Recent Appellate Court Decision Shines Light on Certificates of Error

A Certificate of Error (commonly called a "C of E") is a tool available to county assessing officials for administratively correcting an assessment after the property tax bill has been paid. Last year Certificates of Error resulted in $86 million in property tax refunds paid by Cook County school districts and local governments. In Sears Holding Corp. v. Pappas, No. 1-08-115 (1st Dist. May 7, 2009), the Illinois Appellate Court examined the process of calculating interest on these refunds.

A property taxpayer can receive a refund after a relatively straight-forward, three-step process. First, the county assessing official issues the C of E. Second, the board of review endorses the C of E. Third, the C of E must be approved by the circuit court. In Cook County the Assessor can grant the refund without any further review of the decision in the following circumstances:

• The assessment involves a residential property of 6 units or less;
• The C of E allows for a homestead exemption;
• The C of E corrects for a total tax exemption granted by the Department of Revenue; or
• The reduction being granted is less than $100,000 in assessed value.

Under the Property Tax Code the taxpayer is also entitled to interest at the rate of 6% per year calculated from 60 days after the C of E is issued until the refund is paid.

The calculation of interest on the refunds becomes important because of the amount of money involved and the time it can take to complete the process. In Sears Holding Corp. for example the taxpayer paid its property taxes in 2002 and was granted a C of E in April of 2003. The C of E reduced the assessment in half, resulting in a refund of nearly $370,000. The circuit court approved the C of E in December 2005, and the refund check was finally issued in July 2006. Included in the refund check was an additional $11,000 for the interest accrued since December 2005, when the circuit court approved the C of E.

The taxpayer challenged the calculation of interest claiming that it was entitled to 6% interest per year starting in June 2003, which was 60 days after the C of E was first issued by the Assessor. The County Treasurer argued that the C of E was not "issued" until final approval was granted by the circuit court, and therefore the taxpayer was only entitled to interest beginning in December 2005. The Appellate Court agreed with the taxpayer, ruling that the Property Tax Code requires interest to be calculated from the time the Assessor issues the C of E.

While the case deals with technical aspects of property tax administration, the ruling highlights a little known aspect of the law that will have a definite impact on the budgets of school districts and local governments. If you would like to discuss this case or any other aspects of the property tax system, please contact Ares Dalianis, Michael Hernandez, or Scott Metcalf.