History of Property Taxes in Illinois

The 1800’s

The ability to tax property in Illinois was included in the State of Illinois’ first constitution in 1818. The Illinois constitution of 1818 was unique in that it established: "…That the mode of levying a tax shall be by valuation so that every person shall pay a property tax in proportion to the value of the property he or she has in his or her possession." Basically, this established an "ad valorem" tax, which in Latin means "according to value". Thus, an ad valorem tax is a tax that varies with the value of the property. All property, personal and real, was taxed under this system.

Originally property taxes were collected and used only by the State government. The first significant change in property taxes came in 1839, when growth and political pressure broadened the definition of taxable property, narrowed the scope of exemptions, and identified personal property subject to taxation. In addition, counties were provided the ability to tax personal property.

The Revenue Code of 1853, also allowed for taxation by townships, eliminated double taxation, included stocks and bonds in the tax base, and established a system of utilizing local assessors and created oaths for assessors mandating true and accurate assessments at true full value in money. A State Board of Equalization was established in 1867 and additional provisions concerning assessment practices were established in the Illinois Constitution of 1870.

The 1900’s

The property tax system remained fundamentally the same until the Depression of the 1930’s. The first basic change came with the collapse of personal income during the Depression. The State last levied a property tax in 1932 and replaced the loss in revenue with a State sales tax the next year. Local governments continued to levy and collect tax on property as their main source of revenue.

An amendment to the 1870 Constitution, following the passage of the Illinois Income Tax of 1968, eliminated taxes on personal property for individuals and as provided by the 1970 Constitution, corporate personal property taxes were eliminated in 1979. They were replaced by a corporate income tax and a tax on the invested capital of public utilities.

Later in the 1970’s, due to inflation, prices of homes accelerated faster than other types of property. As a result, residential homes comprised a large proportion of the total assessed value of real property in Illinois. The State then enacted homestead exemptions for owner occupied residential properties, and in Cook County allowed for the institution of a system of property classification.

In 1981, the State changed the basis of assessing farmland from that of the actual market value of the land to the farmland’s agricultural economic value. Basically, the land was valued at its’ ability to produce, which was based upon its’ soil type, drainage and other agricultural economic factors. The need for this change was due to the conversion of farmland for development, which was artificially inflating the value of the land and placing an unfair tax burden on the owners of land still being used for strictly agricultural purposes.

In 1991, the Property Tax Extension Limitation Law (PTELL) provided that non-home rule taxing districts in the collar counties were restricted from increasing property tax extensions by more than 5% or the change in the Consumer Price Index, whichever is less, when property values and assessments increase at a rate that exceeds the rate of inflation. As of 2000, 34 counties were subject to PTELL.

The 2000’s

The Homestead Exemption for owner-occupied residential property was increased to $6,000 statewide. The Senior Citizens Homestead Exemption was increased to $4,000 statewide and removes the requirement (except for Cook County) for the homeowner to annually re-apply for the exemption. The Senior Citizens Assessment Freeze Exemption income threshold was increased to $55,000 statewide. The Homestead Improvement Exemption limit was increased from $45,000 in improvements to $75,000 in improvements.