Special Assessment Practices for Wind Energy Devices and Farmland

By Ares G. Dalianis and Scott R. Metcalf

Article 10 of the Property Tax Code contains valuation procedures for special properties ranging from historic residences to sports stadiums and coal mines.  In light of recent developments in the law, wind energy devices and farmland are two special property types that deserve closer attention.

Wind energy devices are valued for assessment purposes based on the amount of electricity they produce.  Beginning on January 1, 2007, the fair cash value of a wind energy device was set by the Illinois Department of Revenue at $360,000 per megawatt.  Each year after 2007, the fair cash value is increased by the rate of inflation and an amount for depreciation is subtracted to determine the current taxable value.  The assessment is solely for the wind energy device and the land on which it sits because Illinois law also requires owners of wind energy devices to prepare a plat that includes the metes and bounds description, including any access routes, of the land immediately around the wind energy device over which the owner has exclusive control.  Buildings, substations and additional land are valued separately as real property.  The statute governing wind energy devices was amended effective January 1, 2011, to clarify that those owned by tax exempt entities are not subject to assessment.

Farmland, on the other hand, is generally assessed based on the productivity of the soil as certified by the Illinois Department of Revenue.  The exception is Cook County, where farmland is assessed at 16% of its fair cash value and is exempt from the equalization factor.  In all other counties, assessments are determined using an equalized assessed value per acre for different soil productivity levels that is determined by the Department of Revenue and provided to local assessing officials.  Generally, a productivity-based assessment is substantially less than one based on fair cash value.

Two recent Illinois Appellate Court cases involved attempts by developers to maintain the lower farmland assessments on the properties they purchased.  In KT Winneburg, LLC v. Calhoun County Board of Review, a real estate developer purchased 420 acres of farmland in 1995.  A portion of the land was subsequently platted and subdivided into 88 lots, but still assessed as farmland because it had not yet been developed and sold.  During 2007 and 2008, KT Winneburg purchased the mortgages on those 88 lots, foreclosed on the mortgages and acquired title to the properties.  The local assessing officials then reclassified the property as residential, and the taxpayer filed suit in Circuit Court.  The taxpayer did not file its lawsuit as a tax objection complaint required by the Property Tax Code, however, and the Appellate Court dismissed the case for lack of subject matter jurisdiction. 

In Oakridge Development Company, Algonquin Randall, LLC v. Property Tax Appeal Board, the Appellate court upheld a reclassification of farmland that increased the assessed value of the subject property from approximately $11,000 to more than $3 million.  The Property Tax Code requires property assessed as farmland to be used as farmland during the current assessment year as well as for the two prior assessment years.  In this case, the Court found the property was not farmland because the seller did not plant any crops in anticipation of the sale closing before the end of the year.  As a result, it was proper to base the assessment on the price paid by the commercial real estate developer who eventually built a shopping center on the property.

These little known assessment practices can have a significant impact on the equalized assessed values of school districts and local governments.  It is necessary to recognize the importance of these special assessment practices in understanding your overall tax base.