Cook Co. treasurer says Chicago, suburbs losing tens of millions of dollars through tax law loophole

CTBA’s Executive Director Ralph Martire spoke with ABC 7 Investigative Producer Ann Pistone to discuss the recent report Cook County Treasurer Maria Pappas issued that highlights serious issues with a subsection of the Illinois property tax code that covers the sale of delinquent property taxes. By state law, the County Treasurer is required to hold annual auctions selling the delinquent property taxes owed by businesses and homeowners. Purchasers of these delinquent property tax obligations are called “tax buyers.” The concept is to allow the public sector to collect revenue it otherwise wouldn’t, while allowing property tax owners extra time to pay their back taxes and hence not lose their home or business facility. Unfortunately, a loophole in the law known as “Sales in Error,” allows investors that purchase these delinquent tax obligations to get their money back from the public sector, plus interest that could reach 12% annually, for even minor errors that cause no financial harm to the investor at all.

As the Treasurer’s report points out, over the last seven years Cook County has refunded $277.6 million—including $27.7 million in interest costs—to tax buyers under the Sales in Error loophole. When this money is refunded, the local taxing bodies—like school districts, parks, and municipalities, that received the proceeds from the initial sale of delinquent taxes, have to pay them back—with interest. This can result in higher property taxes, as local governments frequently have already spent the proceeds they received, and have no existing budget to cover interest charges. Even worse, the Treasurer’s report found that the vast majority of refunds granted during the prior seven years under the Sales in Error loophole—fully $241 million or 87%—have come from property located in primarily Black and Latinex, low-income communities.