Cook County 

Assessor's Office, Joseph  Berrios




Effective March 22, 2016

The plan for Tax Year 2016 and going forward creates a new minor class, within Class 2 properties, for bed-and-breakfasts. It will be designated, “2-97.” Each 2-97 property will remain eligible for the Homeowner Exemption if the homeowner lives in the B&B as his/her primary residence. Any B&B property which is not the primary residence of the owner, typically because it is owned by an LLC or other corporation, will be 5-97 [Class 5, Business].

Some of the components of the new policy for B&Bs:

·         B&B properties which are owner-occupied and properly qualify for homeowner-type exemptions are being placed in Class 2, which B&B owners have long advocated

·         Class 2 B&B owners retain their Homeowner Exemption

·         An income approach to value is being used, which is very typical for valuation of income-producing properties

·         It is standard in any property assessment model to value property used for business purposes differently than a home which is not used for business

·         For B&B properties which are owner-occupied and properly qualify for homeowner-type exemptions (2-97), the property's Assessed Value (AV) will remain at 10% of estimated fair Market Value (MV). This treatment is equal to homes which are not used to generate income.

·         B&Bs owned by LLCs or other corporations will be in Class 5 and designated as 5-97 properties

·         5-97 B&Bs will have an Assessed Value (AV) of 25% of estimated fair Market Value (MV).

·         It is not inappropriate to change values in a non-triennial year, especially after CCAO last year agreed to postpone until Tax Year 2016 any changes affecting B&B properties, and taxpayers have received the statutorily required notice

·         You have the right to appeal the assessment of your property and challenge its MV

·         Producing evidence is required of all appellants

Preliminary information indicates that the income approach to value for B&Bs will, in some cases, result in lower assessed values than some B&Bs had as “normal” (non-revenue-generating) residential properties. Others will remain essentially flat or increase by just a few percentage points.

Whatever happens with a given property, CCAO reiterates its statements of 2015 and early 2016 that huge assessment increases will simply not occur.

(Page One of four)

Page Two

 

NEW CCAO POLICY on B&Bs (Written 17March16):

 

BED AND BREAKFAST ASSESSMENT AND APPEAL INFORMATION

Bed and Breakfast (B&B) properties throughout Cook County will be reassessed for Tax Year 2016 (TY 2016) taking into account a variety of relevant factors. These include: age, average daily room rates, condition, income-generating potential (including any bookings for banquets, private parties, weddings, and similar events), location, quality,

vacancy and occupancy, rates charged, revenue per room, services and amenities provided, sales and offerings for sale, and relevant market and trade data. The Income Approach and the Sales Comparison Approach to value will be employed. Resulting valuations will also be finalized according to the constitutional principle of uniformity of assessments. The evidence on appeal which will be required is that which is typical of all income-producing properties and is most commonly provided by hotels, motels, and lodging enterprises.

For TY 2016 and subsequent years, the classification of B&B property will be changed. For those which are owner-occupied and properly qualify for homeowner-type exemptions, the new classification will be 2-97 (“special residential improvement”). The records of the Cook County Assessor's Office (CCAO) will also note a “CDU” factor (“condition, desirability, and utility”) of “BB”. For those which are not owner-occupied and do not qualify for homeowner-type exemptions, the new classification will be 5-97 (“special commercial improvement”). The records of CCAO will likewise note a “CDU” factor (“condition, desirability, and utility”) of “BB”. The 2-97 properties will be assessed at the ordinance level of 10% of “fair market value.” The 5-97 properties will be assessed at the ordinance level of 25% of “fair market value.” The change of classification and any new resulting market values will be identified in the notices, as required by law, forthcoming with each individual township.

B&B owners contesting the determination of “fair cash (market) value” by CCAO shall supply the following either pro se or through their attorney or tax representative in support of their appeal:

·         A completed residential or commercial appeal form, depending upon the classification

·         An owner-lessee verification form

·         A fully completed multi-page Supplemental Hotel Summary Form in Support of Appeal

·         If available or commissioned, a full narrative ad valorem or financing appraisal for the property as a bed and breakfast, considering its income-generating potential as such and any relevant market sales indicating the “fair cash (market) value” as of January 1, 2016

 

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·         For 2-97 properties, proof of owner occupancy. Corporations cannot “occupy.”

·         Total gross building area

·         Total square footage available for paying guests and events

·         Total number of rooms and suites available for paying guests

·         Website information identifying the property and marketing it as a bed and breakfast

·         Income and expense information for the years 2013, 2014, 2015, and 2016 (to date), established by copies of:

✓ audited, certified or affidavit authenticated financial statements, and/or

✓ audited, certified or affidavit authenticated profit and loss statements, and/or

✓ federal tax returns (schedule C) or the equivalent for sub-chapter S corporations

·         Occupancy and vacancy schedules for the years 2013, 2014, 2015, and 2016 (to date)

·         Average daily rate (ADR) and revenue per room (RevPar) for the years 2013, 2014, 2015, and 2016 (to date)

·         Bookings and revenue from weddings, private parties, banquets, and related activities;

·         Cost of services for the years 2013, 2014, 2015, and 2016 to date, including any imputed management, janitorial or housekeeping services not otherwise itemized in the income and expense information provided above

·         A statement indicating whether the property was sold within the last three years. If the property sold within that time, evidence of the transaction, including its purchase price and allocation of any personal property, should be provided, together with a detailed description of any relevant factors that should be considered when analyzing the sale.

·         Copies of any business or other licenses or registrations issued by local municipal authorities as well as related municipal, county or state hotel/motel or other business tax returns for the years 2013, 2014, 2015, and 2016 (to date)

·         A detailed narrative brief discussing all relevant factual and legal issues

In the interest of fairness, the document-due deadline for B&B property appeals in Rogers Park Township is extended to April 7 to coincide with the Evanston Township deadline. The Oak Park deadline is April 21.

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CCAO will then carefully and completely consider each appeal and its supporting evidence. A final determination will be made based upon that evidence, as well as known market and trade data. If appropriate, a new revised fair, equitable, and uniform assessment will be made. Notice of decision on appeal will be provided as required by law. A timely request for re-review will be considered in the same manner as all other appeals before this office.

Your involvement in the appeal process is welcomed and will be greatly appreciated. A vibrant appeals process helps assure fairness in the assessment.

Thomas A. Jaconetty, Deputy Assessor, Valuation and Appeals

March 17, 2016

Find the above document online at

http://www.cookcountyassessor.com/Search/Bed-And-Breakfast.aspx#2016

ADDITIONAL INFORMATION

Cook County ordinance creates major classes. Minor classes are CCAO designations. Class 2-97 gives any qualifying homeowner his or her appropriate exemptions, as does Class 2-12. Various 2-12 properties routinely provide income/expense data during the appeal process. However, as of March 11th, not a single bed and breakfast owner has done so. 2-12s also regularly provide uniformity, sales and appraisal data.

An absolute focus on uniformity is inapplicable to any discussion of 2-97 because, simply put, a class does not create uniformity. There are many types of properties in 2-97, including, hypothetically, a 200-unit condominium building not yet sold and divided into separate PINs.

Because 2-97 is used throughout the county and contains that wide variety of properties with disparate uses and market values, uniformity is not a requirement for inclusion in 2-97.  Such properties do not necessarily have the same MV.  2-97 is merely a minor class designating only that its properties are out-of-the-ordinary. So, a “uniformity” analysis across all minor class 2-97 properties would be inappropriate.

Again, 2-97 (or 5-97) will be universally used for B&Bs, which will be treated equally. Some are licensed as hotels, others as B&Bs; all are income-producing properties. B& B owners are entitled and encouraged to use the CCAO appeal process, and no practitioner need be hired, though businesses licensed as hotels, as are most B&Bs, normally engage counsel or a tax representative. There is no thought by CCAO to “push” or “force” B&Bs to hire an attorney or tax representative. That is a decision belonging solely to B&B owners as business owners who can always choose to file pro se.