Cook County and many of it’s municipalities offer numerous tax incentive programs. Each of these programs are the result of a government initiative to stimulate certain types of development. Applicants are advised that merely applying for the program will not necessarily qualify the property for participation in an incentive program. Cook County applies the “But For” test to each application. Under that test, assessing officials must be made reasonably certain that the proposed project will not become a reality “but for” the existence of tax incentives. Potential applicants should know that the Cook County board is currently in the process of studying proposals which if passed, will limit the number of properties that qualify for participation in a tax incentive program. Additionally, in order to keep a property enrolled in the program, there are numerous requirements that must be met annually. The city of Chicago and other Cook County municipalities offer numerous types of other enticements that may be used in conjunction with some of the tax incentives listed below.

When applying for participation in a tax incentive program, we need as much lead time as possible. Applicants should expect a minimum time period of nine months from initial application to final approval.

Applicants are also advised that these tax incentives do not always make good economic sense. I question the wisdom of seeking a tax incentive in a municipality where the tax rate is already excessive (as compared to the average tax rate). The effect of such an excessive tax rate renders the tax incentive as nothing more than an illusion. An illusion which will sooner or later render the project economically unfeasible.


Cook County Tax Incentive Programs

Class 6B:

Class 7A:


Class 7B:

Class 7C: 

Class 8:

Class C: (Environmental Contamination)

Class L: (Architecturally Significant commercial, industrial and multifamily buildings)

CEERM Program (Critical Emergency Employee Retention Modification)  In the instance where real estate does not meet the definition of abandoned property as defined herein, the municipality or the County Board, as the case may be, may still determine that special circumstances justify finding that the property is deemed “abandoned” for purpose of a Class 6b under the CEERM Program if:

  1. There has been no purchase for value; and
  2. The buildings and other structures have been vacant and unused for at least 3 continuous months; and
  3. The applicant has provided sufficient documentation to establish that such applicant will create or maintain at least 250 jobs for employees at the subject location. For purposes of this Section, the term “employee” shall mean an individual who performs duties or services at the subject location on average at least 30 hours per week in any two-week period for which such individual is paid; “hours per week” shall mean hours for which an individual is paid or entitled to payment for a period of time during which no duties are performed by such individual due to vacation, holiday, illness, incapacity, jury duty, military duty or approved leave of absence.

 

The finding of abandonment, along with the specification of the special circumstances, and a determination that the applicant’s participation in the CEERM Program is necessary for the development to occur, and that without such designation the industrial enterprise would not be economically viable causing the property to be in imminent risk of remaining vacant and unused, shall be included in the Resolution or Ordinance supporting and consenting to the Class 6b application under the CEERM Program.

In addition, the Ordinance or Resolution where applicable shall:

  1. Describe the redevelopment objective of the municipality; and
  2. State the applicant’s intended use of the property; and
  3. State that an Economic Disclosure Statement, as defined in this Division, was received and filed by the municipality or the County Board, as the case may be.

The CEERM Program shall be limited to the party who is the initial applicant                             of the Class 6b incentive under the CEERM Program and the subject of the municipal Resolution or Ordinance.

If the Ordinance or Resolution is that of a municipality, the approval of the County Board is required to validate such a finding that the property is deemed “abandoned” for purposes of Class 6b, and a County Resolution to that effect shall be obtained. The applicant must obtain the municipal enabling Ordinance with the required finding of special circumstances and present such municipal Ordinance to the Board of Commissioners of Cook County prior to its determination as to whether it will validate such a finding that the property is deemed “abandoned” for purposes of Class 6b under the CEERM Program and provide a County Resolution to that effect. A certified copy of an Ordinance or Resolution finding that special circumstances exist, as well as a certified copy of a County Ordinance or resolution validating such a finding that the property is deemed “abandoned” for purposes of Class 6b need not be filed at the time of filing the Class 6b application with the Assessor, but must be filed with the Assessor no later than the date an assessment appeal is filed to request the class change to Class 6b. If the Resolution is not filed at the time of the Class 6b application, the applicant shall instead file, at that time, a letter from the municipality or the County as the case may be, confirming that a Resolution or Ordinance regarding special circumstances has been requested.

 

Tax Increment Financing “TIF”
Tax Increment Financing is a method of financing public and private improvements through the sale of municipal bonds. The bonds are secured by future tax revenues which are presumed will be derived by increased property values. TIF’s have been responsible for the revitalization and stabilization of many marginal and declining areas throughout Cook County. The following programs are available in TIF’s throughout Cook County.

Expenses eligible for TIF grants include:
-Land acquisition, clearance and site preparation

-Environmental remediation measures
-Employee training
-Building rehab and repair
-Signage
-Remodeling of tenant improvements
-Professional fees (Architectural and Engineering)
-Up to 30% of the owners borrowing cost

The downside about TIF’s is that commercial and industrial real estate located in or near a TIF tend to be assessed at a higher market value after the TIF is put into place. This phenomenon seems to develop regardless of whether the property values have in fact increased. Since TIF bonds are guaranteed by the local municipality, all taxpayers located within the municipality are responsible for repayment of the bonds.

Until recently, TIF’s seemed to be viewed by every mayor as a means of inexpensive financing for a pet project. Such a perspective has lead to abuse, the cost of which will ultimately be borne by bond holders.


The truth about Tax incentives and TIFs
The Cook County Tax Incentive programs have become the most heavily touted chant in the real estate industry. Within the city of Chicago and many suburbs, they have induced much development and created thousands of jobs. For many businesses, participation in these programs makes good economic sense, but the incentives do not make sense everywhere. Take for example the south suburban townships of Bloom, Bremen, Calumet, Rich and Thornton; and the west suburban township of Proviso. The average tax rate in these townships is 2.5 times higher than the city of Chicago tax rate. See the partial list below.

Tax Abatement
A written agreement between a taxpayer and a taxing body whereby a certain dollar amount is refunded to the taxpayer each year. This is a favorite of some municipalities but without local school district participation, the abatement is illusionary. 

Updated: December 2018

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