The real estate tax burden on commercial, industrial and multi-family rental housing in Cook County is extremely high.  In large part, this is because Cook County assesses industrial, commercial and multi-family properties at much higher levels than single-family homes.  Although property taxes throughout the United States generally average two to three percent of a property’s fair market value, the effective tax rate in Cook County is closer to six or seven percent of a business property’s fair market value. 

In order to reduce this extraordinary tax burden on business properties located in Cook County and to level the playing field, the Cook County Assessor’s Office has for several years administered a tax incentive program which can reduce taxes by as much as 50%.  Recent modifications to this program have made these incentives even more attractive.  We are devoting this newsletter to a discussion of these enhanced property tax incentives in Cook County.

Industrial   (Class 6b)

The Class 6b Incentive, which has been briefly mentioned in previous newsletters, is the most successful and widely utilized of the Cook County real estate tax incentives.  It applies to any industrial building or project, and is available for either new construction, the substantial rehabilitation of existing industrial structures, or the substantial reoccupancy of "abandoned" industrial property (buildings which have been vacant and unused for at least 24 months).  To qualify for the incentive, the property must have an industrial use (manufacturing or warehousing) and be approved for the incentive by the local municipality in which the property is located.  

Once granted, properties receiving the Class 6b certification are assessed at 16% instead of 38% of their fair market value for the first 8 years, 23% for the ninth year and 30% for the tenth year.  The 16% level of assessment under the incentive amounts to more than a 55% reduction in the property's assessment and real estate taxes.

Recent modifications to the Cook County Classification Ordinance have made this popular incentive even more attractive.  First, the period of the incentive has been extended from ten years to twelve years, with the 16% treatment available for the first 10 years, 23% for the eleventh year and 30% for the twelfth.  Most importantly, the industrial incentive is now renewable for an additional 12 year period so long as the application for renewal is timely filed and supported by the municipality in which the property is located. 

Multifamily Residential   (Class 9)

This incentive is designed to encourage the rehabilitation and new construction of multifamily rental housing so as to increase and improve the stock of affordable housing for low and moderate income households in Cook County.  To qualify, the property must consist of 7 units or more and be used primarily for low and moderate income households.  The incentive provides for a 16% instead of 33 1/3 % level of assessment for ten years from the date of completion of rehabilitation.  Also, upon application and approval by the Assessor, the property may be eligible for up to two additional ten year periods.

The property must be located in a targeted area, as defined by the most recent census, in which 51% of the residents are low or moderate income persons.  A percentage of the property’s units must be leased at rents that are affordable to low and moderate income persons or households.  

The rehabilitation must be substantial and meet specific requirements as set forth by the Assessor.  Application for the Incentive must be filed prior to start of construction or rehabilitation.   Annual reports and notices must be filed to prove that the property continues throughout the length of the Incentive to provide affordable housing as defined by the Assessor.

Environmental   (Class C)

Class C is available for those properties, either industrial or commercial, which require environmental remediation before they can be developed or become functional operating properties.  To qualify for the Class C incentive, the applicant must remediate the site in accordance with a remediation plan approved by the Illinois Environmental Protection Agency.  In addition, the remediation costs must total at least $100,000, or alternatively, 25% of the fair market value of the property, whichever is less.  

Recent enhancements to this incentive include the expansion of its duration to twelve full years, with the first ten years at 16% instead of 36% (industrial) or 38% (commercial) assessment level, year eleven at 23% and year twelve at 30%.  A proposed commercial project which would not qualify for the Class 6b Incentive for industrial buildings, could qualify under Class C if there are environmental remediation requirements at the site.  Finally, the Class C Incentive is now renewable, but only for industrial buildings and not commercial properties. 

Landmark Commercial and Industrial   (Class L)

To encourage the preservation and rehabilitation of historically and architecturally significant commercial and industrial buildings, Cook County has instituted a Class L incentive.  Various requirements must be met for a building to be eligible.  The building must be designated as a landmark and its owner must invest at least 50% of the building’s current market value - as determined by the Assessor - in its rehabilitation.

If the requirements of the Class L ordinance are met, the landmark commercial or industrial building will be assessed at 16% of its market value for the first ten years, at 23% in the eleventh year and at 30% in the twelfth year.  Upon approval, the incentive is renewable for industrial properties beyond the specified twelve year period. 

South Suburban Pilot Program 

The South Suburban Pilot Program is a project in the target townships of Bloom, Bremen, Calumet, Rich, and Thornton.  Marketable properties located in these townships are identified and then purchased at the scavenger sale by taxing districts through a no cash bid process.  “Marketable” properties under this program are those tax delinquent commercial and/or industrial properties which have been identified by Cook County as a property that would bring economic benefit to the affected taxing districts.  Once title is acquired by the taxing districts, these properties are then marketed and sold for redevelopment by private parties.   

The South Suburban Reactivation Program allows such properties to automatically receive an incentive that reduces the assessment to 16% instead of 36% (industrial) or 38% (commercial) of market value for the first 10 years, 23% in year 11 and 30% in year 12.  Industrial but not commercial properties can be renewed.

In appropriate circumstances, the Cook County tax incentive program can produce large tax savings.  However, the application process and rules which govern the approval procedures can be quite complicated.  Accordingly, it is advisable to consult with legal counsel familiar with these rules and procedures as early as possible in the planning and application process.  

If you have any questions or would like additional information regarding any of the incentives, please contact us.

Industrial and Multi-Unit Residential Benefit from New Classification Ordinance

Cook County Assessor Houlihan has proposed a revision in the County Classification Ordinance. The result will be beneficial to industrial and multi-unit residential property owners. The County Board appears likely to adopt the proposal.  Under the revised Ordinance, for the 2000 tax year, industrial property would be assessed at 33% of its fair market value instead of the current 36%. In 2001, the assessment level for multi-family residential properties would be reduced from 33% to 30%. That assessment level would decrease further, to 26%, in 2002.  The assessment level for most commercial property would remain unchanged at 38% of market value, at least for the year 2000.  We will keep you informed of the status of this proposal.

Industrial Incentive Extended 10 Years
Effective January 1, 2000, the Cook County Board approved an amendment to the Real Estate Classification Ordinance that contained major changes in the 6b incentive. Industrial property is normally assessed at 36% of its market value, however, under this incentive, industrial real estate is eligible for a 16% level of assessment.  The new amendment provides that the incentive assessment of 16% is renewable for an additional period of ten years.  The Class 6b incentive assessment is available to newly constructed industrial buildings, rehabbed industrial buildings and abandoned buildings which are reutilized.  It is most important that application be made to the Assessor’s Office for the Class 6b Incentive prior to any construction or occupancy of abandoned properties.  For more detailed information, please call our office. We have extensive experience in filing the application for clients.

Fisk Kart and Katz News

• We are pleased to announce the expansion of our offices to occupy the entire ninth floor of the Temple Building. We have also implemented the latest in office technology which enables us to better serve our clients into the new millennium.

• Bob Tonos was recently appointed Chairman of the Real Estate Taxation and Assessment Appeals Subcommittee of the Chicago Bar Association. This Subcommittee reviews and proposes legislation dealing with the assessment of real property in Illinois. Mr. Tonos was previously the legislative liaison for the Real Estate Taxation Committee.
• On June 21, 2000, Jim Regan will moderate a panel on the topic of real estate valuation and appraisal issues at the Real Estate Investment Association’s (REIA) monthly meeting.  If you are not a member of REIA but would like to attend as our guest, please call Linda Frattura at 312-726-1833.

American Property Tax Counsel News

• Marty Katz was presented with a leadership award at the recent APTC meeting in Naples, Florida for his efforts as a founding member and as APTC’s first President.
• John Garippa of Garippa and Davenport in New Jersey has been elected President of APTC to succeed Marty Katz who served as President for six years. James Popp of Popp & Ikard in Texas was elected Treasurer. Other members of the Executive Committee are Marty Katz, Stephen Paul of Baker & Daniels in Indianapolis and Stan Fineman of Wilkes, Artis, Hedrick and Lane, Chtd. in Washington, D.C.
• APTC announced that this year’s Seminar will address real estate tax issues relating to industrial properties and will be chaired by Jim Regan of Fisk Kart and Katz. The Seminar will be held at the Scottsdale Princess on November 10 - 11, 2000.
• APTC’s 1999 Seminar was held on November 12 - 13, 1999, where industry representatives and APTC members discussed property tax strategies for deregulated utilities and telecommunications companies.  The following topics were addressed:

1.  Defining the Boundary Between Taxable Property and Nontaxable Intangible Assets and Rights;
2.  Intangibles in a Changing Business and Legal Environment;
3.  Central v. Local Assessment - Jurisdictional Issues;
4.  Removing Intangible Value from Power Plant Valuations;
5.  Creating a Level Playing Field for Utilities and Telecommunications Companies.

If you would like to receive the Seminar program, please call 877-TAX-APTC or make your request on-line at www.aptcnet.com.

• APTC welcomes Elias, Books, Brown, Peterson & Massad, P.C. of Oklahoma City, OK, as a new member. This addition expands APTCs ability to serve property tax needs of our clients on a national basis.
• On March 21 - 24, 2000, the American Bar Association and the Institute for Professionals in Taxation hosted their annual Sales / Use Tax and Property Tax seminar at Le Meridien Hotel in New Orleans, Louisiana. Three APTC members participated in panel discussions.