Illinois recently enacted HB 4120 regarding the abatement of taxes for businesses that occupy a previously vacant property. The Act states:

“Upon a majority vote of its governing body, any taxing district  may, after the determination of the assessed valuation of its property, order the county clerk to abate any portion of its taxes on any property if (i) a new business first occupies a facility located on the property during the taxable year, and (ii) the facility was vacant for a period of at least 24 continuous months prior to being occupied by the business. The abatement shall not exceed a period of 2 years and the aggregate amount of abated taxes for all taxing districts combined shall not exceed $4,000,000.”

Given the amount of vacant property on the market, this should prove to be an effective tax savings tool for Illinois businesses.

According to section 39-10-114(1)(a)(I)(A) of the Colorado Revised Statutes a taxpayer may file for an abatement of all or part of property taxes that have been levied “erroneously or illegally” within two years after January 1 of the year following the year in which the taxes were levied. The abatement provides for a refund of taxes due to “erroneous valuation for assessment”, “irregularity in levying”, “clerical error” or “overvaluation” and is different and separate from the “normal” property tax appeal process. 

In the recent case of HealthSouth Corporation v. Boulder County Board of Commissioners and Colorado State Board of Assessment Appeals, HealthSouth put this abatement provision to the test. 

HealthSouth filed two abatement petitions seeking to reduce the valuation of its personal property assets at two of its Colorado locations for the 2002 tax year. Now for the twist… 

In 2002 HealthSouth was found to be cooking its books and inflating earnings. In order to balance these cooked books HealthSouth created fictitious assets. The case reads: 

“The factual basis for the taxpayer’s abatement and refund claims is that in 2002, as part of a broader fraudulent scheme to increase the company’s stock price, taxpayer included fabricated valuations for fictitious assets in the personal property declaration schedules it filed.” 

So, HealthSouth’s new management filed abatement petitions with the Board of County Commissioners (BOCC) seeking to reduce the personal property taxes it “overpaid” due to the reporting of nonexistent assets. The BOCC denied the petitions. Appeals were then filed to the Board of Assessment Appeals and were dismissed. HealthSouth appealed to the Court of Appeals. In a nutshell, the Court of Appeals determined: 

“Contrary to the BAA’s ruling, we conclude that, under the statutory scheme, taxpayer has the right to proceed with its abatement and refund claims on the ground of overvaluation, notwithstanding the fraudulent overstatement of its assets and valuations in its initial tax filings. Consequently, the BAA erred in dismissing taxpayer’s appeals without affording an evidentiary hearing, and on remand it must consider the merits of the taxpayer’s overvaluation claims concerning its personal property for the 2002 tax year.” 

I am looking forward to seeing how this will ultimately turn out. It will be interesting to see what HealthSouth provides as evidence to prove that the valuation of nonexistent assets was incorrect.