(The Center Square) – To prevent private investors from exploiting an Illinois law to profit from the property tax debt owed on properties, a lawmaker wants to change the state’s property tax code.
Annually, auctions are held for unpaid property taxes in an effort to recoup lost revenue. Real estate investors can swoop in and buy a tax lien certificate on a property and collect interest on the unpaid property taxes. Once the debt is purchased, a lien is placed on a property and a county’s hands are tied.
State Rep. Nicholas Smith, D-Chicago, the sponsor of House Bill 3040, said allowing a property to sit vacant is detrimental to all Illinois neighborhoods.
“These properties are locked into years-long cycles of tax sales and foreclosures, which leaves them abandoned and deteriorating and just really an eyesore on neighborhoods and communities,” Smith said during a House committee hearing.
Joe Dulin, community development director for the city of Peoria, said other cities around the state are on board.
“We have been partnering with many communities throughout the state of Illinois, Rockford, Decatur, the city of Chicago, Kankakee, to specifically look at these issues,” said Dulin.
According to a study by the Cook County’s Treasurer’s office, a little-known loophole has allowed investors to siphon millions of dollars from schools, fire departments and other government agencies.
Many of these investors have no interest in the property itself as many of them are located in economically distressed areas of the state. The study showed that simple clerical errors were enough to allow many tax lien holders to walk away from the property with their profits intact.
That makes Illinois “like no other state in the country,” where the law “allows tax buyers to easily and quickly undo a tax deal for trivial reasons, often getting all of their money back, including interest, fees and court costs,” according to the study.
Smith’s bill provides that, “if a sale is declared to be a sale in error, the tax certificate shall be forfeited to the county as trustee.”
