Illinois Property Taxes in a Class by Themselves
The Labyrinthine Cook County Tax System
By Andrea A. Raila in Illinois Industrial Real Estate

The Illinois property tax system is one of the most complex and confusing sources of local revenue.  It is a system set up to get you to pay up without a fight. Over $13 billion a year are collected from property owners statewide! Cook County alone generates 45 percent of the state's total property tax collections.

Recent studies show that our state is far too dependent on this highly regressive tax to support local governments.  Illinois' property taxes have grown twice as fast as the actual property tax base.

This article hopes to 1) unravel and demystify this mammoth system; 2) put into layman's terms how to correct and recognize inaccurate assessments; and 3) suggest some reforms that would make the system more business friendly.

Two systems: Cook County and every place else

There are two types of tax assessment systems in Illinois: the system used in Cook County and the system used in every other county.  Set by county ordinance, Cook assessed property into five major types. Industrial properties are assessed at 36 percent of their estimated market value.  Commercial properties are assessed at 38 percent and vacant land is at 22 percent. To complicate the process a little more, there are specialized sub-classes which were created by the Cook County assessor to promote economic growth. They are granted based upon a successful application initiated by the property owner.  They include "6a" industrial (30 percent over eight years); "6b" industrial (16 percent for eight years, 30 percent for the next four years); "7" commercial (16 percent for eight years, 30 percent for the next four years), "8" industrial/commercial (16 percent for 12 years).

Classification of properties places types of properties into specific use so various assessment levels can be assigned.  The classification number for your particular property appears on both the tax bill and assessment notice.  It is important to be classified properly, as this is a variable used by assessment technicians to set initial property values.

The second assessment system functions outside of Cook County.  The 101 counties outside of Cook assess at 33.3 percent for all property types.  These counties have no classification system for major property types.

Another major distinction of the Cook County assessment system is the division of the county into three assessment districts. Each assessment district is reassessed every three years. Counties outside of Cook assess all properties within their county boundaries at once.

Understanding your property's assessed value and tax bill

Fair taxation begins at the first step of the assessment process with the township or county assessor setting assessed values.
The assessor starts off the assessment process by establishing a fair market value for each parcel of property. The assessed value is a percentage of the assessor's estimated market value.  For example, if your property is assessed at $150,000 and has an assessment level at 36 percent, your estimated fair market value is $150,000 divided by .36 percent = $416,000.

Every business can take a stab at decoding the property tax system by understanding how the calculations on their tax bills are arrived at.  The bill begins with the assessed value which is multiplied by the state multiplier or equalizer to get an equalized assessed value.  The multiplier for Cook County is now up to 2.0523, the highest it has been in two decades.  This figure is a barometer of how well the assessor is doing the job. The higher the yearly multiplier rises, the poorer the quality of assessment practices done at the local level. Unfortunately the Cook County multiplier cannot be a target for an assessment complaint.

The equalized assessed value is then multiplied by an overall municipal tax rate- an aggregate figure of the total rates for the taxing bodies within your business' service district.  As with the multiplier, tax rates cannot be appealed.  However, in other states tax rates can be automatically rolled back by certain percentages if reassessments increase over predetermined percentages.

Tax bills are mailed out in two installments and must be paid within 30 days or a penalty of 1.5 percent is applied each month. Watch for that bill, especially if your business moves or your bill is paid through an escrow. Cook County is notorious for sending bills to the wrong address. Even if the correct address procedures have been followed, bills can still be mailed to the wrong addresses. The county will not take responsibility for its own errors.  Indeed, Cook County collects at lest $80 million in property tax penalties each year. It is estimated that five to ten percent of these taxpayers  for one reason or another did not get their tax bill and were unaware of non-payment until they were notified of the tax-delinquent sale.

Exploding the myths

When contemplating filing an assessment complaint, don't be misled by some of these common myths.

-- "You can only appeal your property tax assessment after a reassessment."
False! You can appeal every tax year.  You do not have to first start with the assessor's office to file an appeal at another agency.  Some businesses must file for two to three consecutive years to get their assessment down to an acceptable, financially feasible level.

-- "An unsuccessful appeal may lead to the assessor raising my assessment."
False! It is never too late to appeal your property tax assessment. Depending on where you are in the property tax cycle, successful appeals made to either the assessor, board of review, or tax appeal board, will reduce your tax liability due on the next installment. Also, if your evidence warrants a reduction based on a clear technical error, such as a sale, fire causing a prolonged vacancy, building demolition, etc. you may qualify for a refund check for over-payment on your last installment.

-- "Filing an appeal won't work because the assessor's estimate of my property's market value is already too low."
False! You're wrong to assume your bill is fair because the assessor's estimated market value is well below your own estimate or even actual sale.  The ultimate test in judging the correctness of your assessment is its relationship to assessments of other comparable properties, or the net flow of potential or actual income your property generates.

Remember, initial assessments in Cook County are often more than doubled by application of the state multiplier. Never be dissuaded to appeal simply because the property appears to be underassessed. Regardless of class, most properties in Cook County are underassessed.  Underassessments do not translate into low or fair property tax bills. When property is underassessed, owners are discouraged from examining the quality and fairness of the assessments. They are misled by the system to believe that market value accuracy is the only measure of fairness. Unless property owners fully understand the role, current value, and effect of the state multiplier and initial assessment values, underassessments go unchallenged.