Illinois Supreme Court Clarifies Calculation of Interest on Property Tax Refunds

by Franczek Radelet P.C.
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Last week, the Illinois Supreme Court settled the question of how interest should be calculated on property tax refunds when it ruled on General Motors Corporation v. Pappas. This follows the Illinois General Assembly’s amendment to the interest provisions specified in the Property Tax Code which became law in August 2005. For property tax refunds involving taxes paid prior to December 31, 2005, interest will be calculated at 5% through the end of 2005. From January 1, 2006 forward, interest on those refunds will be calculated at the lesser of 5% or the percentage increase in the Consumer Price Increase (CPI). Additionally, those taxpayers in Cook County who challenged the Treasurer’s use of the CPI interest rate for all years on refunds paid after January 1, 2006 are entitled to an additional judgment interest rate of 6% on the difference between the interest they would have been entitled to under the ruling and what they received from the Treasurer. The Court’s ruling affects property tax refunds from all sources, including valuation and tax rate objections, PTAB appeals, and certificates of error.

As we published in a July 10, 2009 FR Alert reporting on the Appellate Court ruling in this case, the 2005 amendments to Section 23-20 of the Property Tax Code changed the interest rate on property tax refunds from 5% per year to “the lesser of 5% or the percentage increase in the Consumer Price Index” for the calendar year preceding the levy year for which the refund was made. The effective date of the amendment was January 1, 2006 regardless of when those taxes were paid. The Cook County Treasurer interpreted the amended statute to apply retroactively so that all interest would be calculated using the CPI rate for any refund issued after January 1, 2006. The objectors took the position that interest should be calculated at 5% per year for every year in any objection in which taxes were paid before January 1, 2006, arguing they had a vested right in the higher interest rate. The Circuit Court adopted a hybrid approach, ruling that interest should be calculated at 5% up to January 1, 2006 and then at the lower CPI rate after that date. The First District Appellate Court then upheld that ruling in its 2009 decision.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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