Illinois and Indiana recently suffered a series of violent tornadoes. Earlier this November, there were 24 confirmed tornadoes in Illinois and 28 confirmed tornadoes in Indiana.
Property taxes are likely a long-way down the list of concerns of people affected by these tornadoes. However, owners of property in these communities should know that there are provisions of law that may provide relief from taxes. Even before these tornadoes hit, Indiana and Illinois had provisions regarding the assessment of damaged or destroyed property.
The Illinois Property Tax Code, in part, provides the following with respect to damaged or destroyed property:
When, during the previous calendar year, any buildings, structures or other improvements on the property were destroyed and rendered uninhabitable or otherwise unfit for occupancy or for customary use by accidental means (excluding destruction resulting from the willful misconduct of the owner of such property), the owner of the property on January 1 shall be entitled, on a proportionate basis, to a diminution of assessed valuation for such period during which the improvements were uninhabitable or unfit for occupancy or for customary use. The owner of property entitled to a diminution of assessed valuation shall, on a form prescribed by the assessor, within 90 days after the destruction of any improvements or, in counties with less than 3,000,000 inhabitants within 90 days after the township or multi-township assessor has mailed the application form as required by Section 9-190, file with the assessor for the decrease of assessed valuation. Upon failure so to do within the 90 day period, no diminution of assessed valuation shall be attributable to the property. (35 ILCS 200/9-180)
The foregoing provision indicates that there are different time-frames for providing the applicable notice to the assessor in counties with greater than or fewer than 3 million inhabitants. (see also 35 ILCS 200/9-190).
Indiana also has provisions of law governing the assessment of property that has been damaged or destroyed. For example, Ind. Code § 6-1.1-4-11 provides:
Destroyed property; order of reassessment by county assessor
(a) If a substantial amount of real and personal property in a township has been partially or totally destroyed as a result of a disaster, the county assessor shall:
(1) cause a survey to be made of the area or areas in which the property has been destroyed;
(2) order a reassessment of the destroyed property;
if a person petitions the county assessor to take that action. The county assessor shall specify in the assessor’s order the time within which the reassessment must be completed and the date on which the reassessment will become effective. However, the reassessed value and the corresponding adjustment of tax due, past due, or already paid is effective as of the date the disaster occurred, without penalty.
(b) The petition for reassessment of destroyed property, the reassessment order, and the tax adjustment order may not be made after December 31st of the year in which the taxes which would first be affected by the reassessment are payable.
Indiana’s Department of Local Government Finance (DLGF) has provided guidance to County Auditors, Assessors and Treasurers, in the form of a memorandum that can be found here.
Within its memorandum to Auditors, Assessors and Treasurers, the DLGF explains that “No declaration of a disaster by the governor or president is required before reassessment can be undertaken” and that “a ‘disaster’ for purposes of the statute does not need to be wide spread. The destruction of a single structure can be considered a disaster for purposes of the statute and reassessment.”
The DLGF also provided answers to a number of Frequently Asked Questions, including (but not limited to) the following:
Frequently Asked Questions:
Could the decision to reassess or not be based solely on whether the president declared the area as a disaster area and the homeowners qualified for federal disaster aid?
The decision to reassess should never be made solely on the basis of the declaration of a disaster by the governor or president. Each petition must be reviewed independently. The assessor should consider all of the facts surrounding the event before making the determination on whether a disaster with substantial damage to property has occurred.
If a disaster occurs in July of 2008, do I reassess property as of 1/15/08 payable in 2008 for annually assessed mobile homes and March 1, 2008 payable in 2009 for real and personal property or is it for the assessment date of 1/15/09 payable in 2009 for annually assessed mobile homes and March 1, 2009 payable in 2010 for real and personal property?
You would reassess property for the assessment date prior to the disaster. The statute says the reassessed value is effective as of the date the disaster occurred. For example, the assessment dates affected for property damaged or destroyed from the January 7, 2008 floods in White, Tippecanoe, and other counties, would be 07 pay 07 for annually assessed mobile homes and 07 pay 08 for real property and personal property.
So is it possible that an assessment on a home could be reduced to zero if the home was completely destroyed?
Yes. If you assessed that home for March 1, 2008 and a disaster destroyed it after the assessment date, you would remove the true tax value of the improvements from that assessment. The true tax value of the land would remain.
So are you saying that not everyone who files a Form 137R (disaster petition) will receive a reduction to their assessed value?
Many taxpayers who file a Form 137R will be entitled to a reassessment. Each petition will have to be reviewed and adjustments will be based on the facts of each petition. Some taxpayers may have experienced minor damage which will not be significant enough to warrant a reassessment. It is also possible that some taxpayers, who live in the general vicinity of the disaster but were unaffected by it, will file a petition in an attempt to lower their assessment and reduce their tax burden.
So assessors will need to physically inspect the damage done to improvements on every petition filed?
Physical inspections are mandatory and the only way to garner the true amount of destruction.
What role does the taxpayer play in this process?
Taxpayers should be given the opportunity to provide evidence for your consideration. The evidence could include, but not be limited to: photographs, video, repair bills, insurance claims, news articles, appraisals, reports and other documentation from local, state and federal agencies.
Should an assessor refuse to accept a Form 137R from homeowners that the assessor believes do not qualify for reassessment?
No. Any taxpayer who desires to file this petition should be allowed to do so. The assessing officials then review the petition and reassess the property if necessary. Since the County Assessor is required to give notice of his/her action to the taxpayer, IC 6-1.1-15-5 would allow the taxpayer to file an appeal on the action, if so desired.
Does this process only apply to real property?
No, personal property assessments based on the Form 101 (Individual), Form 102 (Farmer), Form 103 (Business), and utility assessments can all be reassessed after a disaster to adjust for the percent of damage.
Can the assessor file a petition on behalf of the homeowner?
No, the taxpayer is required to file the Form 137R and sign, under oath, that the information is true and correct.