purchase the lien and eventually obtain the deed if the taxes remain unpaid. This system is designed to ensure that counties receive the revenue they need to fund essential services.

However, critics argue that the current system disproportionately affects vulnerable homeowners, particularly those in lower-income neighborhoods. A lawsuit filed against Cook County claims that the tax sale system violates due process and equal protection provisions. The plaintiffs argue that the system is fundamentally unfair and targets marginalized communities, resulting in the loss of homes over relatively small tax debts .

The Legal Arguments

The primary legal argument against the tax sale system is that it violates the Fourteenth Amendment, which guarantees equal protection and due process under the law. The lawsuit contends that the system fails to provide adequate notice to homeowners and does not offer sufficient protections to prevent the loss of property over minor tax delinquencies.

One of the key issues raised in the lawsuit is the adequacy of notice given to homeowners. The plaintiffs argue that many homeowners are not properly informed about the impending sale of their property and are not given sufficient time or resources to rectify the situation. This lack of notice is particularly problematic for elderly homeowners, non-English speakers, and those with limited access to legal assistance .

The Impact on Vulnerable Communities

The impact of the current tax sale system on vulnerable communities cannot be overstated. Studies have shown that properties in lower-income neighborhoods are more likely to be sold for unpaid taxes. This disproportionately affects African American and Latino communities, exacerbating existing racial and economic disparities.

For example, a report by the Woodstock Institute found that properties in predominantly African American neighborhoods were significantly more likely to be included in tax sales compared to properties in predominantly white neighborhoods. This disparity raises serious concerns about the equity and fairness of the tax sale system .

Potential Reforms

The litigation against Cook County seeks not only to halt the current practice but also to implement reforms that would make the system more equitable. Some proposed reforms include:

1. Enhanced Notice Requirements: Ensuring that homeowners receive clear and timely notice of unpaid taxes and impending sales, including multiple methods of communication such as mail, phone, and email.

2. Extended Redemption Periods: Allowing homeowners more time to pay off their tax debts before their property is sold.

3. Income-Based Protections: Implementing safeguards for low-income homeowners, such as payment plans or hardship exemptions.

4. Transparency and Accountability: Increasing transparency in the tax sale process and holding county officials accountable for ensuring that the system is fair and equitable .

The Role of Investors

Investors play a significant role in the tax sale system. They purchase tax liens with the expectation of either being repaid with interest or acquiring the property itself. While this can be a lucrative investment, it also raises ethical concerns about profiting from the financial distress of homeowners.

Some critics argue that the involvement of investors exacerbates the inequities of the tax sale system. They contend that investors, who are often more financially sophisticated and better resourced than the homeowners whose properties they target, can exploit the system to their advantage. This dynamic further disadvantages already vulnerable homeowners and contributes to the cycle of poverty and displacement in marginalized communities .

The Broader Context

The legal battle over unpaid tax sales in Illinois is part of a broader national conversation about property rights, equity, and the role of government in protecting vulnerable citizens. Similar issues have arisen in other states, prompting calls for nationwide reform of tax sale practices.

In some states, reforms have already been implemented to address these concerns. For instance, Maryland has enacted legislation requiring more rigorous notice procedures and providing additional protections for homeowners facing tax sales. These reforms have been cited as potential models for other states, including Illinois, to consider.

***Sources***

• Crain's Chicago Business - April 15, 2024

• WTTW News - December 15, 2022

• Top Metal Buyers et al v. Lopinot et al Complaint Filing - April 10, 2024

House Bill 4318 and House Bill 613 (House Amendment No. 1) both address the issue of surplus/excess proceeds from unpaid tax sales in Illinois. Here, we will compare their provisions, highlighting similarities, unique aspects, and opposing elements.

Similar Provisions

1. Distribution of Excess Proceeds: Both bills deal with the process of distributing surplus proceeds from the sale of properties due to unpaid taxes. They emphasize ensuring that any excess funds, after the satisfaction of tax debts and related costs, are handled appropriately.

2. Claimant Rights: Both bills recognize the rights of claimants to surplus proceeds. They outline procedures through which interested parties, such as former property owners or lienholders, can file claims to recover excess funds.

Unique Provisions

House Bill 4318:

• Clear Definition of Surplus Proceeds: HB 4318 provides a clear definition of what constitutes "surplus proceeds," making it easier for stakeholders to understand the specifics of what funds are considered surplus after the tax sale.

• Timeline for Distribution: This bill sets a specific timeline for the distribution of surplus proceeds, ensuring a structured and timely process. This provision aims to reduce delays in disbursing funds to rightful claimants.

• Public Notice Requirements: HB 4318 includes detailed public notice requirements, ensuring transparency in the announcement of surplus proceeds and providing a fair chance for potential claimants to come forward.

House Bill 613 (House Amendment No. 1):

• Expanded List of Eligible Claimants: HB 613 expands the list of eligible claimants to include not only former property owners but also other parties with an interest in the property, such as heirs or legal representatives. This broadens the scope of who can claim the surplus proceeds.

• Administrative Fees: This bill introduces specific provisions for administrative fees that can be deducted from the surplus proceeds before distribution. It outlines what these fees cover and the limits on their amounts.

• Appeals Process: HB 613 outlines a formal appeals process for claimants who are denied surplus proceeds, providing a mechanism for challenging decisions and ensuring due process.

Opposing Provisions

1. Priority of Claims:

   • House Bill 4318 prioritizes claims in a specific order, typically giving precedence to the former property owner before considering other claimants. This ensures that the primary beneficiary of the surplus is the person who lost the property.

   • House Bill 613, on the other hand, allows for a broader consideration of claimants without a strict priority order, potentially leading to conflicts between different types of claimants (e.g., former owners vs. lienholders).

2. Transparency Measures:

   • House Bill 4318 places a strong emphasis on transparency through detailed public notice requirements and timelines, ensuring that all potential claimants are well-informed.

   • House Bill 613 focuses more on the procedural aspects of claims and appeals, with less emphasis on public transparency measures compared to HB 4318.

3. Administrative Fees and Deductions:

   • House Bill 4318 does not specify administrative fees, implying that all surplus proceeds, after covering the tax debt, should be available to claimants.

   • House Bill 613 explicitly allows for administrative fees to be deducted from the surplus proceeds, which could reduce the amount available to claimants but ensures the coverage of administrative costs.

Conclusion

Both House Bill 4318 and House Bill 613 (House Amendment No. 1) address important aspects of handling surplus proceeds from unpaid tax sales, aiming to improve fairness and transparency in the distribution process. While they share common goals, they differ in their approaches to claimant prioritization, transparency measures, and handling administrative fees.

House Bill 4318 emphasizes a structured and transparent process with a clear definition of surplus proceeds and public notice requirements. In contrast, House Bill 613 broadens the scope of eligible claimants and includes specific provisions for administrative fees and an appeals process.

The choice between these bills may come down to preferences for prioritizing former property owners (HB 4318) versus accommodating a wider range of claimants and ensuring administrative costs are covered (HB 613). As the legislative process continues, stakeholders will need to consider which provisions best serve the interests of all parties involved in the aftermath of unpaid tax sales.

Illinois Public Act 103-555, effective January 1, 2024, introduces significant reforms to the state's property tax sale system. Here’s an overview of the key provisions of the Act, the policy goals of its proponents, and aspects subject to administrative rules and regulations.

Origin and Background of the Legislation

The origins of Public Act 103-555, initially introduced as Senate Bill 1675, can be traced back to mounting concerns and advocacy efforts surrounding the inequities in Illinois' property tax sale system. The push for reform gained momentum due to several factors:

• Advocacy and Research: Organizations like the Woodstock Institute and the Chicago Community Trust conducted extensive research and highlighted the disproportionate impact of the tax sale system on low-income and minority communities. Their findings showed that these communities were more likely to lose their homes due to unpaid taxes, sparking calls for reform.

• High-Profile Cases: High-profile cases of homeowners losing their properties over relatively small tax debts brought public attention to the issue. Media coverage and public outcry over these cases underscored the need for a fairer system.

• Legislative Support: Key legislators, recognizing the need for change, championed the cause. Senator Robert Peters and Representative Kam Buckner were instrumental in drafting and promoting Senate Bill 1675. Their efforts were driven by a commitment to social justice and equity, aiming to protect vulnerable homeowners from unjust property losses.

• Community and Stakeholder Engagement: The legislative process involved extensive consultations with community organizations, legal experts, and affected homeowners. These stakeholders provided valuable insights and feedback, shaping the final provisions of the Act to address the real-world impacts of the tax sale system.

Key Provisions of Public Act 103-555

• Enhanced Notice Requirements: The Act mandates that county collectors provide enhanced notice to property owners regarding unpaid taxes and impending tax sales. This includes multiple methods of communication such as mail, electronic notifications, and public postings.

• Extended Redemption Periods: It extends the redemption period for property owners, allowing them more time to pay off their tax debts and avoid the sale of their property. This aims to reduce the number of properties lost due to unpaid taxes.

• Increased Transparency and Accountability: The Act requires counties to maintain detailed records of tax sales and make this information publicly accessible. This includes the amounts owed, the properties involved, and the outcomes of the sales.

• Income-Based Protections: Special provisions are included to protect low-income homeowners. These may involve payment plans, hardship exemptions, or reduced penalties to prevent the loss of homes due to financial hardship.

• Surplus Proceeds Distribution: The Act outlines a clear process for distributing any surplus proceeds from tax sales, prioritizing former property owners and ensuring they receive any excess funds after debts and costs are covered.

• Administrative Fees and Costs: Counties are authorized to deduct reasonable administrative fees from the surplus proceeds, with clear guidelines on what constitutes reasonable costs to prevent excessive deductions.

• Formal Appeals Process: Property owners and other claimants have the right to a formal appeals process if they believe their property was wrongfully sold or if they dispute the distribution of surplus proceeds.

Policy Goals of the Proponents

The proponents of Public Act 103-555 aim to achieve several policy goals:

• Protect Homeowners: The primary goal is to protect homeowners, particularly those in vulnerable situations, from losing their properties due to unpaid taxes. By extending redemption periods and providing better notice, the Act seeks to reduce the number of homes sold at tax sales.

• Increase Fairness and Equity: The Act is designed to make the tax sale process fairer and more equitable. By implementing income-based protections and ensuring that former property owners receive surplus proceeds, the Act aims to mitigate the disproportionate impact on low-income and minority communities.

• Enhance Transparency and Accountability: Proponents advocate for greater transparency in the tax sale process to build public trust and ensure that all actions are conducted fairly and openly. Detailed records and public access to information are key components of this goal.

• Reduce Administrative Burdens: By clarifying the rules around administrative fees and costs, the Act seeks to streamline the process for county collectors and reduce administrative burdens, ensuring that more funds are available to claimants.

Administrative Rules and Regulations

Several aspects of Public Act 103-555 are subject to administrative rules and regulations to ensure proper implementation: Notice Procedures; Redemption Periods; Fee Structures; Public Records; and Appeals Process.

Property Tax Payment Plan Task Force

The Property Tax Payment Plan Task Force for Cook County authorized by Public Act 103-369 was established to address the challenges of property tax delinquencies and prevent property loss, released its adopted report March 18, 2024 (CLICK HERE) outlining key findings and recommendations. The task force's work focuses on creating equitable and sustainable solutions to assist property owners in managing their tax obligations without facing foreclosure.

Key Findings

• High Rates of Delinquency: Cook County experiences significant rates of property tax delinquency, particularly in low-income and minority communities. These delinquencies often lead to property loss and displacement.

• Systemic Barriers: Many homeowners face systemic barriers, such as lack of access to information, language barriers, and limited financial literacy, which impede their ability to navigate the tax payment process and avail themselves of existing relief programs.

• Ineffective Current Programs: Existing payment plan options and relief programs are underutilized due to their complexity and lack of awareness among eligible homeowners. The current system is not sufficiently flexible to address the diverse needs of property owners.

• Financial Hardships: Economic instability and unexpected financial hardships, such as medical emergencies and job loss, significantly contribute to homeowners falling behind on property taxes.

Recommendations

• Simplified Payment Plans: Develop and implement simplified, user-friendly payment plan options that are easy to understand and access. These plans should offer flexible terms, including longer repayment periods and lower monthly payments to accommodate varying financial situations.

• Outreach and Education: Enhance outreach efforts to increase awareness of available payment plans and relief programs. This includes multilingual resources and community-based workshops to improve financial literacy and help homeowners understand their options.

• Tailored Assistance Programs: Create tailored assistance programs that address specific needs, such as those for seniors, low-income families, and non-English speakers. These programs should offer personalized support to help homeowners navigate the tax payment system.

• Partnerships with Community Organizations: Partner with local community organizations to leverage their existing networks and trust within communities. These organizations can play a critical role in disseminating information, providing support, and advocating for homeowners.

• Enhanced Data Collection and Analysis: Improve data collection and analysis to better understand the demographics and needs of delinquent taxpayers. This data will help in designing targeted interventions and measuring the effectiveness of implemented programs.

• Financial Hardship Exemptions: Introduce financial hardship exemptions or deferrals for homeowners experiencing temporary economic difficulties. This could prevent immediate tax sales and give homeowners the time needed to recover financially.

• Legal Assistance: Provide access to legal assistance for homeowners facing complex tax issues or potential foreclosure. Legal support can help homeowners protect their rights and explore all available options to retain their property.

***Sources***

Illinois General Assembly Bill Status - PA103-0555

Chicago Tribune - May 4, 2023

Chicago Community Trust - January 26, 2024

Property Tax Payment Plan Task Force - March 18, 2024