Most people don’t spend much time thinking about the tax value of their toilets. That hasn’t been the case lately for Illinois gubernatorial candidate J.B. Pritzker, however. Pritzker and his wife, M.K. Pritzker, removed all of the toilets from one of their properties in Cook County as part of a plan to reduce their property tax bill. A report by the Cook County Inspector General shows that the Pritzkers were able to save over $300,000 in property taxes for the period of 2012–2016 through the allegedly fraudulent scheme, which also involved submitting false affidavits to the Cook County Assessor’s Office about when the toilets were removed.
These immense savings were possible because of a Cook County law that applies a “vacancy factor” of 10 percent to residential buildings that are “vacant and uninhabitable,” which includes buildings that don’t have working toilets. The vacancy factor applies in addition to the 10 percent assessment level for residential properties. This means that a “habitable” residential building with a fair market value of $100,000 would be assessed at $10,000, while a “vacant and uninhabitable” residential building with the same fair market value would be assessed at $1,000. This results in massive tax savings, especially for properties with a high fair market value, like the Pritzkers’ property, which was given a fair market value of approximately $6.3 million (roughly $5.7 million for the building and $500,000 for the land) in 2015.
Cook County’s treatment of vacant properties is very generous in comparison to other parts of the U.S. States like Kentucky, Oregon, and Wyoming value vacant property based on its current highest and best use, and they do not provide any discount based on vacancy or habitability. Other states, like Montana, provide property tax relief for uninhabitable residences if the damage occurred as the result of a natural disaster. If the property is found to be uninhabitable due to different circumstances, standard assessment and valuation rules generally apply.
West Virginia takes a different approach and specifies that property should be classified and assessed based on its actual use. Further, buildings are not classified and listed until they are fit for use, although the building materials may be taxed as personal property. These rules would likely result in a more favorable assessment for owners of uninhabitable property, but the state does not provide any further reductions or relief based on the property’s uninhabitable status.
Overall, it seems that the Pritzkers’ commode caper may be fairly unique to Cook County. Submitting false affidavits about the condition of your property, however, is a blueprint for trouble regardless of where your property is located.
Continue the discussion on Bloomberg Tax’s State Tax Group on LinkedIn: How does your state treat uninhabitable property for property tax purposes?
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 It should be noted that the vacancy factor is only applied to the value of the vacant and uninhabitable building. The assessed value of the underlying land is not affected.
 $100,000 x 10% vacancy factor = $10,000 x 10% assessment level = $1,000.
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