Assessing the Damage: Property Tax Relief When Property Is Damaged or Destroyed

Illinois and Indiana recently suffered a series of violent tornadoes. In mid-November 2013, there were 24 confirmed tornadoes in Illinois, and 28 confirmed tornadoes in Indiana. While property taxes are likely a long-way down the list of concerns of people and firms affected by such events, there may be limited time-frames for property owners to act to claim assessment reductions associated with these events. Many states, like Indiana and Illinois, have provisions of law that may provide relief from property taxes in the form of reductions of assessed values for property that has been damaged or destroyed.

By way of example, the Illinois Property Tax Code entitles taxpayers to a reduction of assessed value "on a proportionate basis" when, during the previous calendar year, "any buildings, structures or other improvements on the property were destroyed and rendered uninhabitable or otherwise unfit for occupancy." 35 ILCS 200/9-180. Of course, there are caveats, including that the destruction must have been accidental (e.g., the result of natural disaster).

Indiana affords similar relief to taxpayers for both real and personal property that has been destroyed by natural disaster. Ind. Code § 6-1.1-4-11. The Indiana Department of Local Government Finance has explained that there need not be a declaration of disaster by the governor or president, and that the relief — in the form of a reassessment of the property — could be available even where the destruction is "of a single structure."

But there are time limits in which taxpayers must act to obtain the property tax relief afforded by these statutes. In Illinois, depending on the population of the county in which the property is located, the time limit could be as short as 90 days following the disaster. The time limits for Indiana's reassessment due to disaster and destruction of property do not appear to be quite as limited as those in Illinois, but there are still time limits. Thus, in Indiana, taxpayers whose property is affected by disaster should not wait too long to alert the assessor to the damage and need for reassessment.

There are numerous states that provide property tax relief in the event of property damage or destruction, though each state's laws vary. If you have questions about the availability of property tax relief in the event your firm's property suffers damage or destruction due to accident or natural causes, contact any member of Faegre Baker Daniels' tax advocacy team for assistance.