Prem Tax and Business Services, Inc.
Tax, Payroll & Accounting
                       
IL - Alternative homestead exemption survives constitutional challenge

Enactment of the Illinois alternative general homestead exemption from property tax did not violate the state constitutional provisions relating to separation of powers, uniformity of taxation, exemptions, equal protection, or due process, according to the state appellate court. Although the challenge was aimed at the exemption as enacted in 2004, the court noted that the exemption subsequently was substantially reenacted.

Initially, the court noted that complaining taxpayers' multiple instances of noncompliance with rules of appellate procedure could have made dismissal an appropriate consideration. However, the issues raised were of significant public interest, the incomplete record was sufficient to allow evaluation of the taxpayers' claims, and the manifest efforts of the parties otherwise demonstrated serious thought and treatment. The issues raised were considered on their merits.

The Illinois General Assembly did not violate the state's constitutional separation of powers principle by permitting each county in the state to elect whether to adopt the exemption. The General Assembly's authority to incrementally delegate its own authority in furtherance of its enacted legislation was part and parcel of its ability to pass any law on any given subject. There was no designation of any rule-making authority, i.e., authority to formulate and draft a rule. Rather, the delegation was only a "take it or leave it option" of a fully drafted and fully formulated piece of legislation. The local option gave full reflection of the design and intent of the legislature with regard to the exercise of its constitutional authority to provide homestead exemptions. There was no reason to expect that allowing the local option for the exemption would permit the legislature to make further delegations of an unconstitutional nature. Finally, a county's selection of the alternative general homestead exemption would not impermissibly have extraterritorial effect in the form of resulting different tax rates in other counties.

Uniformity of Taxation

There was no violation of the uniformity of taxation clause in permitting each county to adopt the exemption. The assumption that exemptions remained subject to the strictures of uniformity was not well founded, and even if they were, those requirements were not absolute and would flex to accommodate the disunity inherent in the constitutional grant of the power to exempt. To exempt property, in its statutory context, means to except it from the general strictures of the assessment process, which would include the strictures of uniformity, as well. To harness exemptions to the uniformity requirements of the constitution would undermine and defeat the basic policy, purpose, and function of the constitutional power to exempt, as articulated on the constitutional convention floor and the Illinois Supreme Court.

Ultra Vires Assessment Cap

There was no support for a contention that the exemption was an unconstitutional ultra vires assessment cap, as opposed to a constitutionally authorized homestead exemption. The term "homestead exemption" was flexible and did not hinge on formal structure. There was no readily discernible basis on which to insist that homestead exemptions follow any particular form in order to be considered an exemption, so long as they comported with the purpose of reducing the tax burden on homesteads.

Equal Protection

The exemption did not violate complaining taxpayers' equal protection under the law, including their right to not be disadvantaged by special legislation that is passed exclusively for the benefit of a different set of persons or entities because there was no invidious discrimination in their tax treatment. If the exemption itself created irrational discriminations against non-homesteaders, then there could never be a valid homestead exemption; equal protection would necessarily trump the homestead exemption otherwise specifically provided for in the state constitution. Even if the exemption were enacted in order to address issues in Cook County, a law could be general and yet operative in a single place, and the exemption law allowed any other county to opt into the alternative exemption. Even though no county other than Cook County had a triennial assessment process, that process already had been judicially approved.

Due Process

Enactment of the exemption six months after the end of the 2003 tax year did not have the effect of retroactively increasing real property taxes on non-homestead properties in a harsh and oppressive manner so as to constitute a due process violation. The exemption did not embody any improper purpose or constitute a means of retribution, and complaining commercial, industrial, and non-homestead property owners could not demonstrate any lack of substantial notice or detrimental reliance. Complaining organizational taxpayers were actively involved in the fight against the exemption, and all the taxpayers were aware that the exemption would have an impact on their share of the tax burden, even if they did not know to what extent. Chicago Chamber of Commerce v. Pappas, Treasurer and Collector of Cook County, Illinois, Illinois Appellate Court, First District, No. 1-05-1488, December 14, 2007



If and only to the extent that this publication contains contributions from tax professionals who are subject to the rules of professional conduct set forth in Circular 230, as promulgated by the United States Department of the Treasury, the publisher, on behalf of those contributors, hereby states that any U.S. federal tax advice that is contained in such contributions was not intended or written to be used by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer by the Internal Revenue Service, and it cannot be used by any taxpayer for such purpose.
                
  Tax Tips       Tax Alerts       Tax Forms       IRS Publication       2007 Tax Changes    Tax Rates