Benjamin Franklin wrote, “In this world, nothing can be said to be certain, except death and taxes.” Although real estate taxes are an absolute certainty, property owners and managers can take advantage of various incentives for industrial and commercial properties in Cook County to ensure that their real estate taxes are at the lowest possible level.
To encourage new construction and expand employment opportunities, the Cook County Board of Commissioners amended the Cook County Classification Ordinance in 1984 to create incentive classifications and reduced assessment ratios for qualifying properties. Recent changes provide even greater opportunities for industrial and commercial properties to qualify for tax relief.
Class 6B Incentive
One of the most widely used incentives is the Class 6B industrial incentive assessment for a) newly constructed industrial manufacturing properties, b) abandoned properties (defined as vacant and unused for at least 24 months) that are reoccupied for industrial manufacturing use, and c) industrial properties that are renovated and rehabilitated. In addition, the ordinance now provides that a 6B incentive may be granted to a property that does not meet the definition of abandoned, but only if the municipality and the county board determine that special circumstances justify finding that the property is “deemed abandoned.”
The Class 6B incentive reduces the assessment ratio of qualified properties from 36% to 16%, effectively decreasing real estate taxes by approximately 56%. The incentive remains in effect for 12 years and is renewable for subsequent 12-year periods indefinitely, with the continued approval of the municipality in which the property is located.
To obtain a 6B incentive, the property owner must file an eligibility application with the Cook County Assessor before any new construction, reoccupancy or rehabilitation begins. The municipality in which the property is located must adopt a resolution stating that the incentive is necessary for the development to occur, and that the municipality supports and consents to the incentive. In the past, a certified copy of the resolution was required to file the eligibility application. However, recent changes in the ordinance allow the applicant to submit a letter from the municipality stating that a resolution has been requested, with the resolution itself filed at a later date.
Newly constructed and reoccupied properties receive the greatest benefit under the 6B incentive, as the reduced assessment ratio is applied to the entire land and building assessment. By contrast, renovated properties receive the incentive only for the “added value” to the property.
Class 8 Incentive
Many property owners are not aware that the south suburban townships of Bloom, Bremen, Calumet, Rich and Thornton are now categorized by the county assessor and board as areas in need of development. Therefore, newly constructed, reoccupied or renovated industrial and commercial properties with added value in these five townships qualify for a Class 8 incentive, which reduces the assessment ratio from 36% (industrial) or 38% (commercial) to 16% of market value for 12 years. This translates to a 56% to 58% reduction in taxes. A recent change to the ordinance provides that the incentive may be renewed for both industrial and commercial properties for an additional 10-year period.
As with the 6B incentive, approval by resolution from the municipality is required, and the appropriate eligibility application must be filed with the assessor before any new construction, reoccupancy or rehabilitation commences.
Class C Incentive
The Class C incentive encourages the cleanup of contaminated industrial, commercial or vacant sites. To qualify, a property owner must not have been responsible for the contamination and must secure a “No Further Remediation Letter.” Additionally, the cost of remediation must total at least $100,000, or at least 25% of the property’s market value as determined by the assessment of the property in the year prior to the remediation. The Class C incentive reduces the assessment ratio to 16%, continues for 12 years, and is renewable only for industrial properties.
Class L Incentive
Designed to encourage the preservation and rehabilitation of historically significant buildings, the Class L incentive provides a reduced assessment ratio to a landmark property that has undergone substantial rehabilitation, constituting an investment of at least 50% of the building's market value. For example, real estate taxes for a commercial property with a market value of $1 million prior to rehabilitation would be reduced from $62,000 to $26,150, utilizing the current combined tax rate.
Applicants must obtain a resolution from the municipality approving the incentive, and must also obtain a written recommendation of the project from the local preservation commission.
Class 9 Incentive
Owners of new or rehabilitated multifamily apartment buildings can benefit from Class 9 incentives if at least 35% of the units are leased at rents affordable to low or moderate income persons. It is important to note that the assessor has reduced the assessment ratio of multifamily apartment buildings to 24% of market value for 2006, 22% for 2007 and 20% for 2008. As a result, the Class 9 incentive does not supply the benefit it once did, but still reduces real estate taxes by approximately 20% to 33% for qualifying properties.
Because properties in Cook County are reassessed every three years, it pays to be prepared. For example, the north and northwest suburbs will undergo a reassessment in 2007 for real estate taxes payable in 2008. Regardless of your property’s location, owners should watch for assessment notices and review them as soon as they are mailed or published. Beware: It is often too late to contest an assessment after a real estate tax bill has been issued.© 2010 Much Shelist Denenberg Ament & Rubenstein, P.C.