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05/22/87 Richard L. Airey Et Al., v. the Department of Revenue

May 22, 1987

RICHARD L. AIREY ET AL., APPELLANTS

v.

THE DEPARTMENT OF REVENUE, APPELLEE



SUPREME COURT OF ILLINOIS 1987.IL.670

508 N.E.2d 1058, 116 Ill. 2d 528, 108 Ill. Dec. 481

Appeal from the Circuit Court of Cook County, the Hon. Earl Arkiss, Judge, presiding

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE SIMON

Our State Constitution requires that taxes on real property be levied uniformly by valuation. (Ill. Const. 1970, art. IX, sec. 4(a).) Although more dramatically illustrated in other ways, this is an imperfect world; hence, assessment levels vary. Recognizing this prosaic reality, the legislature has charged the Department of Revenue with equalizing assessments on a county-by-county basis so that (with certain exceptions) the assessed valuation of the real property in each county is, in aggregate, 33 1/3% of its fair cash value. (Ill. Rev. Stat. 1985, ch. 120, par. 627.) To carry out this mandate, the Department annually calculates an equalization factor, or "multiplier," for each county.

Richard L. Airey and numerous other Cook County taxpayers appeared at the Department's hearings on the tentative Cook County multipliers for 1983 and 1984. (See Ill. Rev. Stat. 1985, ch. 120, par. 629a.) A hearing officer overruled their objections to the Department's methodology, and the Department certified multipliers of 1.9122 and 1.8445, respectively. On administrative review in the circuit court of Cook County (Ill. Rev. Stat. 1985, ch. 120, par. 619; ch. 110, par. 3-101 et seq.), certain intervenors were permitted to join the existing plaintiffs' objections. The circuit Judge affirmed the Department's determinations for each tax year, and we allowed the plaintiffs to appeal directly to this court. 103 Ill. 2d R. 302(b).

"carcely a model of statutory draftsmanship" (Hamer v. Kirk (1976), 65 Ill. 2d 211, 218), section 146 of the Revenue Act of 1939 somewhat obtusely outlines the procedure for calculating the multipliers. It requires the Department to compare the assessed valuations of various properties in a county "as revised by boards of review or boards of appeals, as the case may be" to the "fair cash values [of those properties] established through the analysis of property transfers, property appraisals, and such other means as it deems proper and reasonable." (Ill. Rev. Stat. 1985, ch. 120, par. 627.) The result of these calculations is the median level of assessment in the county; the multiplier is the factor by which the median level of assessment must be multiplied to reach the statutorily required 33 1/3% of fair cash value. (Ill. Rev. Stat. 1985, ch. 120, pars. 627, 630.) Thus, 33 1/3% divided by the median level of assessment equals the multiplier.

The process is slightly more complicated in Cook County, which pursuant to constitutional authority (Ill. Const. 1970, art. IX, sec. 4(b)) classifies property for purposes of taxation (see Cook County Real Property Assessment Classification Ordinance). Each classification has its own required level of assessment varying between 16% and 40% of market value. For Cook County, the Department actually determines the median level of assessment for each of the five major classes of property (as well as one subclass). From these levels, the Department calculates an overall county weighted median level of assessment. In Cook County, as elsewhere, the overall level of assessment must be equalized at 33 1/3%.

Section 1(20) of the Revenue Act of 1939 fleshes out the method of determining the median level of assessment known as the "sales ratio study":

"The term '33 1/3%' means 33 1/3% of the actual value of real property, as determined by the Department's assessment to sales ratio studies for the 3 most recent years preceding the assessment year, adjusted to take into account any changes in assessment levels implemented since the data for such studies were collected. In compiling such sales ratio studies the Department shall exclude from the reported sales price of any real property any amounts included for personal property and sales finance charges. . . ." Ill. Rev. Stat. 1985, ch. 120, par. 482(20).

Also relevant here is the Real Estate Transfer Tax Act, which provides a data source for the Department's sales ratio studies. (Ill. Rev. Stat. 1985, ch. 120, par. 1001 et seq.) Section 3 of that Act imposes a tax on the transfer of real property and requires the filing of a declaration form (known as a "green sheet") for each transfer, which, in addition to various descriptive information on the property and the type of conveyance, includes "sales information questions" and "financing questions":

"The subject of the sales information questions shall include, but not be limited to, information on compulsory transactions, sales between relatives and related corporations, contractual sales, and deed or trust document types. In addition, the declaration form shall contain questions regarding the financing of the sale. The subject of the financing questions shall include any direct seller participation in the financing of the sale or information on financing that is unconventional so as to impact the fair cash value received by the seller. The intent of such sales and financing questions shall be to aid in the reduction in the number of buyers required to provide financing information necessary for the adjustment outlined in subsection (24) of Section 1 of this Act. The declaration shall include an appropriate place for the inclusion of special facts or circumstances, if any, and shall include the following data: value of personal property sold with the real estate, sales finance charges (points) paid by the seller, the sales price, type of financing (conventional, VA, FHA, seller-financed, other), down payment, term, interest rate, type and description of interest rate (fixed, adjustable or renegotiable), the year the contract was initiated if a contractual sale, and the name, address and telephone number of the person filling out the real estate transfer declaration." (Ill. Rev. Stat. 1985, ch. 120, par. 1003.)

After a declaration is completed, the recorder of deeds transmits it to the assessor, "who shall insert on such declaration the most recent assessed value for each parcel of the transferred property, and, at least once during every month, shall transmit all such declarations to the Department." Ill. Rev. Stat. 1985, ch. 120, par. 1003.

The Department, following section 1(20), used sales ratio studies for the three preceding years -- 1980, 1981 and 1982 -- to compute the average median level of assessment upon which the 1983 multiplier was based. Similarly, the average median level of assessment for the 1984 multiplier was calculated on the basis of 1981, 1982, and 1983 sales ratio studies. In preparing each of the sales ratio studies, the Department compared assessments for the prior year to sales prices for the year of the study. For example, the 1980 sales ratio study had 1979 property assessments in the numerator and the 1980 sales prices of those properties in the denominator. The Department then applied an adjustment factor to the median level of assessment calculated in each sales ratio study to take into account changes in assessment levels made by the county assessor or the board of appeals since the year of the assessments. In calculating the 1984 multiplier, for instance, the Department adjusted the median levels of assessment for each of the three studies used for changes in levels of assessment through the 1984 revisions. The Department did not attempt to determine actual changes in the assessments of the individual parcels used in the studies, but simply adjusted the overall median by the average increase in assessments after the data was collected.

The plaintiffs initially object that the Department's sales ratio study methodology defies the statutory directive. They point to the language of section 146, which requires the Department to use in its sales ratio studies only assessments "as revised by . . . [the] boardof appeals." (Ill. Rev. Stat. 1985, ch. 120, par. 627.) Similarly, section 148a (Ill. Rev. Stat. 1985, ch. 120, par. 629a) requires the Department, in certifying the percentage to be added to or deducted from the aggregate assessed valuation, to compare the estimated percentage to "the level of assessments of the assessed valuations as made by the assessors and thereafter finally revised by the board of review or board of appeals." Plaintiffs' contention is that these provisions, together with the requirement of section 1(20) that the level of assessment determined by the sales ratio studies must be "adjusted to take into account any changes in assessment levels since the data for such studies were collected," require that the assessments used in the numerator of the sales ratio studies be finally revised assessments for the tax year for which the multiplier is being calculated. Thus, under plaintiffs' submission, the sales ratio studies used in arriving at the 1983 multiplier would compare finally revised 1983 assessments with 1980, 1981, and 1982 sales prices, respectively. In contrast, the Department, as noted above, compared 1979 assessments to 1980 sales, 1980 ...


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