COVID-19 and property assessment appeals
COVID-19 and Property Tax
Property Tax Appeals Process
May 15, 2020
Cook County Assessor Fritz Kaegi has announced that he plans to apply adjustments to all Cook County parcels to reflect the impact of COVID-19 and the shutdown of much of the area’s economic activity. The COVID-19 adjustments are expected to reflect the anticipated varying impact based on property location and building classifications.
Kaegi’s proposals have raised many questions as to legal authority and implementation.
Under the Illinois Property Tax Code, the assessor is required to determine as near as practicable the value of each property listed for taxation as of January 1 of the tax year (35 ILCS 200 / 9-155). While COVID-19 already is having and will continue to have major negative impacts on property values, these impacts occurred after the January 1, 2020 lien date. It is unclear how the statutory lien date of January 1 can be reconciled with the Kaegi’s decision to factor COVID-19 impacts in the initial 2020 assessments.
The Illinois Supreme Court has held that “values which are future in character may not be taken into consideration, however, where they are so elusive and difficult of ascertainment that they have not affected the present market value of the property. (People ex rel. Carr v. Stewart, 315 Ill. 25, 31, 145 N.E. 600.) The Court further stated that “what subsequent events assessing officials may consider in any individual case will depend on the nature of the event and the weight to be given the event will depend upon its reliability in tending to show value as of January 1.”
In light of these legal constraints, it is unclear how the statutory lien date of January 1 can be reconciled with Kaegi’s decision to factor COVID-19 impacts in the initial 2020 assessments.
Because the COVID-19 shutdown and related impacts began in March 2020, evidence of these impacts on property values is not yet available to a degree that would provide reliable guidance on property values. It will take time before evidence of rent defaults and forbearances, increased vacancies, and lower property sales prices to emerge. In the absence of such evidence, Kaegi will face great difficulty in establishing property values reflecting the impact of COVID-19.
Kaegi. has stated that he plans to refer to impacts from other major financial disruptions, such as the 2008 recession and the 9/11 attacks. As COVID-19 is a disruption different in kind and duration, it is debatable whether the models from these other events will provide a reliable basis for determining property values.
Kaegi also has stated that he will issue a form for submitting evidence of COVID-19 adverse impact on property values. He has not provided a date when this form will be released.
Illinois law does provide for a reassessment process for real estate because of disasters. Section 200 / 13-5 provides:
Reassessment in disaster areas. In every county that the President of the United States or the Governor of the State of Illinois have declared a major disaster area, the chief county assessment officer, board of review, or board of appeals shall, upon application by the property owner, make a reassessment of any taxable property in the county which was substantially damaged by the disaster. The department shall advise with the chief county assessment officers, boards of review, or boards of appeals of the several counties involved in connection with such reassessment.
In the reassessment, the property value would be determined as of the date of the declaration of the county as a major disaster area. If the value of any property on that date is, by reason of the disaster, less than the prior assessment, the assessment for that year would be calculated by dividing by 365 the sum of the 2 products obtained (a) by multiplying the prior assessment by the number of days from January 1 of that year to the date of the declaration and (b) by multiplying the value of the property as of the date of the declaration by the number of days from the date of the declaration to December 31 of that year.
If the reassessment and computations occur prior to the adjournment of the current board of review or board of appeals, the assessment of the property shall be reduced accordingly. If the board of review or board of appeals has adjourned at the time of the declaration, the department shall convene the board of review or board of appeals to make the reassessment of property applied for after that adjournment.
Kaegi’s office has cited Section 200 / 13-5 as legal authority for its COVID-19 proposals. While Section 200 / 13-5 authorizes property owners to apply for a reassessment because of a major disaster, it does not authorize him to change the statutory January 1 lien date. As stated above, the statute provides that “[i]n the reassessment, the value of the property shall be determined as of the date of the declaration of the county as a major disaster area. If the value of any property on that date is, by reason of the disaster, less than the prior assessment, the assessment for that year shall be arrived at by dividing by 365 the sum of the 2 products obtained (a) by multiplying the prior assessment by the number of days from January 1 of that year to the date of the declaration and (b) by multiplying the value of the property as of the date of the declaration by the number of days from the date of the declaration to December 31 of that year.”
In other words, 200 / 13-5 authorizes Kaegi, upon application by the property owner, to determine a fair market value as of the date of the disaster declaration, and if that fair market value is lower than the fair market value as of January 1, he is to issue a blended assessment, prorating the portions of the tax year before and after the disaster declaration. This would require assessments as of both January 1, 2020, and as of the date of the disaster declaration.
Kaegi’s COVID-19 proposals raise numerous questions, both in terms of legal authority and administration.
Jerry brings decades of experience in research and litigation across several practice areas, with a particular focus in reviewing and analyzing the ever-evolving landscape of state and local regulations of tax assessment and valuation.
Siegel & Callahan, P.C. is singularly focused on property tax appeals serving clients throughout the United States.
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