Federal Appellate Court Issues Rare Property Tax Decision
February 22, 2011
The Seventh Circuit Court of Appeals recently released a decision regarding the assessment and collection of property taxes in Illinois. Such a ruling from a federal appellate court is rare because property tax litigation generally involves state law issues that do not make their way into the federal system. The case, Heyde v. Pittenger, was initiated by a taxpayer in Tazewell County who alleged that the County Board of Review, Supervisor of Assessments, and Township Assessor conspired to violate his equal protection rights and retaliated against him for challenging his assessment, all in violation of his rights under Section 1983.
The dispute between the taxpayer and the Tazewell County assessing officials began in 2003 when the taxpayer challenged his assessment. It continued as he challenged his assessment each year thereafter. The dispute escalated when, for the 2006 tax year, the assessment was increased to $436,276 despite the taxpayer’s submission of an appraisal indicating the assessment should have been only $145,000. The taxpayer appealed his 2005 assessment to the Property Tax Appeal Board (PTAB), but was dissatisfied with the PTAB’s decision and appealed that decision to the Tazewell County Circuit Court. The taxpayer also appealed to the PTAB for each successive year. Litigation in federal court began in 2007 when the taxpayer filed a complaint alleging that the local assessing officials acting under color of state law deprived him of his constitutional right to equal protection.
The Seventh Circuit first addressed whether the Board of Review members were acting in a quasi-judicial capacity and therefore entitled to absolute immunity from § 1983 claims. The taxpayer argued that the Board of Review members were acting in an investigatory capacity, rather than in an adjudicative capacity, and therefore not entitled to immunity. The Court rejected this argument because under Illinois law the Board of Review is the fact-finder and decision-maker for disputed assessments. How the Board of Review assembled the evidence upon which it relied does not change its adjudicative functions. The ability of the Board to administer oaths and examine witnesses also indicated the judicial nature of its functions. This was further supported by the need to insulate the Board from harassment and intimidation so that they could make independent judgments about assessments as well as the fact that Illinois law provides safeguards to review Board decisions on appeal.
The Court then addressed the claims against the Supervisor of Assessments and Township Assessor. The Court relied on two prominent property tax decisions in finding the claims against the Assessors could not proceed. In Fair Assessment in Real Estate Ass’n, Inc. v. McNary, the U.S. Supreme Court found that so long as there is a “plain, speedy and efficient” remedy, taxpayers are barred from bringing § 1983 claims challenging the validity of state tax systems. Instead, taxpayers must exhaust state court remedies and only then seek review of the state decision to the U.S. Supreme Court. In Rosewell v. LaSalle Nat’l Bank, decided two years before McNary, the U.S. Supreme Court found that despite delays of years in processing refund claims, the Illinois assessment review scheme provided a speedy remedy to taxpayers. In the present case, the Court found that, although it is far from perfect, the Illinois property tax appeals system provides an adequate remedy. Therefore, the claims against the Assessors could not proceed because the taxpayer had not exhausted his state court remedies.
The decision is a reminder that federal law has only a limited reach into the administration of the Illinois property tax system. Instead, in the vast majority of cases taxpayers must exhaust their appeals in quasi-judicial and judicial forums before a federal court will become involved.