State loophole allows property tax avoidance
Wednesday, Nov 14, 2018 - Posted by Rich Miller
* Jake Griffin…
Robert Werderich used to pay the property taxes he owed for operating his Illinois Aviation Academy out of space he rents from the DuPage Airport Authority.
But he stopped paying years ago, which explains why his company now owes $187,937 in back taxes to 13 taxing bodies, including the airport itself.
Werderich is exploiting a loophole in the state property tax law that fails to penalize tenants operating businesses on government property who ignore property tax bills because the property can’t be seized for noncompliance. […]
Werderich is among at least seven current or former tenants of the airport that owe nearly $770,000 in back taxes, according to property tax sale information released by DuPage County Treasurer Gwen Henry.
The tax sale is where delinquent property taxes are purchased by investors who will either receive interest from the property owner to clear the debt or — after a couple years of nonpayment — be allowed to claim the deed on the land. However, Henry said, no one wants to buy the tax debt for the airport tenants because they can never claim the deed because it’s government land.
There’s also no mechanism to force the tenants to pay the tax obligation.
And if it’s happening there, you gotta wonder if it’s happening elsewhere.
- Anonimity - Wednesday, Nov 14, 18 @ 11:36 am:
So how long has the Dept of Revenue sat back and done nothing to amend the State Property Tax law to fix this?
- JS Mill - Wednesday, Nov 14, 18 @ 11:39 am:
I can’t imagine how much is owed from O’Hare
- A guy - Wednesday, Nov 14, 18 @ 11:43 am:
==There’s also no mechanism to force the tenants to pay the tax obligation.==
Call me crazy, but I think there is a solution to changing this, and little sympathy for the people who might oppose it.
- cdog - Wednesday, Nov 14, 18 @ 11:44 am:
Why is he paying property taxes on leased land? Does the airport pay property taxes? I’d be surprised if they do.
It seems analagous to a coffee vendor in a property-tax-free zone at a hospital. I doubt any lessee’s of a hospital are getting a property tax bill.
- DuPage Saint - Wednesday, Nov 14, 18 @ 11:46 am:
Why are there real estate taxes due on government property anyway? This tax bill must be a left over from years ago when it was private property. Tax parcel must never have been changed to exempt when DuPage took over
- Tommydanger - Wednesday, Nov 14, 18 @ 11:46 am:
Silly question, but can’t the Du Page Airport Authority, as the landlord, require as part of their lease agreement that all such taxes be paid on a timely basis?
- wordslinger - Wednesday, Nov 14, 18 @ 11:47 am:
–And if it’s happening there, you gotta wonder if it’s happening elsewhere.–
Happened in Oak Park with a hot dog stand the village built for the owners after their previous property was taken in eminent domain.
They didn’t pay rent or property taxes for years, and the place became a hang out for petty criminals and street dealers. Took the village years in the courts to force them out.
- FN - Wednesday, Nov 14, 18 @ 11:53 am:
Churches also avoid paying property taxes. They are mostly corporate political enterprises (see Paprocki) and should pay taxes too.
- Perrid - Wednesday, Nov 14, 18 @ 11:57 am:
@ FN, hello there red herring. Churches are exempted from paying taxes, they legally don’t have to. You can argue whether or not they should, whatever, but you gotta be a certain kind of special to equate that to this, where the tenant is refusing to pay what they legally owe, and there is no way to enforce the law.
- Long Live Tasty Dog - Wednesday, Nov 14, 18 @ 11:58 am:
Wordslinger I love you but you’re off base about the Oak Park hot dog stand. I was a regular customer to the end and is there were any petty criminals or street dealers there they were not at all apparent to regular customers. In my opinion, Tasty Dog fell victim to the Village Board’s STILL unsated appetite for luxury condominiums. Miss those cheese fries.
- wordslinger - Wednesday, Nov 14, 18 @ 12:07 pm:
Long, $1.45 million for starters, plus years of past-due rent, taxes and legal fees is a wee bit steep to subsidize your favorite cheese fries.
http://www.oakpark.com/News/Articles/6-23-2015/Could-this-be-the-end–of-Tasty-Dog%3F/
- Matts - Wednesday, Nov 14, 18 @ 12:09 pm:
It is ‘Rauneristic’ to exclaim we can balance the budget by elimination Waste, Fraud, and Abuse. It is head in the sand stupid to downplay the real scourge of W,F, and A that exists in small and huge doses. Aside from the fact that shortages must be supplied by those that don’t cheat, lie, and weasel, it weakens the already thin line of confidence in the integrity of the bodies that are charged with serving the citizens/taxpayers.
- Perrid - Wednesday, Nov 14, 18 @ 12:10 pm:
@cdog, the article says the lease agreement makes it clear the tenant is responsible for any assessed property tax. So they agreed to do it when they signed on the line.
- Anon - Wednesday, Nov 14, 18 @ 12:19 pm:
Counties are responsible for collecting property taxes. How far do we want local government entities to go in collecting property taxes from businesses and residents? And, do they have the legal ability to actually do so?
Also, I’d like to know how far DuPage County has gone to try and collect the taxes. Did they just send the bill and then not follow-up?
- cdog - Wednesday, Nov 14, 18 @ 12:25 pm:
Perrid, ok, but… just because something was written into a lease doesn’t mean it will survive litigation.
Mills’ question about Ohare is definitely worth closer inspection.
- Sox Fan - Wednesday, Nov 14, 18 @ 12:41 pm:
Now that the story is out there, Cook County better hope this loophole closes before the major airlines (and their heavily clouted attorneys) are able to exploit it. All of a sudden you go from $770k over many years to 10’s of millions annually.
- Huh? - Wednesday, Nov 14, 18 @ 12:43 pm:
“There’s also no mechanism to force the tenants to pay the tax obligation”
Anyone think about changing the locks? Tenant gets stuff back when taxes are paid.
- Huh? - Wednesday, Nov 14, 18 @ 12:52 pm:
In addition to changing the locks, work with the tower controller to keep the planes on the ground, FBO to deny fuel, etc.
If lease includes tie down spots, seize the plane for non-payment.
If can’t get fuel or take off, can’t provide training flights.
- Been There - Wednesday, Nov 14, 18 @ 12:53 pm:
===Anyone think about changing the locks? Tenant gets stuff back when taxes are paid===
I don’t know how the lease is structured but the amount of rent paid to the airport is probably a lot more than the airports share of the property tax.
- Rutro - Wednesday, Nov 14, 18 @ 12:53 pm:
Is this why aren’t there McDonald’s at midway anymore? Worst decision ever.
- old pol - Wednesday, Nov 14, 18 @ 1:18 pm:
The landlord (in this case DuPage) can cancel the lease. Enforcement is simple.
- Liandro - Wednesday, Nov 14, 18 @ 1:32 pm:
“Why is he paying property taxes on leased land? Does the airport pay property taxes? I’d be surprised if they do.”
and
“Why are there real estate taxes due on government property anyway?”
Only the governmental entities are free from property taxes. Any space(s) leased to a taxable entity (including some non-profits) must pay their space’s portion of the property tax bill.
That is why the airport made clear in the lease that those property taxes were the responsibility of the tenant–otherwise, the airport itself would have had to pay on their rented space.
- Liandro - Wednesday, Nov 14, 18 @ 1:38 pm:
To the post: I would think the airport could include an property tax escrow requirement in their leases? Seems like a simple solution.
- I Miss Bentohs - Wednesday, Nov 14, 18 @ 1:53 pm:
= So how long has the Dept of Revenue sat back and done nothing to amend the State Property Tax law to fix this? =
Does this have anything to do with DoR? And I do believe they cannot change tax law.
- Anonymous - Wednesday, Nov 14, 18 @ 2:20 pm:
==Only the governmental entities are free from property taxes. Any space(s) leased to a taxable entity (including some non-profits) must pay their space’s portion of the property tax bill==
Correct. If a government entity holds out its property for rent (for profit), the entity renting, whether for-profit, not-for-profit or another government entity (made-up e.g., the secretary of state opens an office at the DuPage County Courthouse), that entity has to pay property taxes.
- Sox Fan - Wednesday, Nov 14, 18 @ 2:35 pm:
If I were these tenants’ lawyers, I would have a hard time recommending non-payment. I would figure eventually the loophole would be closed and then you would be on the hook for taxes + penalty + interest. I guess it’s worked out so far for the tenants.
- Annonin' - Wednesday, Nov 14, 18 @ 3:35 pm:
can we just blame GovJunk and his DuPage GOPies for giving some crony a sweet heart deal. check the donors
- 618er - Wednesday, Nov 14, 18 @ 3:55 pm:
So as a businessperson I rent a building to run my business out of, and I have to pay the property taxes on that building instead of the property owner that I am paying rent to? That’s not how residential rentals work?
- 618er - Wednesday, Nov 14, 18 @ 3:59 pm:
I guess that would depend on the lease agreement, but wow, tenants pay taxes but no penalty in the lease for non payment. That seems not a loop hole in the property tax law but a bad leased being drafted..
- Perrid - Wednesday, Nov 14, 18 @ 4:07 pm:
“That seems not a loop hole in the property tax law but a bad leased being drafted”
Bad PR maybe, but the Airport Authority isn’t on the hook for the taxes, so they don’t have a whole lot of incentive to enforce the tax collection. You could argue that’s not their job.
And for the comparison to residential rentals, as long as the rent accounted for the lessor not paying taxes I think it would wash, assuming you trust the rent rate.
- Liandro - Wednesday, Nov 14, 18 @ 4:59 pm:
**”That’s not how residential rentals work?”**
This is commercial/business. Google “triple net lease” for a deeper explanation. That said, I’m guessing residential landlords factor their costs (including property tax) into most residential rents…
- Anono - Wednesday, Nov 14, 18 @ 5:46 pm:
@cdog, etc - For-profit commercial businesses pay property taxes (or should) whether housed on operated on private land or government land.
- Demoralized - Wednesday, Nov 14, 18 @ 5:53 pm:
==That’s not how residential rentals work?==
Maybe not specifically but I guarantee you residential landlords include the property taxes in the rents they charge.
- Southside Markie - Wednesday, Nov 14, 18 @ 9:03 pm:
This is nothing new. I saw this go on for years in many suburbs. There is a real simple fix. The way most other governmental landlords dealt with this was to put a clause in the lease allowing them to evict the tenant if property taxes weren’t promptly paid. Got to wonder why whoever drafted/reviewed the lease for the airport authority didn’t include such a clause.
- Suburb rat - Thursday, Nov 15, 18 @ 6:57 am:
Any guesses as to the property taxes paid by the Westin Hotel in Lombard - Yorktown?
- Real estate pro - Thursday, Nov 15, 18 @ 9:17 pm:
The landlord is always responsible for thr property taxes. We should make the government owner responsible for the taxes owed to other gov bodies. Then you will see the government bodies evict the commercial tenant as fast as private landlords do. Only cronyism let tenant’s run up these large tax bills. Also, as a private landlord, I ask for personal guarantees from our local tenants, why doesn’t our government bodies do that as well? It’s so easy to be a crony in IL.