In a recently published case by the United States Tax Court, the court decided that Tax Purchasers may not treat the gains resulting from the sale of Tax Deeded properties as Capital Gains under the Internal Revenue Code.  The opinion, published in its entirety, for this case is provided below.  If you have any questions please do not hesitate to contact us.

Download (PDF, 135KB)

 

 

 

jstanko3

On February 26, 2015, Firm Partner, John W. Stanko, Jr., will be giving a Tax Lien seminar on Perfecting Tax Liens in the State of Illinois at the 2015 National Tax Lien Association’s Annual Conference and Meeting, held in Fort Lauderdale, FL.

For more information on the NTLA Conference, please click here. (thentla.com)

To learn more about Mr. Stanko, please visit his attorney profile.

New Updates to Cook County Treasurer Website

The Cook County Treasurer’s website has undergone some recent updates.  In addition to having a different appearance, the website has introduced the “Cook County Treasurer’s eNotification program.”  This new feature is designed to keep taxpayers “advised of important dates and aware of other important property tax information.”  To visit the new website, visit www.cookcountytreasurer.com.

 

Screenshot 2015-01-27 17.03.34

In the article linked (here) it shows how delinquent real estate taxes can cause serious problems, but can also lead to some creative dealing as well. (Quad City Business Journal)

Summarized from a story first published on ohio.com (click here for the full article):

 “A planned Summit County sheriff’s sale Tuesday was canceled after the owner of the mall, who has not paid property taxes since buying the property in 2010, filed for bankruptcy in California late Monday.

 That action automatically pulled the mall from the morning sheriff’s sale.

 Summit County is foreclosing on the mall because about $1.4 million in back taxes and liens are due.

 According to the notice of bankruptcy filing, the Chapter 7 liquidation in U.S. Bankruptcy Court in the Central District of California in most cases “automatically stays certain collection and other actions against the debtor and the debtor’s property.”

 Summit County Fiscal Officer Kristen Scalise said Tuesday morning that “the owner has the right to do this to attempt to protect themselves. What I know is when the bankruptcy is filed, the property must be pulled from sheriff’s sale. It has happened in the past.”

 As seen in the story above, the protections provided by the United States Bankruptcy Code offer property owners options when dealing with tax lien issues.  Whether in California, Ohio or Illinois, the automatic stay provided by a bankruptcy filing in federal court prevents local municipalities from acting on an unpaid debt. These protections can even extend to situations where taxes have already been sold, but title remains in the hands of the property owner.  If you’d like more information on how filing for bankruptcy might help with your property tax issues, please contact our firm for a consultation.

Photo courtesy of FreeDigitalPhotos.net and image creator Stuart Miles

 

jstanko3

On October 24, 2014, Firm Partner, John W. Stanko, Jr., will be giving a Tax Lien seminar on Perfecting Tax Liens in the State of Illinois at the 2014 National Tax Lien Association’s Fall Symposium held in Washington D.C.

For more information on the NTLA Symposium, please click here. (thentla.com)

To learn more about Mr. Stanko, please visit his attorney profile.

Importance of the Section 22-5 Take Notice (a/k/a 4.5 month notice) after Illinois real estate tax sales.

The Cook County Annual Tax Sale is underway and other Illinois counties will be holding their tax sales later this year. Many tax buyers will become successful bidders and receive certificates of purchase representing a tax lien on a property. But now what?

One of the first steps a tax buyer must take is preparing a Section 22-5 Take Notice (a/k/a as the 4.5 month notice) that must be properly completed and delivered to the county clerk within 4 months and 15 days after the tax sale (among other statutory requirements).

What if the tax buyer fails to tender the Section 22-5 Take Notice within 4 months and 15 days of the tax sale? The tax buyer cannot get a tax deed (although the tax buyer may have other remedies).

What if the tax buyer prepares and timely delivers a defective Section 22-5 Take Notice? Again, the tax buyer cannot get a tax deed.

Over the last few years, Illinois courts have ruled that tax buyers must strictly comply with Section 22-5 of the Property Tax Code. Application of County Treasurer (Glohry, LLC v. OneWest Bank), 2019 IL App (1st) 100196 (emphasis added). In Glohry, the tax purchaser listed the wrong redemption date in the form notice required by Section 22-5. Id. ¶5. It was undisputed that the owner never received the Section 22-5 notice. Id. The court stated:

“The General Assembly transcripts confirm that the purpose of the Section 22-5 post-sale notice provision was to provide a tax assessee, who is usually the property owner, with additional notice which conveys all necessary information. To achieve this goal, the legislature has indicated that a tax purchaser will not be entitled to a deed unless he gives the notice required. Permitting a tax purchaser to be entitled to a deed despite not fully complying with section 22-5 would defeat the legislature’s intent. Section 22-5 lends credence to the idea that tax purchasers should not be allowed to disclose only that information they deem relevant. Id. ¶34 (citations omitted).

***
A tax deed petitioner must do as required by the statute “[i]n order to be entitled to a tax deed.” (Emphasis added.) 35 ILCS 200/22–5 (West 2006). It would be absurd to find the legislature intended a purchaser to be entitled to a tax deed even where he had not done as required by the statute. Id. at ¶36.”

More recently in Equity One Inv. Fund, LLC v. Williams (In re County Treasurer), 2013 IL App (1st) 130463, the tax buyer included the following in the “location” of the property on its Section 22-5 Take Notice: the dimensions, the street intersection, the township, the county and the state. Id. ¶3. The tax buyer also included the property index number in the section for “Legal Description or Permanent Index No.” Id. ¶3. However, the tax buyer failed to include the common address or municipality where the property was located: “6901 South Euclid Avenue, Chicago, Illinois.” Id. ¶5. The property owner filed objections and argued that the incomplete address on the Section 22-5 notice rendered it defective. Id. ¶6.

The court in Equity One cited Glohry, In re Application of County Collector (Petition of Matthew A. Flamm, as Receiver for Salta Group, Inc.), 2013 IL App (1st) 130103 and In re Application of County Collector (Midwest v. Anderson), 295 Ill. App. 3d 703, 692 N.E.2d 1211 (1st Dist. 1998), among other cases, and held that the tax buyer had failed to strictly comply with Section 22-5 of the Property Tax Code. Equity One, ¶10-14.

The Equity One court noted that in the beginning of the Midwest Real Estate Investment decision, the appellate court noted that its task was to determine ′′how the legislature would answer the question, ’How strict is strict?’′′ The answer is, “strict.” Equity One, ¶13.

If you would like to retain our firm to properly prepare and timely place your Section 22-5 Take Notices in Illinois, please contact us to discuss. We can provide a fee quote based upon the number of tax sale certificates you have. We look forward to working with you.

The Cook County Treasurer has announced that the 2012 Annual Tax Sale will start on August 4, 2014 at 8:30 a.m. The Annual Sale includes properties in Cook County eligible for sale due to delinquent 2012 real estate taxes (including, without limitation, general property taxes, back taxes, special assessments, etc.) that were payable in 2013 and remain unpaid. A list of properties eligible for sale in the 2012 Annual Tax Sale will be published in community newspapers by township on June 4-5, 2014. Properties with delinquent taxes that are eligible for sale may be searched by Property Index Number (PIN) on the Treasurer’s Office website beginning June 3, 2014. Delinquency lists in electronic format will be available for purchase online at www.cooktaxsale.com (available June 5, 2014). For more information visit http://www.cookcountytreasurer.com/annualtaxsale.aspx.

Tax buyers must keep in mind that in order to be entitled to a tax deed, the notice required by Section 22-5 of the Illinois Property Tax Code must be properly completed and delivered to the county clerk within 4 months and 15 days after the tax sale (among other statutory requirements). Courts have ruled that tax buyers must strictly comply with Section 22-5 of the Property Tax Code. Application of County Treasurer (Glohry, LLC v. OneWest Bank), 2019 IL App (1st) 100196 (emphasis added). In Glohry, the tax purchaser listed the wrong redemption date in the form notice required by Section 22-5. Id. ¶5. It was undisputed that the owner never received the Section 22-5 notice. Id. The court stated:

The General Assembly transcripts confirm that the purpose of the Section 22-5 post-sale notice provision was to provide a tax assessee, who is usually the property owner, with additional notice which conveys all necessary information. To achieve this goal, the legislature has indicated that a tax purchaser will not be entitled to a deed unless he gives the notice required. Permitting a tax purchaser to be entitled to a deed despite not fully complying with section 22-5 would defeat the legislature’s intent. Section 22-5 lends credence to the idea that tax purchasers should not be allowed to disclose only that information they deem relevant. Id. ¶34 (citations omitted).

*** A tax deed petitioner must do as required by the statute “[i]n order to be entitled to a tax deed.” (Emphasis added.) 35 ILCS 200/22–5 (West 2006). It would be absurd to find the legislature intended a purchaser to be entitled to a tax deed even where he had not done as required by the statute. Id. at ¶36.

More recently in Equity One Inv. Fund, LLC v. Williams (In re County Treasurer), 2013 IL App (1st) 130463, the tax buyer included the following in the “location” of the property on its Section 22-5 Take Notice: the dimensions, the street intersection, the township, the county and the state. Id. ¶3. The tax buyer also included the property index number in the section for “Legal Description or Permanent Index No.” Id. ¶3. Unfortunately, the property owner objected and the court ruled that the tax buyer had failed to strictly comply with Section 22-5 of the Property Tax Code. Equity One, ¶10-14. The Equity One court noted that in the beginning of the Midwest Real Estate Investment decision, the appellate court noted that its task was to determine ′′how the legislature would answer the question, ’How strict is strict?’′′ The answer is, “strict.” Equity One, ¶13.

A recent unpublished order, Kelver v. Baczek, 2014 IL App (2d) 130569-U, exemplifies the confusion between different judicial circuits when it comes to expunging redemption of delinquent taxes. In Kelver, the record owners of property refused to recognize a contract with the contract purchaser, forcing the purchaser to file suit for specific performance.

When the delinquent real estate taxes were sold, the contract purchaser redeemed. The contract purchaser and the tax buyer then worked out an agreement wherein the redemption would be expunged, the tax buyer would seek a tax deed and the tax buyer would sell the property to the contract purchaser. The tax buyer and the contract purchaser agreed that the record owner would not receive notice of the agreed order. Unlike the Circuit Court of Cook County (Rule 10.3.1), the 19th Judicial Circuit (Lake County) does not have a local rule requiring notice to interested parties when expunging a redemption. Moreover, Section 21-397 of the Property Tax Code does not require notice to interested parties in counties with less than 3,000,000 inhabitants (non-Cook County).

When the contract seller learned of the agreement, she filed a petition to vacate pursuant to Section 2-1401 of the Code of Civil Procedure claiming the tax buyer procured the tax deed by “fraud or deception.” The court conducted a “multi-day” evidentiary hearing and granted the contract seller’s petition to vacate. The appellate court order does not explain the basis for granting the petition to vacate but it does not make any mention of 21-397 of the Property Tax Code regarding expungement of redemptions.

Tax buyers and parties with an interest in real estate should be aware of the different applications of the Property Tax Code by county. Regarding redemptions in counties outside of Cook County, redeeming parties must be aware that they only have one chance to redeem the taxes if the tax buyer expunges the redemption after the redemption period has expired.

ERM-photo-5-26-11-smaller-file1

In Equity One Inv. Fund, LLC v. Williams (In re  County Treasurer), 2013 IL App (1st) 130463, the tax buyer included the following in the “location” of the property on its Section 22-5 Take Notice: the dimensions, the street intersection, the township, the county and the property index number. However, the tax buyer failed to include the municipality where the property was located. When the tax buyer prepared its Section 22-10 and 22-25 Take Notices, it then included the common address of the property, which included the mailing address and the municipality.

Following Application of the County Collector (Glohry, LLC v. OneWest Bank), 2011 IL App (1st) 101966, Application of County Collector (Petition of Matthew A. Flamm, as Receiver for Salta Group, Inc.), 2013 IL App (1st) 130103, and Application of County Collector (Midwest Real Estate Investment v. Anderson), 295 Ill. App. 3d 703, 692 N.E.2d 1211 (1st Dist. 1998), the Court held that the tax buyer had failed to strictly comply with Section 22-5 of the Property Tax Code.

At the beginning of the Midwest Real Estate Investment decision, the appellate court noted that its task was to determine ′′how the legislature would answer the question, ’How strict is strict?’′′ The answer is, “Strict.”

Click Here to Read the Full Case (http://www.state.il.us/court/)

Click Here to Read Emmett McCarthy’s Bio