Could a senior claim the Illinois property-tax credit in a year when the state paid the bill under the tax-deferral program?

Plain-English summary

The senior could not claim the credit in the deferral year because the taxpayer had not paid the property tax. The state sent payment to the county, treated the amount as a loan, charged interest, and placed a lien on the home.

Section 208 and Regulation 100.2180 required the taxpayer to pay the property tax during the taxable year. Program participants could postpone repayment until a later event, potentially for many years, so the state's payment was not treated as the taxpayer's payment for the credit.

What this means for you

Identify who actually remitted the tax and when your repayment occurred. A county record showing the bill as paid does not by itself prove payment by the taxpayer.

Common questions

Q: Did the state's payment count as the taxpayer's payment?
A: No.

Q: Did ownership and occupancy alone qualify the taxpayer?
A: No. Actual taxpayer payment was also required.

Citations and references

• 35 ILCS 5/208
• 86 Ill. Adm. Code 100.2180(b)

Subject

Credits – Property Tax

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/income-tax/2011.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/income-tax/2011/it-11-0020.pdf

Original ruling text

IT 11-0020-GIL 10/20/2011 CREDITS – PROPERTY TAX
General Information Letter: No credit is allowed for property taxes deferred, rather than
paid during the taxable year, under the Senior Citizens Real Estate Tax Deferral
Program.
October 20, 2011
Dear:
This is in response to your letter dated June 2, 2011 in which you state the following:
This letter is to inquire regarding the applicability of the property tax credit on form IL-1040 if a
taxpayer participates in the Senior Citizens Real Estate Tax Deferral Program.
The Senior Citizens Real Estate Tax Deferral Program allows a taxpayer to defer all or part of
their property tax payments on their principal residence. The State of Illinois pays the tax bill,
essentially setting up a loan with the taxpayer as a 6 percent simple interest rate is charged on
the deferred amounts and a lien is filed on the property. The deferred amounts must be repaid
within one year of the taxpayer’s death or 90 days after the property is sold, transferred, or
otherwise no longer qualifies for the program.
Since the State of Illinois is paying the property tax on behalf of the taxpayer, the property tax
is considered paid and will show as paid when due. Per our discussion with COUNTY
Treasurer’s Office, they have advised that the deferred payment is allowed as a property tax
credit on the IL-1040 in the year the deferral occurs because it is considered paid and is no
different than the taxpayer taking out a loan to pay the taxes.
However, per two phone calls with IDOR we have been told the taxpayer cannot take the credit
since the taxpayer did not pay it directly.
Please advise in writing to us as to the correct way to apply the property tax credit if a taxpayer
participates in the Senior Citizens Real Estate Tax Deferral Program. We have also enclosed
a brochure that includes some of the details of the program.
According to the Department of Revenue (“Department”) regulations, the Department may issue only
two types of letter rulings: Private Letter Rulings (“PLR”) and General Information Letters (“GIL”).
The regulations explaining these two types of rulings issued by the Department can be found in 2
Ill.Adm.Code §1200, or on the website http://www.tax.illinois.gov/LegalInformation/regs/part1200.
Due to the nature of your inquiry and the information presented in your letter, we are required to
respond with a GIL. GILs are designed to provide background information on specific topics. GILs,
however, are not binding on the Department.
The Illinois property tax credit is codified in Section 208 of the Illinois Income Tax Act (“IITA”; 35 ILCS
5/101 et seq.) and states in its entirety:
Beginning with tax years ending on or after December 31, 1991, every individual
taxpayer shall be entitled to a tax credit equal to 5% of real property taxes paid by such
taxpayer during the taxable year on the principal residence of the taxpayer. In the case of
multi-unit or multi-use structures and farm dwellings, the taxes on the taxpayer's principal
residence shall be that portion of the total taxes which is attributable to such principal

IT 11-0020-GIL
October 20, 2011
Page 2
residence.
Further guidance is provided in department rules found at 86 Il.Admin.Code 100.2180. For example,
subsection (b) provides three requirements in order to qualify for the property tax credit:
b)

A taxpayer will qualify for the property tax credit if:
1)
2)
3)

the taxpayer's principal residence during the year preceding the tax year at issue
was in Illinois, and
the taxpayer owned the residence, and
the property tax billed in the tax year at issue has been paid. This is the amount
paid after factoring in any applicable exemptions.

Based on the brochure you provided regarding the Senior Citizens Real Estate Tax Deferral Program,
requirements 1 and 2 will be met by program participants as the program requires the participant to
“have owned and occupied the property or other qualifying property for at least the last three years.”
The third requirement, however, is not met by program participants. The brochure indicates that the
Illinois Department of Revenue “sends the tax bill payment to the county collector by June 1 or within
30 days of receipt of the tax bill, whichever is later.” This does not comply with the specific
instructions of the statute which clearly states “every individual taxpayer shall be entitled to a tax
credit equal to 5% of real property taxes paid by such taxpayer during the taxable year on the
principal residence of the taxpayer.”
The statute did not intend for taxpayers to receive a credit without actually paying their property taxes.
According to the brochure, there is no real deadline for repaying the “deferred amounts” other than
“[d]eferred amounts must be repaid within one year of the taxpayer’s death or 90 days after the
property is sold, transferred, or otherwise no longer qualifies for this program.” Participants in this
type of a program could claim property tax credits for decades without ever paying their property
taxes due to the programs unlimited requests for deferrals that need not be paid back until after
taxpayers’ death. The statute specifically requires taxpayers themselves to pay the property taxes in
order to receive a credit to prevent such a scenario as the one described above.
As stated above, this is a general information letter which does not constitute a statement of policy
that either applies, interprets or prescribes tax law. It is not binding on the Department. Should you
have additional questions, please do not hesitate to contact our office.
Sincerely,

Heidi Scott
Associate Counsel -- Income Tax