Do you own commercial or industrial property in Cook County? You may be eligible for an incentive with substantial tax benefits.
How do the Cook County Tax incentives work?
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. 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.
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:
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:
The incentive under the SER Program is not renewable.
 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.
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?
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.
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.
If Elliott appeals my assessment and wins, will my tax bill be less than last year?
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.
Your taxes are based on:
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?
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.
Elliott & Associates is pursuing a tax appeal for me. Should I pay my tax bill?
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.
Why does my tax bill rise each year?
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.
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.
How is my tax bill calculated?
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:
Should our association waive legal fees for senior freeze recipients?
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.
I have the senior freeze and I don’t think the Association’s tax appeal benefitted me. Please explain if it did.
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 …
Property values for all homeowners – seniors included – are positively impacted from keeping taxes in your development low.
If my association files a tax appeal on behalf of all unit owners in our development, am I at risk of losing my Senior Freeze exemption?
No. The filing of a tax appeal will never cause you to lose the senior freeze. But, it could look that way.
The Senior Citizen Assessment Freeze (the Freeze) provides an exemption (a deduction off the tax bill) for qualifying seniors that is about equal to the increased tax on the home from a base year to the current year using current tax rates. The base year is the year before the senior first qualified for the Freeze. So, this effectively freezes the taxable value (EAV) of the home at the level of the base year. In a rising market, that is a good for taxpayers as their taxes are based on a low value from the past rather than the higher value of the present.
If your Association filed an appeal and the assessment of your property was reduced, but your EAV remained higher than in the base year, you will receive a senior Freeze exemption this year and the tax this year will be the same as it would have been had no appeal been filed.
But, if your Association filed an appeal and the assessment of your property was reduced below the base year EAV, your senior Freeze exemption this year will be $0. This makes it appear as if you lost the Freeze, but that is not the case. If you applied for the Freeze this year on a timely basis, you remain eligible for it even though the exemption amount is $0.
If your assessment (EAV) is reduced below your previously frozen Base, your will receive a new Base that will be adjusted below the old/higher one. Your will continue to enjoy this reduced base for so long as you continue to qualify for the Freeze. In this case, you will benefit from the Association’s appeal for years to come.
Please see the next page for a numerical example of how the Freeze works:
1Assumes the senior first obtained the Freeze in 2010; that the assessment in 2009 was $20,000; that the original Base was 67,402 (2009 assessment of 20,000 x 2009 State Equalization Factor of 3.3701); and, that the new Base has been reduced to 53,471 (2001 assessment of 18,000 x 2011 equalizer of 2,9706). In this case, the Senior Assessment Freeze Exemption is $0 because the Base has been lowered from 53,471 to 67,402.
2Tax Savings from Association Appeal is the difference between your Current Year Tax Bill After Exemptions & Savings With the Assessment Reduction (2,371.43) Current Year Tax Bill After Exemptions & Savings Without the Assessment Reduction (3,131.28). The client received an additional savings of 759.94from the appeal.
What is the difference between the senior exemption and the senior freeze?
The senior exemption and the senior freeze are deductions off of a senior citizen’s real estate tax bill. Here’s how these exemptions work and some of the differences between them.
Real estate taxes are based on the current assessed value of the home. As the value of the home rises, the taxes also rise.
Qualifying seniors receive deductions off their tax bills because they are senior citizens. The senior citizen exemption reduces the tax bill by a sum certain each year. The actual deduction is $5,000 times the local tax rate. So, if the local tax rate is 6%, the senior citizen exemption will be $300.
The goal of senior freeze is to lock the taxable value of the senior’s home.
As the senior’s home value rises, its taxes will also rise. But, senior freeze recipients receive a deduction off their tax bills for the freeze. The senior freeze deduction is an amount large enough so the final tax bill (after the senior freeze exemption) is based on the frozen value and not the current --- and higher --- assessed value. As a result of the senior freeze, qualifying seniors enjoy a much lower tax bill.