The Cook County Board of Commissioners has adopted a new commercial real estate tax incentive known as the Class 7c Commercial Urban Relief Eligibility incentive aiming to encourage real estate development in the Chicago region.
Class 7c is available to real estate primarily used for commercial purposes (goods and services and also hotel and motel). It joins other more commonly known Cook County incentive classifications, such as 6b (industrial), 7b (commercial) and Class L (landmarks), as well as municipal incentives such as tax increment financing and sales and hotel tax rebates, to expand the tools available to assist projects that would not otherwise be economically feasible.
Class 7c treatment is available for new construction, substantial rehabilitation and reoccupancy projects and generally applies to both the building and the land. (For rehab projects, the incentive applies to the added value). To qualify for Class 7c treatment, the municipality in which the real estate is located must support the application and find that four criteria are satisfied:
- the assessed valuation has declined for three of the last six years
- the project is viable and likely to go forward on a reasonably timely basis
- the designation will materially assist development, redevelopment or rehabilitation activity which would not go forward without the incentive and
- there is an expectation of an increase in real estate taxes and employment opportunities. 7c-classified property receives a reduced assessment for five years – 10 percent for the first three years, 15 percent for the fourth year, 20 percent for the fifth year, and then the assessment returns to the full 25 percent level.
The 7c classification can be renewed one time with municipal approval. As currently enacted, the program will sunset in November 2019, and all new applications must be filed by then.
Class 7c differs in several important respects from the better known 7b classification for commercial development. Determining which classification to seek will depend on the specifics of the project.
First, unlike with 7b, there is no requirement that the property be located in an area which has been designated as a conservation, blighted or renewal area, which allows more flexibility for projects which have economic development benefits in “non-blighted” areas.
Second, there is no minimum investment requirement – 7b requires a minimum investment of $2 million.
Third, there is a lower threshold related to declining assessed valuation (only three of the past six years, instead of all six years).
Finally, the 7c classification lasts for a shorter period of the time than the 7b designation, and thus may not yield the same economic impact to a developer or owner as the 12-year 7b classification.
Obtaining a 7c
The process for obtaining a 7c designation is similar to the 7b process. An application with supporting documentation is required to be submitted to the Assessor and the Cook County Bureau of Economic Development and must include the resolution of the municipality (or the County Board if unincorporated) consenting to the application and making the required findings. The application is then presented to the Cook County Economic Development Advisory Committee for a review of the findings, and then presented to the Assessor for final approval.