Every week Mansion Global poses a tax question to real estate tax attorneys. Here is this week’s question.
Q. Can you explain the proposed property tax changes recently passed by the Illinois General Assembly?
A. The Illinois General Assembly passed a bill in May that allows local tax authorities to offset lost school district income if a taxpayer challenges their asset valuation, according to Scott Metcalf, partner at Chicago-based law firm Franczek.
The bill has been sent to Governor JB Pritzker and is awaiting ratification.
Currently, if a property owner successfully challenges their Illinois property taxes, “the district treasurer’s office will be instructed to withhold the amount of overpaid property tax from the next school district distribution,” said Mr. Metcalf.
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“So if a school district charges $ 100, for example, and someone manages to reduce their contribution and that results in a property tax refund of $ 10, then the school district only gets $ 90 of the $ 100 that he raised, ”he continues.
If the law were signed, the local authorities would be tasked with tracking the refunds starting this year.
“Then [they would] Add that amount back to the school district tax before taxes are increased, ”Metcalf explained. “So if they refunded $ 10 last year and they raise $ 100 again, they’ll raise our tax of $ 110 this year so the school district can get or get back the amount of refunds they made.”
The bill will allow schools to budget more effectively, but it will also affect how much taxes property owners pay.
“Homeowners’ taxes will be higher than they otherwise would have been because they essentially make up the deficit,” noted the attorney.
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There are arguments on both sides of the problem, he added.
“Some people would say, ‘This is what the tax burden should have been like if the estimate had been correct in the first place,'” said Metcalf. “But other people will say, ‘Well, that may be true, but … the tax rate will still go up compared to what it would have been if this law hadn’t been passed.'”
Another problem is that homeowners may need to cover commercial and industrial real estate.
“[They] are the most active in the valuation process and also tend to have more valuable properties than your average homeowner, ”noted Mr. Metcalf.
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It’s not clear how much that would be, and the attorney had no firsthand knowledge of the governor’s thoughts on the bill.
It has been on Governor Pritzker’s desk since late July, and there is no timetable for when he can look into it.
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