surplus equity – Illinois lawmakers approved a measure late Saturday that reshapes how counties handle delinquent property taxes, aiming to comply with a 2023 U.S. Supreme Court ruling after years of noncompliance.
Late Saturday night in Springfield, the Illinois House voted 80-to-35 to overhaul the way the state recoups delinquent property taxes—after three years of not complying with a 2023 U.S. Supreme Court ruling. The bill is now headed to Gov. JB Pritzker for signature.
For years. Illinois counties have sold delinquent property tax debt to investors who could ultimately seize properties if owners failed to redeem what they owed. But the Supreme Court ruled it was unconstitutional for counties to withhold surplus equity from homeowners who lose their properties in the process. Illinois is the only state affected by the ruling that had not yet reformed its property tax debt system.
The measure approved by the House, House Bill 4537, comes with a specific timetable in Cook County. It would add six more annual tax sales, with the final one scheduled for 2030. Justin Kirvan. policy director for the Cook County Treasurer’s Office. said the legislation would require Cook County to run a pilot program that withholds 100 delinquent tax certificates at each of the next six tax sales.
Those withheld certificates would be limited to properties where the owners have claimed a homeowners exemption and where the certificates are among those with the lowest tax debt. The selected owners would be enrolled into a payment plan that gets them paid up after a three-year redemption period. In the current system. property owners generally have two-and-a-half years to clear their debt. and there is no payment plan available.
Cook County Treasurer Maria Pappas framed the proposal as a safeguard for families trying to keep their homes. “This bill provides reform that works for property owners, taxing districts and taxpayers,” she said. “Temporary financial hardship shouldn’t result in families losing generational wealth and being left broke.”.
The bill also builds a surplus equity fund for homeowners who are at risk of losing their properties after delinquent tax certificates have been purchased at the two most recent tax sales. In those cases, Kirvan said, a tax buyer may pursue the deed to the properties, which can lead to foreclosure. Kirvan said property owners can file a claim to recover any lost equity in their home from the surplus equity fund. That fund would be financed through additional fees paid by the property tax buyers.
Supporters say the change responds directly to the Supreme Court’s constitutional problem. Under the current system in Cook County. the county can put tax liens on properties with at least one year of delinquent property taxes and sell those tax liens or certificates at the annual tax sale. During the redemption period. homeowners must pay the tax buyers for the original debt plus fees and interest. as set by the tax buyers. Property tax attorneys say that typically 90% to 95% of property owners settle their debt within the allotted two and a half years.
For those who do not redeem, a tax buyer can petition the court for the deed to the home. Once the tax buyer secures the deed, property owners are out of any equity in the home.
House Bill 4537 changes the mechanics of what happens next. After Cook County holds six annual tax sales and the delinquent tax certificates are sold. the bill would still allow certificates to be sold. But if a tax buyer or other interested party wants to pursue the deed to a home. an auction would be held. Kirvan said the starting bid would be set at the total amount of the delinquent property taxes. If the winning bid exceeds the total debt. the remainder would be considered surplus equity and would go to the original homeowner. Those property owners could also participate in the public auction.
For tax certificates not purchased at the tax sale, the county would offer homeowners the chance to enroll in a payment plan.
The measure passed the Illinois State Senate two days earlier. It is sponsored by State Sen. Celina Villanueva (D-Chicago) and State Rep. Curtis Tarver (D-Chicago). In a statement. Villanueva said the legislation “is about upholding Illinoisans’ constitutional rights and ensuring our state’s tax sales process places fairness over profit.”.
Not everyone is convinced the bill cures the constitutional harm. Opponents worry the auction structure does not guarantee homeowners receive the full market value of their homes.
Kirvan responded to that concern by pointing to the existing ability of homeowners to sell. He said property owners can still sell their homes during the redemption timeline, pay their outstanding tax debt, and keep what’s left.
During Saturday’s discussion on the House floor. lawmakers also expressed concern about the Illinois Tax Purchasers Association’s opposition to the bill. The legislation could reduce how much tax buyers are able to profit from the tax sales. The association did not respond to multiple requests for comment.
Cook County Board President Toni Preckwinkle, in a statement, called the bill a move toward equity. “This bill sunsets the practice of private tax buying in Cook County and replaces it with a more equitable process that better protects property owners.”
The political fight over the bill is also being felt in ongoing litigation. The Chicago Sun-Times reported that Cook County was found liable in a recent class-action lawsuit in federal court. The case involved 2,500 property owners who did not receive their surplus equity once the delinquent property taxes were paid. John Bouman, the lawyer for the plaintiffs, said the core issue is the lost equity, not the tax sales themselves. He said if Illinois cannot resolve the equity issue, more homeowners could be added to the class.
“If the legislation is successful in eliminating the source of the constitutional violation,” Bouman said, “if it fixes that, then there … won’t be any more people entering into our class who need to get their money back.”
Illinois property taxes Cook County delinquent taxes surplus equity U.S. Supreme Court House Bill 4537 JB Pritzker foreclosure tax liens class action