One of the most popular ways to lower property tax bills is also one of the most misused — benefiting thousands of people ranging from mayors to landlords and snowbirds.
The homestead exemption is supposed to lower taxes only for a taxpayer's primary residence. But a Tribune investigation found some Chicago-area taxpayers have incorrectly received two, three or even more of the exemptions. It's part of a tax system that has cut breaks through vague rules, little oversight and almost no penalties.
Nobody knows just how many people are getting the extra exemptions, or how much it costs in lost tax revenue. Area assessors estimate it's tens of millions of dollars a year. One thing is clear: Those costs are passed on to other taxpayers who must make up the difference.
"The effect of one fake exemption spread across an entire region is negligible," said Kane County Supervisor of Assessments Mark Armstrong. "But the effects of hundreds of them become real."
Those getting improper exemptions typically save only several hundred dollars a year per property. But for those who collect on several properties over several years, the savings can add up. Records show that:
•Olympia Fields Village Trustee Willis Pennington saved nearly $1,600 over four years with an extra exemption he didn't request.
•Chicago tax consultant Andrea Raila saved $8,000 over nine years. She said she didn't know she had the extra break for years but thought she deserved it anyway.
•And Cook County Commissioner Jesus "Chuy" Garcia saved $8,500 over eight years. He said he was unaware of the exemption and will pay it back.
Many who received the additional exemptions say they didn't ask for the tax breaks and didn't realize they were getting them. Tax officials say others purposely abuse the system because there's little chance of getting caught or being penalized.
"People figure out a way to save some money," said Cook County Assessor Joe Berrios, who is pushing get-tough legislation. "People actually go out there and brag about it, which is nuts."
Homeowners save money because the exemption artificially lowers the assessed value of their homes — typically by $6,000 to $8,000. Taxes are then based on the lower value. If one homeowner pays less, neighbors must pay more because schools and other taxing bodies receive a set amount.
A Tribune analysis of tax data from Cook, DuPage, Kane, Lake and Will counties suggests about 17,000 properties may be improperly getting the exemption.
About 13,000 were in Cook County, netting those property owners an estimated $7 million a year. But Berrios said he believes the Tribune's estimate is conservative. He pegs the number of properties at double the newspaper's figures and the costs at nearly triple.
The Tribune linked properties if the tax bill for one was mailed to another property also getting an exemption, and the last names on both tax bills matched. That may count some properties where both exemptions are legitimate — such as cases where an elderly parent's tax bills are mailed to a son or daughter — but authorities said it's a good indicator of questionable exemptions, and likely an undercount.
Through the analysis, the Tribune found the case of Pennington. The village trustee, also a Metra board member, lives in Olympia Fields but has a "getaway home" nine miles south in rural Will County. Pennington said he never knew he had the exemption on the Monee home, and Will County officials confirmed they gave it to him in 2007 without him asking, assuming he deserved it.
He saved $330 that first year, and the annual savings grew to $470 last year, according to Tribune calculations based on records. Pennington said he shouldn't have to pay the $1,600 total back because it wasn't his fault.
Garcia, a former state senator and newly elected Cook County commissioner, has vowed to pay back the $8,500 he collected since 2003 after learning from the Tribune that an exemption had been placed on the home he inherited from his parents. He said the exemption must have remained on the property when he became owner.
"I know you can only claim where you live. That's why it's a homeowner exemption," he said. "I didn't know I was getting an exemption (for his parents' former house) because I'm not eligible."
State law doesn't tell assessors exactly how they're supposed to ensure property owners deserve their exemptions.
Some assessors have automatically given it to people buying a home that had it before, no questions asked. Others have begun using a form for all property transfers that asks whether the new owner plans to live in the home.
And still others have struggled with more intense methods, such as Cook County. For years the county annually mailed postcards to homes requiring homeowners to reaffirm they lived there. If they weren't mailed back, the exemption was removed.
That proved too expensive and cumbersome, so the county began asking only new home buyers to verify they were living at the property. After that, they kept the exemption unless they told the county otherwise.
Several assessors said they believe most people improperly getting the exemption are making honest mistakes. Many homeowners don't actually read their tax bills, particularly if taxes are included as part of the mortgage payment. And it's not as if many are trying to hide where they truly live: The tax bills for the second homes are mailed to their primary residences.
But in the past year, news reports exposed other cases of questionable exemptions given to property owners who had the bill mailed to various addresses or used different names.
WBBM-Ch. 2 this summer highlighted the case of a landlord who had bills mailed to eight of his apartment buildings with exemptions that netted him $87,000 over nearly a decade.
And there's the case of Raila, a onetime candidate for Cook County assessor from Chicago who used different names on her tax bills.
Property records obtained by the Tribune show the tax consultant bought an adjoining condominium a decade ago. Though the mortgages for both condominiums were in her name, one tax bill was in husband Michael Rohrbeck's name and another was addressed to "Chris" Rohrbeck, which she said referred to her husband's middle name.
Raila said she wanted to keep her name off property records, fearing political retribution.
Regardless, she said, she didn't know she was getting a homestead exemption on the new condo, and even when she learned last year, she thought it was proper since she lives in both. The assessor's office said it's not — owners of multiple condos can't collect more than they would on one unit.
Records show she saved $8,025 in the past decade. Raila said she believes she's entitled to it, although she tried to have the second exemption removed before assessors dropped it on their own last year. Raila said she also tried to pay an extra $1,250 last year to cover the additional exemption, but the treasurer's office wouldn't accept it.
"I knew there was a gray area, (but) I felt I was entitled to both (exemptions)," she said. "It was an honest mistake."
State law has allowed what many agree is a legal gray area to flourish with landlords.
Lawmakers expanded the homestead exemption in 1980 to some types of leased property: single-family homes where tenants leasing the property were responsible for paying the taxes.
Just who qualifies — and who gets to keep the extra cash — has been in dispute for years, with different interpretations from county to county.
Some assessors argue the expanded program was meant to benefit renters. They say the Legislature wanted to help a rare type of renter: Someone who owns a home but rents the land — typically used in exclusive developments.
Some landlords have argued it's a benefit tied to any rental home, no matter who actually cuts the check to the treasurer's office for taxes. So all a landlord need do to earn an exemption on the property, the argument goes, is write a lease agreement that notes renters are responsible, through normal rent payments, for covering taxes.
Critics say it can be financial catnip for landlords. If they can get an exemption, they can pocket the tax savings themselves without lowering the rent.
In response, some assessors impose tight rules on when they'll grant exemptions to leased properties. Among them:
•In Lake County, landlords must put renters' names and addresses on tax bills before the exemption can be given.
•In Cook County, renters every year must show assessors their leases with language requiring the renters to pay the tax bill and their canceled checks to the treasurer's office for past tax bills.
•In Kane County, landlords and tenants must sign annual applications that promise that the tax payments made by renters are separate from any rent they paid.
The first year Kane County required applications, the county's supervisor of assessments, Mark Armstrong, called renters to verify they actually signed the application. "We called the tenants, and (many) tenants said: 'I didn't sign this. I've never seen this. And I'm not liable for the taxes.'"
There are no set rules on this issue in DuPage County, and that allowed Elmhurst Mayor Peter DiCianni to save more than $2,500 in taxes on two rental properties since 2006, according to a Tribune analysis of records.
The township assessor's office automatically gave him the exemptions when he bought the properties, and the tax bills remain in his name.
DiCianni said he's done nothing improper by getting the exemptions.
"I believe I am in compliance with state statute," he wrote in an email, adding that for his rental properties, "it is agreed that the tenant pays the property taxes through the proceeds of their rent."
In York Township, where DiCianni's homes are located, all a landlord needs to do to qualify for an exemption is bring in a lease saying part of the rent goes to pay the property taxes, said the township's deputy assessor, Cathy Murphy.
The township said it didn't know DiCianni was renting out the homes until contacted by the Tribune.
Murphy said the mayor can keep collecting the rent, paying the tax bill and getting the discount, as long as he shows a copy of the leases with wording that states part of the rent is used to cover taxes.
The Tribune found assessors across the state handle the issue differently. The one nearly universal sentiment: They loathe the landlord loophole, said McLean County Supervisor of Assessments Bob Kahman, president of the county assessors' statewide association. The laws are hard to interpret and enforce, he said.
Kahman said he believes many landlords collect the rent and pay the tax bill themselves — just as before. The only difference? They now get a tax break on each property.
Beyond defining who qualifies for an additional exemption, area assessors struggle to identify those who violate whatever definition is used.
Cook County tried a computer analysis last decade based on name matches and came up with stacks of addresses, but struggled to prove many were abusing the system, officials said.
DuPage County has sent lists of government-subsidized rental homes to township assessors to help them police exemptions.
Kane County did a check a few years ago by name, then examined some signatures on property documents, one-by-one, to find abusers.
But with years of staff cuts, assessors are often reduced to trying to field unsolicited tips from jealous or angry neighbors who turn in property owners unfairly getting the exemption.
Cook County officials said they get about a thousand tips a year. If the tip appears legitimate, assessors wipe the exemption off the properties and mail a letter to the owners asking them to prove they deserve the exemption if they want it back.
For now, Berrios said, state law doesn't allow assessors to seek back taxes — only to readjust currently owed taxes to the proper amount.
So Berrios is pushing a bill in Springfield — loosely modeled after laws in other states — that would require back taxes to be paid as well as penalties and interest. For those with just one or two improper exemptions, the penalty period would go back three years. For those with more, it would go back six years.
Other assessors said they generally support more punishment options but are not yet sold on the bill. Some say the costs to ferret out cheats could be more than the payback from catching them.
For now, some of those getting the exemptions improperly aren't waiting to see what lawmakers do.
Several have shown up to pay back the extra amounts they collected in improper homestead exemptions so their names will be cleared.
After a tipster recently outed a landlord, her lawyer showed up at Berrios' office with checks to cover years of improper homestead exemptions on six of the client's rental properties, Berrios said.
The total payback? $45,000.
Tribune reporter Annemarie Mannion contributed.Copyright © 2015, Los Angeles Times