Contact Your Senator: Property Tax Freeze Legislation

April 29, 2016

ILA has received a number of requests to clarify the impact of the so-called "Property Tax Freeze" legislation.  While several versions of a property tax freeze have been proposed by Governor Rauner and considered by the Illinois General Assembly, the most current active proposal is House Bill 696.

House Bill 696 was approved by the Illinois House of Representatives on April 26, 2016.  The bill would make two dramatic changes to the Property Tax Extension Limitation Act, commonly known as tax caps.  The legislation would expand the total number of local governments and school districts covered by Tax Caps.  The legislation would also permanently lower the property tax extension limiting rate to zero percent above the previous year.

The first change would apply the law to every single non-home rule local governmental unit and school district in the state.  Currently tax caps apply to non-home rule governmental units and school districts in Cook County, the collar counties (DuPage, Will, Kane, McHenry, and Lake) and 28 other counties that voted to impose the tax cap law.  So this first change would apply to the remaining 68 counties, including 9 counties that specifically rejected tax caps in previous voter referendums.

Each year, tax caps limit a taxing district's levy to the previous year's levy plus the lesser of 5% or the consumer price index.  This limitation rate has always been intended to allow levies to grow with inflation up to a maximum of 5% per year.  House Bill 696 would lower any inflation increase to zero.  That's why this legislation is called a "property tax freeze."  If the legislation becomes law, all non home-rule local government and school district levies would be limited to the taxing district's previous year's levy.  While there have been many legislative proposals to apply only a two-year tax freeze, House Bill 696 would impose a permanent inflation limit of 0% per year.

However, tax caps only apply to a taxing body's corporate and special purpose levies.  Tax caps do not apply to special service areas and some types of bonds. Taxing district's may also increase their levies to include newly built property, newly annexed property, and property returning to the tax rolls following the expiration of a Tax Increment Financing (TIF) district.  Most importantly, the tax cap limiting rate may be increased if specifically approved by voter referendum.  

A full explanation of exactly how tax levies are impacted and calculated under the current law can be found in the Illinois Department of Revenue tax cap manual.  Click here for a PDF of the manual

Finally, House Bill 696 has several technical flaws because it was drafted assuming it would have passed in 2015 rather than 2016.  Because taxing bodies are already preparing the next tax levy, there would be unintended consequences from enacting this particular legislation without making those technical corrections, and most likely amending the bill to delay implementation.  However, if not amended, House Bill 696 would apply tax caps statewide to all non-home rule taxing bodes and school districts and impose an immediate and permanent zero limiting rate.

Call your Senator to oppose this legislation, as it will unfairly impact libraries, along with other local services.

Please feel free to contact Kip Kolkmeier, ILA's General Counsel, if you have any further questions about this pending legislation or the more general issue of a property tax freeze. 

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