Essential Case Law for Illinois Real Estate Tax Appeals Ellen G. Berkshire, Esq. January 29, 2014 Chicago Bar Association

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1 Essential Case Law for Illinois Real Estate Tax Appeals Ellen G. Berkshire, Esq. January 29, 2014 Chicago Bar Association Constitutional Concerns Tax Injunction Act, 28 U.S.C. Sec 1341 The district courts shall not enjoin, suspend, or restrain the assessment, levy, or collection of any tax under state law where a plain, speedy, and efficient remedy may be had in the courts of such State. Rosewell v. LaSalle National Bank, 450 U.S. 503, 101 S.Ct (1981) Owner of apartment building unsuccessfully challenged tax assessment in administrative appeal and refused to pay taxes, bringing an action in Federal District Court for injunctive relief arguing deprivation of equal protection and due process under the Fourteenth Amendment. Illinois refund procedure is a plain, speedy and efficient remedy within the meaning of the Tax Injunction Act, thereby barring federal jurisdiction to grant injunctive relief. Uniformity: Taxes upon real property shall be levied uniformly by valuation ascertained as the General Assembly shall provide by law. Article 9, Section 4(a) of the Illinois Constitution Walsh v. Property Tax Appeal Board, 181 Ill.2d 228, 692 N.E. 2d 260, 229 Ill.Dec. 487 (1998) Uniformity Clause of Constitution violated where plaintiff established by clear and convincing evidence that property valued at its recent sales price resulted in the property s being taxed at a different proportion of its true value than other Tazewell properties assessed using the mass appraisal method. Logic and taxation not the best of friends but until Tazewell County systematically ascribes true cash value to all like properties, plaintiffs are entitled to the benefits they have accrued under a uniform, though flawed, basis of valuation. Apex Motor Fuel Co. v. Barrett, 20 Ill.2d 395, 169 N.E.2d 769 (1960) Concept of practical uniformity in assessments; classifications must have reasonable basis Moroney and Company v. Property Tax Appeal Board, 2013 IL App (1 st ) Contesting party did not establish a lack of uniformity by clear and convincing evidence because they failed to show through substantive, documentary evidence

2 or legal argument that the Cook County Board of Review has a uniform policy of granting reductions based on vacancy alone and where taxpayer failed to offer evidence as to why property was vacant. Administrative body has broad discretion in conducting hearings. Decision of PTAB to prohibit attorney from offering opinions regarding the Board of Review s treatment of vacancy is not abuse of discretion where he had no experience with the assessor or board of review s internal policies and procedures. PTAB to Determine Appropriate Weight of Evidence Kraft Foods, Inc. v. Illinois Property Tax Appeal Board, 2013 IL App (2d) PTAB may properly credit some of the evidence presented by both parties to conclude that a property is worth a different amount that what any of the experts testified to. This is based on the weight-of-the-evidence concept and the PTAB s decision will only be reversed if it is against the manifest weight of the evidence. Cook County Board of Review v. Illinois Property Tax Appeal Board, 334 Ill.App.3d 56, 777 N.E.2d 622 (2002) PTAB may properly credit rely on two-year old appraisal report. Whether a twoyear old appraisal is substantive, documentary evidence sufficient to establish value is for the trier of fact to consider in giving weight to the evidence. Appropriate Methods of Valuation Chrysler Corp. v. Illinois Property Tax Appeal Board, 69 Ill.App.3d 207, 387 N.E.2d 351, 25 Ill.Dec. 695 (Ill. App. Ct. 1979) Findings of the Property Tax Appeal Board are prima facie true and correct and the court should not intervene in a case where property has been assessed higher or lower than it should have been through a mere error of judgment by the agency. However, where a court is faced with potential use of an improper method of valuation, rather than with a mere difference of opinion as to the market value of a parcel, courts have intervened. Real property valuation of auto assembly plant based solely on reproduction cost method was incorrect as matter of law. The market or comparison approach to valuing property is preferred, and heavy reliance on the cost method of valuation has been frowned upon. Reproduction cost should be used only in the context of special use property and only given weight when there is no actual or potential market for the property at issue.

3 Board of Education of Meridian Community Unit School District No. 223 and the Ogle County Board of Review v. PTAB and Onyx Orchard Hills Landfill, Inc., 2011 IL App (2d) The exclusion of the sales comparison approach may be appropriate where it leads to an unreliable estimate of market value. Cook County Board of Review v. Property Tax Appeal Board (Omni), 384 Ill.App.3d 472 (2008) Appellate Court reversed PTAB s decision reducing assessment of property based on appraisal using only the income approach to value. Court held that absent a showing that a single approach appraisal is warranted because the subject property is a special use property such that there is no evidence of market data, the exclusion of the sales comparison approach is an improper method of valuation. The sales-comparison approach is the preferred method, but each of the approaches should be used where reliable information is available. Board of Education of Ridgeland School District No. 122 v. Property Tax Appeal Board and Sears, Roebuck and Company, 2011 IL App (1 st ) Appellate Court affirmed decision of PTAB relying on sales of out of state properties where local comparable sales were leasebacks, financing mechanisms, or big box stores not comparable to the subject anchor department store property. PTAB s reliance on adjustments to out-of-state comparables for different variables supported by record. Exclusion of cost approach and failure to provide separate land value was not improper valuation methodology under Showplace Theatre v. PTAB, 145 Ill.App.3d 774 (1986) Kankakee County Board of Review v. Property Tax Appeal Board and Armstrong World Industries, 2012 IL App (3d) PTAB did not error in rejecting appraisal based upon multitenant leases of industrial properties (where witness provided no information regarding lease terms, length or details) and concluding that non-leased properties were a better indicator of value. The PTAB s reliance on sale values from out-of-market properties upheld as it was the result of assessment of witness credibility and weighing of evidence supported by testimony.

4 Current vs. Speculative Use State of Illinois v. Illinois Central Railroad Company, 27 Ill. 64 (1861) Landmark case establishing that valuation for tax purposes should be based on current use of property and an assessor valuing a property in some future use, should do so with extreme caution. In this country at least, hope is so seductive, and the future so bright, and so full of promise, there is the greatest danger that the most prudent may be mistaken, and the most considerate be misled, and it is much safer to rely upon practical demonstration, to determine the present value of such property, rather than, speculatively, enter into the unknown future, whose dark veil is not given to us to life, and look beyond. It is safer surely, to say, that when the future shall be revealed, and practically exhibit an increased value of the property, then would be the proper time to assess it at such increased value. Bloomington Public Schools, District No. 87, McLean County v. Illinois Property Tax Appeal Board, 379 Ill.App.3d 387, 886 N.E.2d 362 (2008) The PTAB s decision to give little weight to the comparable sales of land was speculative as neither Eastland Mall nor Sears had any future plans to demolish or redevelop the property. There was no evidence presented as to the financial feasibility to redevelop the parcel or the consideration of the cost to acquire the lease or reconfigure or demolish the existing building currently used as an anchor department store. Board of Review of Macon County v. Property Tax Appeal Board (Staley Company), 295 Ill.App.3d 242, 692 N.E.2d 417, 229 Ill.Dec. 644 (Ill. App. Ct. 1988) If valuing property in its separate parts under a different highest and best use, the appraiser must consider costs that would be incurred in dividing the property into its component parts for sale. Valuing industrial complex under its current highest and best use as used by the single owner-occupant was a better supported theory. Market vs. contract rent Springfield Marine Bank v. Property Tax Appeal Board, 44 Ill.2d 428 (1970) It is clearly the value of the tract or lot of real property which is assessed, rather than the value of the interest presently held by the owner. Rental income is a relevant factor; however, it cannot be the controlling factor, particularly where it is admittedly misleading as to the fair cash value of the property involved. Earning capacity is property regarded as the most significant element in arriving at fair cash value.

5 Homestead Exemption Proviso Twp. High School District No. 209 v. Hynes, 84 Ill.2d 229, 417 N.E.2d 1290, 49 Ill.Dec.276 (1980) Homestead exemption from real estate taxes cannot be validly granted where owner is corporation, since latter cannot reside in building, but rather, owneroccupant must be natural person. Authority to settle Brewer v. National Railroad Passenger Corp., 640 N.E. 2d 1331, 165 Ill. 2d 100, 208 Ill. Dec. 670 (1995) Where a settlement is made out of court and is not made a part of the judgment, the client will not be bound by the agreement made by counsel without proof of express authority.