Leading Lawyer magazine names Elliott & Associates partner Mike Elliott #5 Real Estate Tax attorney in Illinois and #3 in the Suburban Real Estate category.

Super Lawyers selects Elliott & Associates attorney Lauren Elliott to the Illinois Super Lawyer Rising Star list for the second year In a row.  

Question:
How do the Cook County Tax incentives work?

Answer: ​
Cook County offers tax incentives to owners of commercial and industrial property.  These incentives reduce taxes by 60% for 10 years and gradually increase back to market in years 11 and 12.  Here’s how they work.     

The most common incentives are known as Class 6b (industrial property) and Class 8 (commercial and industrial property).  They apply when property owners build new buildings, substantially rehabilitate or expand existing buildings and re-occupy vacant buildings (referred to as “abandoned property” in the law).   For commercial properties, Class 8 also requires that the property be located in a blighted area[1].  Class 6b does not include the blight requirement.
 
Recent modifications to the law have relaxed the vacancy requirement and allow industrial businesses who have operated in the same location for 10 years or more and can demonstrate an economic hardship to obtain an incentive.  As a result of these changes, more properties will qualify for these incentives.
 
Vacant Property
If property has been vacant long enough, the ordinance considers it “abandoned property” and incentives may apply.  Over the years, the definition of abandoned property has been expanded several times.  Recent changes to the law have continued the expansion allowing more taxpayers to take advantage of the vacancy provisions.
 
Under recent changes to the law, “abandoned property” includes:

• Property sold to a bona-fide purchaser that was vacant for at least 24 months prior to the sale. 
• Property sold to a bona-fide purchaser that was vacant for less than 24 months if there is a finding of “special circumstances” (more about that later).
• Property that has not been sold, but has been vacant for at least 24 months if there is a finding of special circumstances.
• Property that has not been sold, but has been vacant for at least 12 months if there is a finding of special circumstances.   This is a recent (non-permanent) change in the law that is called the TEERM Program.

The term “special circumstances” is not defined in the County ordinance, but typically means the property possesses some negative attribute (such as functional or economic obsolescence) that would justify granting the incentive.   The finding of special circumstances must be made by the municipality or the Cook County Board (if the property is in an unincorporated area).   Furthermore, the governmental officials may incorporate a “but-for test” meaning they may not support granting the incentive unless the taxpayer proves that the construction project or re-occupancy will not occur unless the incentive is granted. 
 
Applications for exemption under the TEERM program must be filed by November 30, 2018 and are not renewable.
 
Industrial Properties Without Vacancy
 Prior to the recent changes in the law, occupied industrial properties were not eligible for Class 6b incentives.  Under recent changes, however, occupied industrial properties may obtain an incentive under a program known as Class 6b SER Program if the municipality or County Board concludes a financial hardship exists and the business is not viable without the incentive.  The specific requirements of the SER Program are as follows: 

• An industrial enterprise must have occupied the property for at least 10 years;
• The industrial enterprise must prove the tax incentive is necessary for the business to “continue operations at the current location and maintain its staff” and without the incentive, the business would “not be economically viable causing the property to be in imminent risk of becoming vacant and unused.”
• The applicant does not receive any other tax incentives for the property.
• The municipality and the County Board find special circumstances exist and that the property is qualified for the SER Program.
• Application must be made before November 30, 2018.

 
The incentive under the SER Program is not renewable.

[1] The term “blighted area” means an area “certified as in need of substantial revitalization” under the Cook County Classification Ordinance.  This includes all properties located in Bloom, Bremen, Calumet, Rich and Thornton Townships and any property acquired through the Cook County Tax Reactivation Project.

Question:  
​You filed an appeal on my property and the assessment was reduced, buy my tax bill is higher than last year.  Where are the savings?

Answer:
​When your assessment is reduced because of a tax appeal, your taxes before exemptions will always be less than what they would have been had there been no reduction. You cannot see the savings by comparing this year’s bill to last year’s bill. You see the savings by comparing this year’s bill to the bill you would have received had your assessment not been reduced. 

​Your taxes are determined by the: assessed value, state equalization factor, and local tax rate.
 
Months before you received your bill, the Assessor placed an assessment on your property.  In a reassessment year, an assessment notice was mailed to you.
 
You contested that assessment and caused it to be reduced. The reduced assessment appeared on your tax bill and was used to compute your taxes.
 
But, since you won your appeal, you never saw the bill that would have been issued had the original assessment not be lowered.
 
The bill you received included the reduced assessment and not the original  Here’s what an actual tax bill looks like and  what the bill would have looked like had there been no assessment reduction.

​As you can see, the actual tax was lower than the tax that would have been billed had no reduction been obtained. That’s the savings.          
 
There are several factors that could have caused this year’s real estate tax bill to be greater than last year’s.

1. Equalizers and tax rates vary from year to year but tend to increase over time.
   
   1. This year’s equalization factor may have been higher than last year’s.
      
   2. This year’s tax rate could have been higher than last year’s.
2. Even if there was an assessment reduction, this year’s assessment may have been higher than last year’s assessment.

 
The tax savings that you realize because of an assessment appeal is the difference between the actual taxes billed and the taxes that would have been billed had no reduction been obtained. It is not the difference between this year’s taxes and last year’s taxes. 

Question: 
If Elliott appeals my assessment and wins, will my tax bill be less than last year?
 
Answer:
Not necessarily.  But, in nearly all cases, if we file a tax appeal for you and win, your taxes will be less than otherwise and you will save money.
 
Here’s why.      
 
Your taxes are based on:

1. Your current assessment
2. The county equalization factor,
3. Your local tax rate, and
4. Any exemptions you are entitled to receive as a homeowner.
                  

If we file an appeal for you and win, your assessment will be reduced.  And, that reduced assessment will be reflected on your next tax bill. 
               
If the originally proposed assessment were reflected on your bill, your taxes (before exemptions) would be higher.                

The difference between the taxes based on the original assessment and the final one because of the appeal we filed is the tax savings. 
 
Your tax bill following a successful appeal could be more or less than the prior year.  Why?   

• Even though your assessment was reduced this year, it could be higher than last year.             

• The county equalization factor changes each year and tends to rise over time.  The tax rate reflects local government spending that increases over time causing rates to go up.  On the other hand, increasing property values can put downward pressure on tax rates.  So, tax rates change each year.       

• And, finally, the value of the exemptions you receive each year can change.

 
The savings you realize from a tax appeal is not computed by comparing this year’s bill to last year’s because there are other factors that change from year to year that affect your bill.  The savings you realize from a tax appeal is the difference between the taxes you would have owed had no appeal been filed and the taxes you will owe following the appeal. 

Question:
Elliott & Associates is pursuing a tax appeal for me.  Should I pay my tax bill?

Answer: 
Yes, you should pay your tax bill even though you have an appeal pending.  Here’s how the appeal process affects your tax bill.     
 
In Illinois, property taxes are paid in arrears.  That means taxes for a particular year are paid the next year.  
 
In Cook County, taxes are payable in two installments.  The first installment is 55% of the prior year’s tax bill and is basically a down payment on what you will eventually owe for this year.  So, you need to pay your 1st installment bill regardless of whether a tax appeal is pending.               
 
After all appeals have been concluded, 2nd installment tax bills will be computed and issued.  The 2nd installment bills are usually mailed around July 1st and due August 1st.  The 2nd installment bill will reflect any assessment reduction we obtain for you.  If your assessment is reduced, your 2nd installment bill will be smaller than otherwise.              
 
Your 2nd installment bill will include a credit for the amount you paid for the 1st installment and you will be billed for the balance due.         
 
Outside of Cook County, tax bills are not issued until all appeals have been concluded.    Then, the taxes are computed and will reflect any assessment reduction we obtain for you.  The bills are usually mailed in mid-April and payable in two installments of 50% each.  There is no estimated 1st installment bill as there is in Cook County.
 
So, regardless of whether your property is located in Cook County or elsewhere, you must pay each tax bill when it due regardless of whether a tax appeal is pending.  If you fail to do so, interest will accrue at the rate of 1-1/2% per month.

Question: 
Why does my tax bill rise each year? 

Answer:
Tax bills can rise over time even when you diligently contest your assessment.  But, if you don’t contest your assessment, the tax increases will be even greater. 

Here’s why.
                                                                                                                         
Property taxes are directly impacted by local government spending.  If you review your tax bill, you will see all the governmental agencies that levy a tax on your property.     
                                  
The more these agencies spend, the greater the tax they take from property owners like you.   
  
The amount government  takes from you is reflected on your tax bill in the tax rate.  The higher the spending, the higher the tax rate and the more you will owe.          
                                                
Many governmental agencies are limited by law as to how much they can take from property owners each year.  These limitations are known as tax caps.  Tax caps limit tax levies from increasing from year to year by more than the rate of inflation ---which has been about 2% to 3% per year recently.  
             
But, other agencies are not limited by tax caps and they can take whatever amount they wish.    
In the final analysis, you can expect tax levies to increase at least 2% to 3% each year because of increases in government spending.    
                                                                                                     
So, even if you keep your property assessment under control, increases in spending could cause your  tax bill to grow over time.                                                                                                                          
But, if you don’t contest your assessment, the situation will be even worse as a higher tax rate will be applied to a higher assessment causing an even higher tax bill.

Question: 
How is my tax bill calculated? ​

Answer:
Your tax bill is based on your current assessment, current equalizer, current tax rates and any exemptions you are entitled to as a homeowner.
 
Here’s how the bill is computed:            

1. Your tax bill reflects the current assessment of your property.  If an appeal was filed– and if you won that appeal – the reduced assessment will appear on your tax bill. 
2. The assessment is multiplied by the County equalization factor to arrive at the equalized assessed value of your property, or the EAV.  This is also known as the taxable property value.            
3. The EAV is multiplied by the local tax rate to determine the gross tax due.       
4. If you are a homeowner, you may be entitled to receive exemptions. 

     5.  Exemptions are then deducted from the gross tax to arrive at the net tax due.

Question:
Should our association waive legal fees for senior freeze recipients?

Answer: 
This is a business decision for your board.  We will tell you what the law says and give you some of the pros and cons of waiving legal fees for senior freeze recipients.         
 
The Condominium Property Act gives associations the right to file tax appeals for all unit owners and to charge them for the costs incurred as a common expense.  The Condominium Act provides:

​Some associations choose to bill their unit owners for their share of tax appeal costs.
 
Senior freeze recipients may object to paying tax appeal costs because their taxable property values were already frozen under the senior freeze program.  Why bill senior freeze recipients?         

​These are some of the reasons why the Association might choose to waive legal fees for senior freeze recipients.  We hope this helps your board to make an informed decision.

Question:
I have the senior freeze and I don’t think the Association’s tax appeal benefitted me.  Please explain if it did.

Answer: 
An Association tax appeal can benefit senior freeze recipients.  Here’s how the freeze works and how it may benefit you.      
 
Real estate taxes are based on property values.  The higher the value of your home, the higher your tax.         
 
If you are a Senior Freeze recipient, as your home value rises, the Senior Freeze locks its taxable value saving you money.
 
Even though you are a senior freeze recipient, your taxes are based on your current assessed value. 
 
But, you will receive a deduction on your tax bill for the Senior Freeze Exemption.

This exemption reduces your final taxes so they are based on your frozen value and not your current assessed value.   
 
In many cases, you will not directly benefit from an association tax appeal while you receive the freeze.         
 
But, there are a few instances where you might …         
 

• If the association appeal reduces your assessment below your previously frozen base, you will save money because of the association appeal for years to come.    
• An association appeal will reduce your assessed value and your taxes before exemptions.  This will benefit you when you sell your home because buyers are interested in knowing what the taxes will be when they purchase the home and the freeze no longer applies.            
• While you may receive the freeze this year, you may not be eligible in future years.  And, the association’s appeal will save you money when you no longer obtain the freeze.      

 
Property values for all homeowners – seniors included – are positively impacted from keeping taxes in your development low.