The Illinois Appellate Court recently reversed a decision of the Illinois Property Tax Appeal Board (PTAB) involving the taxation of a mobile home in Jones v. State Property Tax Appeal Board. While the opinion addresses a very rare circumstance, it is interesting for its reminder of how mobile and manufactured homes are taxed as well as for its somewhat confusing outcome.
Prior to January 1, 2011, mobile homes in Illinois were taxed as real property only if they rested on a permanent foundation. If they were not on a permanent foundation, they were subject to a “privilege tax” rather than a property tax. Because the privilege tax was less than what the real estate taxes would have been, it was considered preferable to property taxes. Since January 1, 2011, all mobile and manufactured homes have been taxed as real property. However, if they were installed outside of a mobile home park prior to January 1, 2011, manufactured and mobile homes continue to be subject to the privilege tax until they are moved or sold.
At issue in this case was a manufactured home installed in the summer of 2010 that was not registered for the privilege tax. When a real estate tax bill was issued for the property in 2011, the owners appealed to PTAB claiming the grandfather clause of the statute exempted them from real estate taxes. PTAB ruled against the homeowners finding the failure to register for the privilege tax made them liable for 2011 real estate taxes.
The Appellate Court disagreed. The Court was persuaded that in this instance the property owners were entitled to the benefit of the grandfather clause that allowed inhabited manufactured or mobile homes to continue their preferential treatment under the privilege tax rather than be subject to real estate taxes. The opinion recognizes the central problem in this case, which is that the taxpayers’ manufactured home was neither inhabited nor subject to the privilege tax in 2010. Thus, this property has seemingly escaped taxation. The Court recognizes the conundrum, but ultimately concludes that this legislative oversight applies to a very small number of homes and subjecting these homeowners to real estate taxes would be an “arbitrarily harsh penalty.” What is left unaddressed, however, is how the property should be taxed going forward.
The decision is a good reminder that the Property Tax Code contains a labyrinth of categories designed to provide special treatment to specific types of properties. And despite the General Assembly’s best efforts, it is simply not possible to draft legislation that addresses every possible factual situation faced by local assessing officials.
*Also written by Thalia Pacheo who will be a third-year law student at DePaul University this fall and is a Franczek Radelet LEADS Fellow.