Appellate Court Reverses PTAB on Erroneous Interpretation of Law: Taxpayer will have to reimburse impacted taxing districts

Written by Scott L. Ginsburg and Jessica L. Knox

On August 17, 2020, the Third District Appellate Court reversed a decision of the Property Tax Appeal Board (PTAB) that had previously required taxing districts to pay a substantial refund.  In the case of Manteno Community Unit School District No. 5 v. Property Tax Appeal Board, 2020 IL App (3d) 180384, handled by Scott L. Ginsburg and Jessica L. Knox of Robbins Schwartz, the appeals court concluded that in misinterpreting a section of the Property Tax Code regarding the assessment of Illinois Supportive Living Facilities, the PTAB erroneously slashed the assessed value of a senior housing facility, owned by DSI Manteno Owner, LLC (DSI), by nearly $1 million. When the PTAB issued this decision, the affected taxing districts, including our client(s), were forced to refund thousands of property tax dollars to DSI.  Under the appellate court’s decision, DSI will have to return this money to the taxing bodies.  The appellate court’s decision will significantly impact cases involving Supportive Living Facilities throughout Illinois for property tax purposes. 

In this case, DSI, who owns many Supportive Living Facilities throughout Illinois, tried to use clever bookkeeping tactics to reduce its property tax liability.  Citing a provision of the Property Tax Code requiring appraisers and assessment officials to value these facilities using the “income capitalization approach,” rather than the regularly accepted “sales comparison approach,” DSI allocated approximately 80% of its monthly rent checks to “services” like housekeeping and laundry, with only the remaining portion going to the taxable real estate.  This approach greatly underestimated the taxable real estate value by reducing the income per resident from about $4,000 per month to about $600 per month.  The appellate court ruled that DSI’s appraisal, adopted by the PTAB, ”was predicated on [the taxpayer’s] understated numbers for the real estate income, together with excludable, but overstated, numbers for service income.” Thus, the appellate court rejected DSI’s appraisal as it left out a significant amount of real estate income resulting in an undervaluation of the property.  

Units of local government, maybe more than ever, depend on property tax revenue to provide services and pay staff.  By asserting its right to participate in the property tax appeal process, the school district in Manteno was able to ensure that it could challenge erroneous refunds by property owners and defend its tax base.  It is important to pay attention to property tax appeals in your district as these appeals can have a significant impact and should not go unchecked and unchallenged. 

More information on the PTAB’s reversal in the Manteno decision is available in the published article, Ill. Panel Nixes $1M Assessment Cut For Senior Care Facility P

lease contact your Robbins Schwartz attorney for further information or questions about how to best to protect your tax base by timely intervening in property tax appeals

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