School Board Need Not Honor Property Tax Abatement Issued to Prior Property Owner

The Illinois Appellate Court recently upheld the dismissal of a lawsuit filed by Invenergy Nelson, LLC, a power company, against a school board to enforce a property tax abatement issued to the prior property owner, LSP-Nelson. In 2000, the Board of Education for Rock Falls Township High School District No. 301 adopted a Resolution to abate LSP-Nelson’s property taxes pursuant to Section 18-165 of the Illinois Property Tax Code, pending LSP-Nelson’s completion of a power-plant project. (As relevant background, Section 18-165 of the Property Tax Code allows school boards and other taxing bodies to grant property tax abatements to a commercial or industrial firm to encourage development.) However, in 2003, LSP-Nelson abandoned the project and filed for bankruptcy, and Invenergy later purchased the property during the bankruptcy proceedings. It was not until years later, in 2017, that Invenergy finally completed the power-plant project and sought to enforce the tax abatement granted to LSP Nelson that it believed still applied to the property despite the transition in ownership. The Board denied the abatement, and Invenergy then filed suit against the Board and the County claiming it was entitled to the abatement.

HLERK attorneys, including Steve Richart, Babak Bakhtiari and Katharine LaRosa, successfully defended the Board in the circuit and appellate courts. Of critical importance for any future property tax-abatement disputes in Illinois, the appellate court applied the well-settled rule that any laws granting tax exemptions are to be construed narrowly and in favor of taxation and that a party claiming an exemption has the burden to conclusively prove that it is entitled to an exemption. The appellate court stated that these same principles should apply to an abatement, thus creating a hurdle for any future company seeking to enforce an abatement in court against a school board.

Applying these principles to the facts of the case, the appellate court determined that the abatement issued to LSP Nelson did not “run with the land.” In other words, the court agreed with the Board that the abatement did not survive the transfer in ownership from LSP-Nelson to Invenergy. The court determined, after careful inspection of the 2000 Resolution, that the plain language of the Resolution granted the abatement to “LSP-Nelson Energy.” Additionally, the Resolution did not include that it would run with the land or that the benefits of the Resolution would pass to LSP-Nelson’s heirs, successors, or assigns. Because there was no solid indication that the abatement would run with the land, the court concluded in favor of taxation. Furthermore, Invenergy did not notify or contact the Board when it purchased the land. In fact, the court’s opinion states that Invenergy should have provided some sort of notice to the Board following the purchase of the property. Because it failed to do so, the court upheld the lower court’s ruling.

This case demonstrates that taxing bodies have discretion when granting property tax abatements, and it helps establish a presumption against any company seeking to enforce abatements in court against a school board. For questions about property tax abatements, contact Steve Richart, Heather Brickman, or Dean Krone. 

Source: Invenergy Nelson LLC v. Rock Falls Township High School District No. 301, East Coloma Nelson School District No. 20, and the Lee County Collector, 2020 IL App (2d) 190374

Sign up for our monthly Extra Mile newsletter. We go the extra mile so you don't have to. Subscribe