REAL ESTATE TAX BENEFITS

Property Tax Reductions - Every business person has a secret partner that takes a large share of profits from the business-- real estate taxes. The easiest and largest benefit available to Illinois businesses is the right to apply for a reduction of real estate taxes. Good business people focus on holding down payroll expenses, benefit costs, the price of goods purchased and vendor charges. Yet a surprising number of owners and managers neglect to adequately challenge and reduce their properties' real estate taxes. Cook County offers special property tax incentives for property anywhere in the county.

    Complexity. This may be due to the tax system's complexity and the sometimes perceived "political" nature of the assessment levy and tax collection process.

    Multiple Taxing Bodies.
    General Rule.
    Favorable Fee Structure.

    Tax Reductions and Refunds. Using Cook County as an example, services taxpayers can request from real estate tax attorneys include:

      filing a complaint with the Assessor to reduce the property's current (1996) Assessed Value. A successful complaint results in reducing the next year's tax bill (1996 taxes due in 1997).

      filing an appeal with the Board of Appeals to reduce the property's current Assessed Value. A successful appeal results in reducing the next year's tax bill.

      filing a Tax Objection in Circuit Court to further reduce the property's Assessed Value. A successful suit results in a tax refund check including 5% interest per year.

      filing a Certificate of Error with the Assessor to reduce the Assessed Value for a prior year. If successful and when confirmed by the Circuit Court, this results in a retroactive tax refund.

      paying taxes under protest each fall and filing a tax rate objection. This results in a small tax refund plus 5% interest per year.

      filing an exemption application with the Board of Appeals and Illinois Revenue Department. For specified properties and uses, this can result in the complete elimination of taxes.

      requesting tax incentive status for certain industrial or commercial expansions. When appropriate, this results in reduced taxes for a number of future years.

    Reassessment Cycle.
    Assessment Notice vs. Tax Bills.

    Assessment Reduction Now = Tax Reduction Later. Successfully appealing an increase in assessed value will result in next year's taxes being less than they would otherwise have been without being appealed. Properties are valued in one year but the taxes on those values are not calculated or collected until the following year.

    Do Not Wait For The Tax Bill.

    Tax Formulas. The formula for calculating real estate taxes can be stated three different ways:

    TAX = Fair Market Value x Assessment Ratio x Equalizer x Tax Rate
    TAX = Assessed Value x Equalizer x Tax Rate
    TAX = Equalized Assessed Value x Tax Rate

    Example.

      $76,000 = $1,000,000x 38% x 2.0 x 10%
      $76,000 = $380,000 x 2.0 x 10%
      $76,000 = $760,000x10%

    Assessment Ratio:

      All counties = 33.3%

      Cook vacant land=22.0%
      Cook residential = 16.0%
      Cook apartments= 33.0%
      Cook non-profit = 30.0%
      Cook commercial= 38.0%
      Cook Industrial = 36.0%

      Cook overall = 33.3%

    Cook County Appeal Process
    Downstate Appeal Process
Tax Increment Financing Program - TIF is a municipal financing technique that can be used to renovate declining areas while improving their tax base. The program allows a municipality to acquire and prepare property for redevelopment and make needed public (and some private) improvements such as land assemblage, building demolition, utilities, streets and sidewalks. Property owners in the project area continue to pay their full taxes. However, those taxes generated by the increase in assessed valuation -- the tax increment -- go into a special allocation fund used to repay the bonds that financed the public improvement costs. This technique is not a tool to prepare for speculative development -- tax increment financing requires an advance commitment by a developer to a project.
    TIF District Created. For an area to be designated as a tax increment financing district, a municipality must demonstrate that the area qualifies as a "blighted area" or as a "conservation area" as defined in the state legislation. An eligibility study is conducted to demonstrate that the area meets the criteria, and a redevelopment plan is created setting forth the plans for the proposed TIF district. The municipality then holds a public hearing to consider the redevelopment plan. A joint review board is also created, consisting of one representative selected by each taxing district having taxing power over the area, and a member of the public.

      A "blighted area" may be either improved or vacant. If the area is improved, five or more of the following factors must be present:

        age
        dilapidation
        obsolescence
        deterioration
        illegal use of individual structures
        structures below minimum code standards
        excessive vacancies
        overcrowding of structures and community facilities
        lack of ventilation, light or sanitary facilities
        inadequate utilities
        excessive land coverage
        deleterious land-use or lay-out
        depreciation of physical maintenance
        lack of community planning

      If the area is vacant, the municipality must find that its sound growth is impaired by a combination of two or more of the following factors:....

    Private Developers.

    Increases in Taxes Diverted. Tax Increment Financing allows a community to capture the increase in real estate taxes that result from a redevelopment project. The tax revenue obtained from the redevelopment project which exceeds the taxes derived from the area before redevelopment is called the "tax increment." If the redevelopment project increases sales, assessed values will rise. Higher property values increase tax revenues. These incremental revenues, if they occur, pay for the project's costs such as street paving and new curbs.

    Increment Denied To Outside Taxing Bodies.
    Eligibility.

    Paying for Redevelopment Costs. The municipality can pay forredevelopment costs in two ways:

      "Pay as you go" basis:
      "Upfront" basis:

    Length of Tax Increment.

    Go to Government Incentives for Illinois Businesses Table of Contents

    For the full unabridged edition of this document call 312/726-9700.

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