The Illinois Property Tax Appeal Board (PTAB) recently issued a decision finding that the clubhouse, parking lot, swimming pool, and tennis courts at a golf club are not entitled to favorable treatment as open space. The decision was issued in the 2006 assessment appeal of the Onwentsia Club in Lake County after the Appellate Court remanded the case for further hearings a second time. Since we first reported this case to you in an August 2011 FR Alert, the Appellate Court clarified its instructions for determining whether improvements at golf clubs should be assessed as open space. Based on these instructions, the recent PTAB decision focuses on whether the improvements have a “substantial nexus” to the preservation of open space.

The central issue in this case is whether improvements on land classified as open space, in this case buildings such as the clubhouse and caddy shack, should be treated as open space. If the improvements are treated as open space, they do not receive an assessment. The result is a significant tax reduction for the property owner.

Two Appellate Court decisions have already been issued in this one case. In the first Appellate Court decision, the PTAB was instructed to treat the improvements on the golf course as open space if the improvements “conserve” landscaped areas. On remand, the PTAB found that all of the improvements on the golf course conserve landscaped areas. That decision resulted in a second appeal in which the Appellate Court clarified its earlier ruling. In its second decision, the Appellate Court explained that conservation of landscaped areas must be narrowly construed. Therefore, there must be a “substantial nexus” between the landscaped areas and the improvement. In other words, “the improvement in question must directly relate to and thus facilitate the existence of the golf course.”

Earlier this year, the PTAB held another hearing, this time to receive evidence and testimony on the relationship between the improvements and the continued existence of the golf course. During the hearing, the appellant conceded that the tennis courts and swimming pools are not entitled to open space treatment. With regard to horse stables on the property, the appellant’s witnesses testified that the building is not used for horses, but rather to store the equipment used to maintain the golf course. The witnesses also testified that the clubhouse, halfway house, and caddy shack are essential to the existence of the golf course.

The PTAB decision analyzes each improvement based on its use in relation to playing golf. The decision finds the halfway house, caddy shack, horse stables, and practice facility are entitled to assessment as open space because the testimony established those improvements are directly related to playing golf. The clubhouse, parking lot, swimming pool, and tennis courts, however, are not entitled to an open space assessment. Regarding the clubhouse, which is the most substantial improvement on the property, the PTAB found it was used for golf-specific functions only 29.5% of the time and therefore not entitled to open space treatment.

While this outcome appears to be a reasonable balancing of competing interests, the decision is still subject to another appeal. Individuals familiar with the issue have also indicated that legislation may be introduced in the Illinois General Assembly to provide further guidance to local assessing officials.