Cameron Miranda
The Property Tax Extension Limitation Law (PTELL) is a law that limits the increase in property tax extensions to either 5% or the increase in the consumer price index for the year before the levy year, depending on which is lesser. The law applies to the portion of a taxing district's total extension that is subject to the limitation, with some funds being exempt. PTELL taxing districts are allowed a yearly inflationary increase in taxes billed, with the prior year's total taxes increasing by a percentage equal to the rise in the consumer price index or 5%, depending on which is the smaller figure.
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What You'll Learn
- The law limits property tax extension increases to 5% or the increase in the consumer price index
- Voter approval is required to increase the tax limitation for a taxing district
- The law applies to all funds except those specifically exempted
- Separate limiting rates are not usually calculated for individual funds of taxing districts
- The law allows taxing districts to ask voters to approve an increase for multiple levy years
The law limits property tax extension increases to 5% or the increase in the consumer price index
The Property Tax Extension Limitation Law (PTELL) limits increases in property tax to the lesser of 5% or the increase in the consumer price index (CPI) for the year preceding the levy year. This means that if the CPI increases by more than 5% in a given year, the increase in property taxes will be capped at 5%. On the other hand, if the CPI increases by less than 5%, the increase in property taxes will be limited to the percentage increase in the CPI. For example, if the CPI increases by 3% in a given year, the increase in property taxes for that year will also be 3%.
This law applies to the portion of a taxing district's total extension that is subject to the limitation, known as the aggregate extension. The aggregate extension includes funds such as insurance, self-insurance, tort liability, IMRF, audit, and FICA. However, certain funds may be specifically exempted from this limitation.
The purpose of the Property Tax Extension Limitation Law is to control the increase in property taxes and provide some stability for taxpayers. By limiting the increase to 5% or the CPI, whichever is lower, taxpayers can have some predictability and assurance that their property taxes will not increase drastically from one year to the next.
It's important to note that the limitation rate can be increased with voter approval. In some instances, taxing districts may exceed the voter-approved rate limit for a fund as long as the sum of all rates of funds subject to the PTELL does not exceed the limiting rate. Additionally, PTELL taxing districts are allowed a yearly inflationary increase in taxes billed, based on the previous year's total taxes.
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Voter approval is required to increase the tax limitation for a taxing district
In the context of the Property Tax Extension Limitation Law, the involvement of voters in approving tax increases is essential. Voter approval is a critical component of the law, particularly when it comes to increasing the tax limitation for a taxing district. This law, often referred to as PTELL, includes provisions that empower voters to have a direct say in tax matters.
The law recognises the importance of voter involvement in the decision-making process regarding tax increases. When a taxing district considers exceeding the established tax limitation, it is mandatory to seek approval from the voters. This process ensures that any increase in taxation is justified and supported by the people who will be directly impacted.
In the case of school districts, for instance, a tax rate ratification election (TRE) is typically required if the governing body adopts a tax rate that surpasses the voter-approval tax rate. This election provides voters with the opportunity to either support or oppose the proposed tax rate increase. If a majority of voters reject the adopted tax rate, the taxing district's ability to raise taxes is restricted to the voter-approval tax rate for that specific year.
Similarly, water districts follow distinct procedures, adhering to Water Code provisions for most matters related to truth in taxation. However, when it comes to holding elections to approve tax rates, water districts must follow the processes outlined in the Tax Code. This ensures that voters within these districts also have a say in any proposed tax increases.
The requirement for voter approval to increase tax limitations extends beyond individual states. For example, in California, there is a push for a Two-Thirds Legislative Vote and Voter Approval for New or Increased Taxes Initiative. This initiative aims to give voters the right to vote on all future state taxes, holding politicians accountable for new fees and increased costs that impact Californians. This initiative underscores the broader trend of involving voters in tax matters and ensuring their approval for tax increases.
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The law applies to all funds except those specifically exempted
The Property Tax Extension Limitation Law (PTELL) applies to all funds, including insurance, self-insurance, tort liability, IMRF, audit, and FICA. This means that any increases in property tax extensions are limited to the lesser of 5% or the increase in the consumer price index (CPI) for the year preceding the levy year. This ensures that the sum of all tax rates for funds subject to the PTELL does not surpass the limiting rate.
However, it's important to note that the law does exempt certain funds specifically listed in 35 ILCS 200/18-185. While the majority of funds are subject to the limitations set by the PTELL, these exempted funds are not constrained by the same rules.
In the context of the PTELL, the limiting rate is crucial. It represents the tax rate that enables a district to impose taxes within the confines of the extension limitation. This limiting rate is calculated using a specific formula: Limiting rate = A x (1 + I) / CEAV - NP - AX - TIF + DIS. This formula takes into account various factors to determine the maximum tax rate allowable under the law.
While the PTELL sets limitations on tax increases, there are instances where taxing districts may exceed voter-approved rate limits for specific funds as long as the aggregate of all rates of funds subject to the PTELL remains within the limiting rate. Additionally, the law allows for separate limiting rates to be calculated in certain situations, providing some flexibility in tax rate determination.
To summarize, the Property Tax Extension Limitation Law applies broadly to all funds with the exception of those specifically exempted. This comprehensive application ensures a consistent approach to managing tax increases, with the limiting rate serving as a crucial benchmark to prevent excessive taxation.
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Separate limiting rates are not usually calculated for individual funds of taxing districts
The Property Tax Extension Limitation Law (PTELL) limits increases in property tax extensions to the lesser of 5% or the increase in the consumer price index for the year before the levy year. This law applies to all funds, including insurance, self-insurance, tort liability, IMRF, audit, and FICA. However, it is important to note that separate limiting rates are typically not calculated for individual funds of taxing districts.
While the law generally does not provide for separate limiting rates for each fund, there are specific instances where separate limiting rates can be calculated. For example, if a county clerk is required to reduce rates, they will do so proportionally for each fund. However, if a taxing district prefers not to have rates reduced proportionally, they can pass a resolution or ordinance with specific instructions for the clerk. This could include directions to reduce the corporate rate to a specific dollar amount or a percentage of the levy.
The PTELL plays a crucial role in slowing the growth of property tax revenues for taxing districts when property values and assessments are increasing faster than the rate of inflation. It offers protection to property owners by preventing their tax bills from rising solely due to the rapid increase in the market value of their properties.
It's worth noting that the limitation for a taxing district can be increased with voter approval. This flexibility allows for adjustments to be made when necessary, ensuring that the taxing district's needs are met while also providing safeguards for property owners.
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The law allows taxing districts to ask voters to approve an increase for multiple levy years
The Property Tax Extension Limitation Law (PTELL) limits increases in property tax extensions to the lesser of 5% or the increase in the consumer price index for the year before the levy year. This limitation applies to the portion of a taxing district's total extension that is subject to the limitation (aggregate extension) for funds subject to the PTELL. The law allows taxing districts to ask voters to approve an increase for multiple levy years. This is known as a levy lid lift, and it allows taxing jurisdictions to increase their taxes above the statutory maximums. Most jurisdictions may submit a special, or excess, levy to their voters to temporarily increase their taxes, which requires a 60% majority. This is separate from the regular levy and expires after one year for all agencies except fire protection districts.
A taxing jurisdiction that is collecting less than its maximum statutory levy rate may ask a simple majority of voters to "lift" the total levy amount collected. The new levy rate cannot exceed the maximum statutory rate. Levy lid lifts may generate revenue for any purpose, but if the amount of the increase for a particular year exceeds the statutory maximum tax rate, the assessor will levy only the maximum amount allowed by law.
To get voter approval for a levy lid lift, the governing body must first adopt a resolution specifying the proposed amount of the increase and whether it will apply for the next levy only or on an ongoing basis. The resolution must also specify the purpose of the levy increase. The resolution must then be submitted to the electors for a vote. In even-numbered years, a levy limit referendum may be held at the spring primary or election, or partisan primary or election. In odd-numbered years, a municipality may call a special referendum on the same dates as when a school board may call for one.
The ballot title for a levy lid lift must include the maximum tax rate to be imposed in the first year and the total levy duration (number of years). If the levy lid lift is permanent, this must be stated. The ballot title must also state the maximum tax rate to be collected in the first year and the limit factor to be used for all subsequent years, which can be stated as an annual percentage increase or inflation index.
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Frequently asked questions
It is a law that limits increases in property tax extensions to 5% or the increase in the consumer price index for the year before the levy year, whichever is lesser.
The rate increase factor was eliminated for all referenda held after March 21, 2006.
The limiting rate is the tax rate that allows the district to impose the amount of taxes allowed under the extension limitation.
The formula is: Limiting rate = A x (1 + I) / CEAV - NP - AX - TIF + DIS.
