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Hospital and Homeowner Property Tax Exemptions Examined by Illinois Courts

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October 26, 2017

By Scott Metcalf

Illinois Courts are currently examining several different aspects of property tax exemptions, all of which impact the revenues of school districts and other units of local government.  Most notably, the Illinois Supreme Court has agreed to hear a challenge to the constitutionality of the statute granting most hospitals a complete exemption from property taxes.  Also, the Illinois Appellate Court recently upheld the Cook County Assessor’s decision to charge a property owner $58,000 in back taxes, interest and penalties for claiming erroneous homestead exemptions.  In addition, it upheld the Rock Island Supervisor of Assessment’s decision to deny homestead and senior citizen exemptions to a licensed life care facility. 

Hospital Exemptions

As we discussed earlier this year, a split among the Appellate Courts on the constitutionality of Section 15-86 of the Property Tax Code has lead the Illinois Supreme Court to once again address the issue of property tax exemptions for hospitals. In March, the Supreme Court avoided ruling on the constitutionality of the exemption, finding in Carle Foundation v. Cunningham Township that for procedural reasons the issue was not properly before the Court at that time. As a result, that Fourth District Appellate Court decision finding the exemption unconstitutional was vacated.  However, the Supreme Court recently granted a petition for leave to appeal in Oswald v. Hamer, which is a First District Appellate Court decision finding the exemption to be constitutional. The parties are currently preparing their briefs, and we expect a friend of the court brief to be filed by the IASA and the IASBO. 

Homestead Exemptions

While the hospital exemption is important to school districts because it results in a total exemption from taxation for what is often one of the largest properties in a community, the homestead or homeowners’ exemption is also important to a school district’s tax base, even though it results in only a small amount of property value escaping taxation.  It is the large number of residential properties in most communities that makes this exemption equally important from the perspective of revenue protection. And, at least in Cook County, the exemption is increasing this year. For the 2017 tax year, P.A. 100-401 increases the senior citizen homestead exemption from $5,000 to $8,000 and the general homestead exemption from $7,000 to $10,000. 

Exemption

Cook County

All Other Counties

Prior

Current

Prior

Current

General Homestead

$7,000

$10,000

$6,000

$6,000

Senior Homestead

$5,000

$8,000

$5,000

$5,000

Senior Freeze

No minimum

$2,000 (min.)

No minimum

No minimum 

Senior Freeze (Income Limit)

$55,000

$65,000

$55,000

$55,000 (2017)

$65,000 (2018)


All of this makes two recent Appellate Court decisions concerning the homeowners’ exemption worth noting.  In Hussein v. Berrios, the Appellate Court looked at a 2013 amendment to the Property Tax Code that allows the Cook County Assessor to place liens on properties for which taxes were not paid as a result of erroneous homestead exemptions. In this case, the taxpayer received homeowners’ exemptions on four different properties, even though under the Property Tax Code taxpayers are entitled to a homestead exemption only their primary residence. She claimed the multiple exemptions were the result of a clerical error in the Assessor’s Office and not the result of her submitting multiple applications. However, the Court found that the burden for maintaining accurate property tax exemptions was properly placed on the taxpayer.

In Friendship Manor v. Wilson, the Court addressed the ability of an assisted living facility to receive homeowner exemptions on behalf of its residents. The Rock Island Supervisor of Assessments concluded that Friendship Manor was not entitled to receive general homestead exemptions on behalf of its residents under Section 15-175(f) of the Property Tax Code. Friendship Manor filed a complaint with the Board of Review and a declaratory judgment action in circuit court. The circuit court agreed that Friendship Manor was not entitled to the exemptions because the residents did not have ownership of record in the facility. However, on appeal, the Court determined that Friendship Manor could challenge the determination only by following through on its complaint at the Board of Review and not by filing a complaint in circuit court. While the outcome is largely procedural rather than substantive, the case is worth noting because of the importance of continuing care retirement communities in many communities and the fact that in not every situation are such facilities entitled to homeowners’ exemptions.

Ultimately, these cases demonstrate that a wide array of issues can exist within the relatively limited field of property tax exemptions. Each one of these issues raises its own revenue protection concerns for school districts and units of local government, which remain dependent on property taxation to provide public services.

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