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Illinois Appellate Court Upholds PTAB Decision Involving Farm Property Appraisal

Property Tax Publications

The Illinois Appellate Court recently upheld a decision of the Illinois Property Tax Appeal Board (PTAB) involving the assessed value of a farm property owned by Edward Sims Jr. Trust (Trust) in Edward Sims Jr. Trust v. Henry County Board of Review. At issue was the value of a farm building on the property, which the Trust asserted had been given too high of an assessed value by the local assessor.  

After the farm building was first assessed by the local assessor in 2012, the Trust filed a property tax appeal with the Henry County Board of Review (Board), seeking a reduction of the assessed value, which the Board denied. The Trust subsequently appealed the Board’s denial to the PTAB, again seeking a reduction in the assessed value. Both parties submitted appraisals to the PTAB for review. The Trust’s appraisal used the cost approach to determine the contributory value of the farm building, which consisted of subtracting any depreciation from the estimated replacement cost of a new farm building. In determining the amount of depreciation, the Trust’s appraisal used a comparable sale of a similar farm building, although the sale had been court-ordered and the property sold through an online auction. The Board’s appraisal also used the cost approach. However, the Board’s appraisal determined that there was no physical depreciation because the Trust’s farm building was new, there was no functional obsolescence, and that there was no external obsolescence because the economic conditions in the local farm market were reasonably strong.  

Ultimately, the PTAB denied the Trust’s request for a reduction in the 2012 assessed value, finding that the Trust failed to demonstrate by a preponderance of the evidence that a reduction in the assessed value was warranted. The PTAB gave little weight to the Trust’s appraisal because it did not include calculations for determining the replacement cost of a comparable farm building and the appraisal report did not adequately explain or support the depreciation values. Instead, the PTAB determined that the best evidence of the contributory value of the farm building was the Board’s appraisal because it was more detailed and encompassed all the individual components making up the farm property. The Trust filed for review and the trial court affirmed the PTAB’s decision, which the Trust appealed.  

On appeal, the Trust argued that the Board’s appraisal, which the PTAB relied upon in coming to its decision, was flawed because it failed to consider obsolescence in violation of section 10-140 of the Property Tax Code, among other alleged flaws. The Illinois Appellate Court concluded that the PTAB’s finding was not against the manifest weight of the evidence and upheld the trial court’s decision. In coming to its conclusion, the Appellate Court agreed that the appropriate method for valuing a farm building is the cost method, but determined that the Trust’s appraisal was flawed and entitled to little weight because it only relied on one comparable sale to determine the amount of functional and external obsolescence to apply to the farm property. Furthermore, the Appellate Court found that the comparable sale used in the Trust’s appraisal was invalid for comparison purposes because it was not an arms-length transaction. Alternatively, the Appellate Court agreed with the PTAB that the Board’s appraisal was the best evidence of the farm building’s contributory value, noting that it was more detailed and better reflected individual components of the farm property. 

The decision is a good reminder to parties of the standards the PTAB and Illinois Courts consider when determining whether an appraisal of farm property is reliableparticularly because the focus will be on the cost approach rather than the more commonly applied sales comparison and income approaches to value.  For more information on this topic, contact any Franczek attorney.