Cook County recently amended its real property assessment classification ordinance to add a new property tax incentive classification to stimulate real estate development in the County.  The new classification, known as “Class 7c – Commercial Urban Relief Eligibility (CURE)”, provides eligible commercial property owners with a five year reduction in property tax levels for: (i) all newly constructed buildings or other structures, (ii) the utilization of vacant structures which have been abandoned for at least 12 months, and (iii) all buildings and other structures which are substantially rehabilitated to the extent the rehabilitation adds to the value of the property.  The Class 7c classification also extends the assessment relief to the property value attributable to the underlying land.

Projects which qualify for the Class 7c incentive will receive a reduced assessment level of 10% of fair market value for the first three years, 15% for the fourth year and 20% for the fifth year. Without this incentive, commercial property would normally be assessed at 25% of its market value. This has the effect of reducing the assessment by 60% for each of the first three years, 40% for the next year and 20% for the fifth year.  For a newly constructed building with a $5,000,000 fair market value in the City of Chicago, the savings based on 2013 tax rates, would be approximately $136,000 for each of the first three years and approximately $546,000 over the five year duration of the incentive.

To be eligible for Class 7c, the property must be “real estate used primarily for commercial purposes”, which is defined as “any real estate used primarily for buying and selling of goods and services, or for otherwise providing goods and services, including any real estate used for hotel and motel purposes.” Qualifying property must meet four eligibility factors:

    • The property’s assessed valuation for three of the past six years has declined or remained stagnant due to the depressed condition of the property;
    • The proposed project development or redevelopment is viable, likely to proceed on a reasonably timely basis and result in an economic enhancement of the property if granted a Class 7c designation:
    • The Class 7c designation materially assists in the development of the property and the development would not have gone forward without the Class 7c designation; and
    • The designation is reasonably expected to result in an increase in property tax revenue and the creation of employment opportunities at the property.

An application for Class 7c designation must be submitted prior to the commencement of construction, rehabilitation or reoccupation.  The application must include a resolution or ordinance from the municipality in which the property is located supporting the project and stating that the municipality has confirmed the above-referenced eligibility factors and that the area in which the property is located is in need of commercial development.

For further information regarding the Class 7c incentive program, and real estate development and related issues, please contact:

Jeffrey M. Galkin:  jgalkin@lgattorneys.com or 312-368-0100

or

Morris R Saunders:  msaunders@lgattorneys.com or 312-368-0100