Retroactive and Alternative Real Estate/Property Tax Relief

Property owners may have retroactive and/or alternative property tax relief options such as the following:

Certificates of Error

A taxpayer may discover an error in an assessment after the deadline for filing complaints has passed. Under certain circumstances, relief may still be available through a certificate of error. A certificate of error is basically an acknowledgement by the assessor that an error occurred in the assessment of property. It is a statutory device used to correct a variety of mistakes discovered after the assessment rolls have  closed. One common scenario occurs after a property is declared exempt, then the applicant applies for certificates of error for the 3 previous tax years. See 35 ILCS 200/14-25(a). If granted, the certificate of error results in refunds to the tax payer. A taxpayer is entitled to 0.5 percent interest per month, 35 ILCS 200/20-178, with interest starting 60 days after the certificate of error is issued by the chief county assessment official. 

Under 35 ILCS 200/14-25(b) and (c), taxing authorities may rectify errors in failing to maintain exemptions in subsequent years. Unlike 35 ILCS 200/14-25(a), which provides a three-year limitation, there is no limit on the number of post-exemption years for which an applicant can seek to reinstate a lost exemption. 

In Cook County, certificates of error are initiated through the Assessor’s office and endorsed by the Board of Review. Outside of Cook County, certificates of error are initiated through the Board of Review and endorsed by the county’s chief assessment official. Court approval may be required for some certificates of error. Others may become final based upon the discretion of the Assessor. 35 ILCS 200/14-15 (homestead exemptions, residential property of six units or less, tax-exempt property, and reductions in assessed value of less than $100,000). Most exemption certificates of error do not go to court and are simply transmitted to the county treasurer, who marks the tax records.

If you think you may be eligible to apply for certificates of error, please contact us for more information.

Omitted Assessments/Back Taxes

When a property transfer results in a change from exempt use to non-exempt use, that property is subject to taxation from the date of purchase or conveyance. 35 ILCS 200/9-185. It is the obligation of the title holder or transferee to notify the chief county assessment officer within 30 days of the change. If the property continues to be assessed as exempt based upon the failure to give such notification, the property shall be considered “omitted property” and the county collector is authorized to issue a tax bill to the person holding title to the property in that part of the year during which it was not exempt. These omitted assessment tax bills are commonly called “back tax”bills.

The county assessor may assess properties which may have been omitted from assessments for the current year and not more than 3 years prior to the current year. 35 ILCS 200/9-260. However, first there are statutory requirements that must be followed for the omitted assessment to be valid. Second, properties meeting certain requirements are not subject to omitted assessments. Moreover, an omitted assessment shall not be made against any property for years prior to the date of ownership of the person owning the property at the time the liability for the omitted tax was first ascertained. 35 ILCS 200/9-270. Ownership refers to bona fide legal and equitable titles or interests acquired for value and without notice of the tax, as may appear by deed, deed of trust, mortgage, certificate of purchase or sale, or other form of contract. An evidentiary hearing may be necessary to determine whether the property interest was acquired without notice of the tax. 

Before the omitted assessment is considered final, the taxpayer may contest it. We have also successfully contested the validity of omitted assessments after they have become final. For example, two factors must be considered when assessing the validity of omitted property: the land and the improvements. Case law has held that if both the land and the improvements are listed and valued separately, the assessor cannot back tax the property in a subsequent year. However, if either the land or the improvements have been completely omitted, the omitted part may be subject to a back tax. Litigation in these scenarios typically focuses on the definition of “omitted,” whether the “description was defective” and whether the omission was a “ministerial assessor error.”

Tax Injunctions

An entity seeking a real estate a tax exemption must initiate the claim with the local board of review and ultimately obtain a ruling by the Department of Revenue. However, once an entity obtains a ruling by the Department of Revenue judicial remedies are then available to establish an exemption for prior or subsequent years pursuant to 35 ILCS 200/23-25(e). Section 23-25(e) provides:

“The limitation in this Section shall not apply to court proceedings to establish an exemption for any specific assessment year, provided that the plaintiff or its predecessor in interest in the property has established an exemption for any subsequent or prior assessment year on grounds comparable to those alleged in the court proceedings. For purposes of this subsection, the exemption for a subsequent or prior year must have been determined under Section 8-35 or a prior similar law by the Department or a predecessor agency, or under Section 8-40. Court proceedings permitted by this subsection may be initiated while proceedings for the subsequent or prior year under Section 16-70, 16-130, 8-35, or 8-40 are still pending, but judgment shall not be entered until the proceedings under Section 8-35 or 8-40 have terminated. 35 ILCS 200/23-25(e).”

Entities and practitioners must be careful when selecting administrative and/or judicial courses of action so as not to be foreclosed by the “election of remedies” doctrine. It is critical to seek the correct remedy as soon as possible to obtain exempt status for the tax years in question. Failure to do so may cause the property to be sold at a tax sale and ultimately lost to a tax deed. In such event, remedies may still be available but the “clock is ticking.” If you have any questions, please contact our office.

Actions in Debt

The current property owner or a party seeking to acquire property with certain tax liabilities may be able to negotiate and settle the outstanding taxes with the State’s Attorney in the county where the property is located. The State’s Attorney has the authority to settle taxes against delinquent taxpayers pursuant to Section 3-9005 of the Counties Code.  

This authority was confirmed by the Illinois Supreme Court in In re Application of County Collector (J & J Partnership v. Laborers’ International Union), 155 Ill.2d 520, 617 N.E.2d 1192, 187 Ill.Dec. 471 (1993). “We believe that, through his actions on behalf of the county clerk and county collector, the State’s Attorney in the present case was authorized to reach an agreement with the property owner regarding its tax liability, including a compromise of the amount necessary to effect a redemption of the subject property from the scavenger sale.” The State’s Attorney has “the authority to reach an agreement with the property owner for payment of a lesser sum, if that officer should conclude, as a discretionary matter, that such an agreement is in the best interests of all concerned.” In J & J, the settlement reached by the State’s Attorney quickly garnered more money for the taxing authorities than they received from the sale of the delinquent taxes (although not necessarily more than if a redemption occurred).

The mechanism by which the delinquent taxes are resolved is called an action in debt and is a lawsuit filed by the county against the delinquent tax payer and/or a party submitting to the jurisdiction of the court for purposes of paying the reduced tax delinquency (such as a contract purchaser). This is a very rare cause of action but can be effective in handling unique real estate tax situations. If you have a real estate tax situation that calls for a unique solution, please contact our office to discuss your options.

Merging Prior Years’ Taxes

Section 22-40 of the Property Tax Code allows the merging (zeroing out) of prior years’ taxes in certain situations involving tax sales. Basically, if there are delinquent taxes for years prior to the year or years listed on a tax sale certificate, the court shall order that the lien of those prior delinquent taxes has been “merged” into the title of a tax deed grantee. This situation usually arises when there are multiple tax sales on the same property and the earlier tax sales results in a sale in error refund. This can result in substantial tax savings for the later tax buyer because they are not required to pay the prior years’ taxes which would otherwise have to be paid. We have represented clients who have merged over $100,000 worth or prior years’ taxes in these situations.

If you have any questions regarding the above, please contact us for more information.