HB5355 96TH GENERAL ASSEMBLY

LRB096 20090 HLH 35611 b

96TH GENERAL ASSEMBLY
State of Illinois
2009 and 2010
HB5355

Introduced 2/5/2010, by Rep. John A. Fritchey - Kevin Joyce

SYNOPSIS AS INTRODUCED:

35 ILCS 200/1-50
35 ILCS 200/9-144 new
30 ILCS 805/8.34 new

Creates the Acquisition-Based Assessment Law and amends the Property Tax Code concerning acquisition-based assessments. Sets forth an alternative method of calculating fair cash value based on recent purchase prices, subject to certain maximum changes. Provides that the alternative valuation procedures apply in Cook County and in other counties that adopt those procedures by ordinance. Amends the State Mandates Act to require implementation without reimbursement by the State. Effective immediately.

FISCAL NOTE ACT MAY APPLY

HOUSING AFFORDABILITY IMPACT NOTE ACT MAY APPLY

STATE MANDATES ACT MAY REQUIRE REIMBURSEMENT

A BILL FOR

AN ACT concerning revenue.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 1. Short title. This Act may be referred to as the Acquisition-Based Assessment Law or the ABA Law.

Section 5. Legislative findings. The General Assembly finds that:

(a) Portions of the State and, in particular, Cook County have experienced redevelopment and gentrification that have significantly increased real property values in some neighborhoods in unpredictable ways and beyond the rate of increase in many established residents' income, while real property values in other neighborhoods have increased less rapidly or even declined, creating large and unpredictable changes in real property assessments and property tax bills.

(b) The creation of property tax classifications pursuant to Section 9-144 of the Property Tax Code will promote local neighborhood preservation, continuity, and stability by ensuring that the taxes associated with increased sale prices in an area do not harm established residents and other property owners, or effectively force them to sell their property and thereby destabilize or erode the historic character of those areas.

(c) By minimizing assessment changes for current owners of real property and basing the assessment for new purchasers on the actual purchase price, the creation of property tax classifications pursuant to Section 9-144 of the Property Tax Code will promote transparency in assessments and fair and predictable taxes on real property, thereby improving relationships between property owners and their government, reducing distrust and resentment engendered by large and unpredictable increases in assessments or property tax bills, and promoting support for governmental programs.

(d) Because real estate that has recently sold is significantly different from other real estate in that (i) its fair cash value may be determined with precision and (ii) the purchasers of property in appreciating areas often have a greater ability to pay taxes based on the actual price paid than other owners have to pay taxes based on appreciated prices, the creation of property tax classifications pursuant to Section 9-144 of the Property Tax Code will facilitate the treatment of like properties on a uniform basis.

(e) Basing assessments directly on recent purchase prices, with predictable maximum changes thereafter, is fair to buyers because (i) new owners at the time of acquiring their property do not have the same reliance interest warranting protection against higher taxes as do existing owners and (ii) it enables buyers to reliably forecast the tax component of their ownership costs and to avoid future financial difficulties caused by large and unpredictable assessment changes.

(f) Cook County, because of the great diversity of its tax base, which causes extreme differences among property owners in the rates of change of assessments and taxes, would benefit from acquisition-based assessment because acquisition-based assessment will significantly reduce differences in rates of tax change resulting from, among other reasons, redevelopment and gentrification in portions of that county and relative stability or stagnation in other parts.

(g) In counties other than Cook, due to each county board's familiarity with the extent to which its county would benefit from acquisition-based assessment pursuant to Section 9-144 as a result of changes in values of real property in the county and the extent to which the county would experience the benefits of acquisition-based assessment, it is preferable to give each county board, other than the Cook County Board, the ability to decide whether to adopt acquisition-based assessment for its own county rather than mandating acquisition-based assessment statewide.

Section 10. The Property Tax Code is amended by changing Section 1-50 and by adding Section 9-144 as follows:

(35 ILCS 200/1-50)

Sec. 1-50. Fair cash value. In a county with 3,000,000 or more inhabitants, except as otherwise provided in this Code, fair cash value shall be determined as set forth in Section 9-144. In a county with less than 3,000,000 inhabitants, except as otherwise provided in this Code, fair cash value shall be determined as set forth in Section 9-144 if the county adopts, by ordinance, the method of determining fair cash value set forth in Section 9-144. Except as otherwise provided in this Code or pursuant to this Section and Section 9-144, "fair cash value" means the The amount for which a property can be sold in the due course of business and trade, not under duress, between a willing buyer and a willing seller.

(Source: P.A. 88-455.)

(35 ILCS 200/9-144 new)

Sec. 9-144. Determination of fair cash value.

(a) Fair cash value shall be determined in accordance with this Section for properties to which this Section applies pursuant to Section 1-50.

(b) The words and phrases used in this Section, when used in this Section, are defined as follows:

(1) Nominal assessable value. The amount, as determined by the assessor and adjusted by any subsequent appeals or judicial review, for which a property can be sold in the due course of business and trade, not under duress, between a willing buyer and a willing seller.

(2) Addition. Any new or added buildings, structures, or other improvements of any kind.

(3) Addition value. With respect to each addition (i) that is not already being taxed in the year this Section becomes effective in that county and (ii) that became fit for occupancy or intended customary use any time after the last title transfer and before the current assessment year, the increase in the nominal assessable value attributable to that addition when it became fit for occupancy or intended customary use; provided that the increase for each addition shall be phased in at the rate of 20% per year over 5 years.

(4) Homestead property. Residential property that, as of January 1 of the tax year, is occupied by its owner or owners as his, her, or their principal dwelling place, or that is a leasehold interest on which a single family residence is situated, that is occupied as a residence by a person who has a legal or equitable interest therein evidenced by a written instrument, as an owner or as a lessee, and on which the person is liable for the payment of property taxes. Residential units in an apartment building owned and operated as a cooperative, or as a life care facility, which are occupied by persons who hold a legal or equitable interest in the cooperative apartment building or life care facility as owners or lessees, and who are liable by contract for the payment of property taxes, shall be included within this definition of homestead property.

Homestead property includes the dwelling place, appurtenant structures, and so much of the surrounding land constituting the parcel on which the dwelling place is situated as is used for residential purposes. If the assessor has established a specific legal description for a portion of property constituting homestead property, then the homestead property shall be limited to the property within that description.

(5) Change factor. The annual percentage rate as determined in accordance with the following table:

(6) Title transfer. A transaction, other than solely between spouses, for which a transfer declaration is required pursuant to Section 31-25.

(7) Transfer declaration. The real estate transfer declaration required by Section 31-25.

(8) Declared value. The value of the real property or beneficial interest in real property stated on the transfer declaration. If a transfer declaration is not filed or there is an exemption from the filing of a transfer declaration, the "declared value" is the amount paid for the real property or beneficial interest in real property, as determined by the assessor and adjusted by any subsequent appeals or judicial review.

(9) Purchase price. If a title transfer involves a 100% interest in real property, the "purchase price" is the declared value or the nominal assessable value, whichever is higher. If a title transfer involves less than a 100% interest in real property, the transfer declaration shall include or be accompanied by a sworn declaration of the percentage interest transferred, signed by both parties. The "purchase price" shall be the value of a 100% interest, as determined by the greater of the nominal assessable value or on a pro rata basis by reference to the declared value for the lesser percentage interest.

(10) Assessment year. The 12 months beginning with the statutory assessment date in any year and continuing through the day before the assessment date in the following calendar year.

(11) Current assessment year. The assessment year beginning with the statutory assessment date for the assessment then in progress.

(12) Base year. The latest of (A) assessment year 2008, (B) the assessment year prior to the year in which the county government, in counties with a population of less than 3,000,000, chose to assess according to this Section, (C) the most recent assessment year before the current assessment year in which there was a title transfer, (D) the most recent assessment year before the current assessment year in which the adjusted base value, after an increase, equals the nominal assessable value, excluding any reduction due to temporary conditions, or (E) the most recent assessment year before the current assessment year in which the adjusted base value, after a decrease, equals the nominal assessable value, excluding any reduction due to temporary conditions.

(13) Base value. For real estate that had a title transfer during the base year, the purchase price associated with the last such title transfer, plus 20% of the addition value attributable to any additions that became fit for occupancy or intended customary use during the base year but after the transfer.

For all homestead property that did not have a title transfer during the base year and for which the base year is either (A) or (B) in paragraph 12, "base value" is: (A) the amount, if any, of the general homestead exemption in the base year, found in Section 15-175, plus the amount, if any, of the alternative general homestead exemption in that year, found in Section 15-176, plus the amount, if any, of the long-time occupant homestead exemption in that year, found in Section 15-177, divided by the final state equalizer for the county in which the property is located, and (B) dividing that result by the percentage of market value used by the assessor for determining the assessed value pursuant to State law and the county classification ordinance, if any, and (C) subtracting that amount, if any, from the nominal assessable value, excluding any reduction due to temporary conditions.

For all other real estate, "base value" is the nominal assessable value for the base year, excluding any reduction due to temporary conditions.

(14) Adjusted base value. For the assessment year immediately following the base year, the base value plus the portion of the addition value phased in during the assessment year. For each succeeding assessment year, "adjusted base value" is the adjusted base value of the preceding assessment year changed as follows:

(A) if the nominal assessable value exceeds the adjusted base value of the preceding assessment year, by adding an amount equal to the change factor times the adjusted base value of the preceding year, provided that the result shall not exceed the nominal assessable value; or

(B) if the nominal assessable value is less than the adjusted base value of the preceding assessment year, by subtracting an amount equal to the change factor times the adjusted base value of the preceding year, provided that the result shall not be less than the nominal assessable value; and

(C) in either case, adding the portion of any addition value phased in during the assessment year.

(c) All real estate is divided into the following classes:

Class A: All real estate that was the subject of a title transfer in the previous assessment year.

Class B: All real estate other than that included in Class A.

In counties that classify real estate for assessment purposes and that are subject to this Section either by reason of their size or election by county government, the county classifications shall be subclasses within these Classes A and B.

(d) Fair cash value shall be determined as follows:

(1) With respect to real estate in Class A, the base value of the real estate.

(2) With respect to real estate in Class B, the adjusted base value.

(e) In any county that is or becomes subject to the provisions of this Section, the provisions of this Section shall operate in lieu of the provisions in Section 15-175 (general homestead exemption), Section 15-176 (alternative general homestead exemption), Section 15-177 (long-time occupant homestead exemption), and Section 15-180 (homestead improvements).

(f) Notwithstanding Sections 6 and 8 of the State Mandates Act, no reimbursement by the State is required for the implementation of any mandate created by this Section or this amendatory Act of the 96th General Assembly.

(g) All portions of this Section and this amendatory Act of the 96th General Assembly are severable, and if any provision or any sentence, clause, or paragraph is held unconstitutional by any court of competent jurisdiction, the decision of that court shall not affect or impair any of the remaining provisions.

Section 95. The State Mandates Act is amended by adding Section 8.34 as follows:

(30 ILCS 805/8.34 new)

Sec. 8.34. Exempt mandate. Notwithstanding Sections 6 and 8 of this Act, no reimbursement by the State is required for the implementation of any mandate created by this amendatory Act of the 96th General Assembly.

Section 99. Effective date. This Act takes effect upon becoming law.