Budget and Levy Cycle

While the assessment cycle defines the allocation of the tax burden among property owners, the budget and levy cycle determines the total amount of property tax to be allocated to the property owners. The three steps in the budget and levy cycle are

1 levy,

2 extension, and

3 collection and distribution.

The budget and levy cycle begins in the fall of the assessment year when most boards of review are still in session. At this time, taxing districts have generally determined their budgets for the next fiscal year and have held a public hearing on this budget. Taxpayers who are concerned with the amount of property tax distributed to taxing districts should attend these public hearings and voice their opinions concerning how much money will be needed from the property tax.

After the budget is approved, the taxing districts can then calculate the amount of revenue needed from the property tax. This amount is certified to the county clerk as the property tax levy on or before the last Tuesday in December. The amount levied is the amount that tax- payers will pay on their property tax bills in the following year.

Once the assessment cycle is complete, the county clerk receives the assessment books from the board of review and applies the county equalization factor from the department to the individual assessments. With this information, and the levies received from the taxing districts, the county clerk proceeds with the extension of taxes. Extension is a two-step process that includes the computation of tax rates and the application of those rates to the EAVs (Equalized Assessed Value) of the individual parcels of real estate.

In the first step, tax rates are computed by dividing a taxing district's levy by file total EAV of all parcels of property in the taxing district. Some tax rates are subject to statutory maximums. If the calculated rate is above the maximum rate, the county clerk uses the maximum rate.

Levy = $1,000

EAV of property in the district = $100,000

Tax rate = Levy / EAV

Tax rate -  $1,000  / $100,000

Tax rate = .01 or 1 percent

Tax rates are normally expressed in dollars per $100 of EAV. In the example above, the tax rate is $1/$100 of . EAV, or $1 in taxes for each $100 of EAV.

In the second step of the extension process, the individual tax bills are extended in the collector's book by multiplying the EAV of each property by the sum of the tax rates for all districts in which the property is located. This sum is called the aggregate tax rate. A typical aggregate rate would include rates for the count, township, school district, and municipality, and could also include rates for a park district, fire protection district, library district, etc., depending on where the property is located.

Assume the property's aggregate tax rate is $7.00/$100 and the property's EAV is $20,000.

Tax bill = EAV x aggregate tax rate Tax bill = $20,000 x $7/$100 (or .07) Tax bill = $1,400

For this example, the collector's books would normally show an abbreviated legal description of the property, the owner's name, the property index number (PIN, the EAV of $20,000, the tax code that indicates what combination of taxing district the property is located in, the aggregate tax rate of $7.00/$100, the tax bill in two equal installments of $700 each; and spaces to enter the payments for the two installments.

The statutory date for the delivery of the collector's books from the county clerk to the county treasurer, who also serves as the ex officio county collector, is December 31 of the assessment year. As a practical matter the collector's books are not normally given to the county treasurer until March or April of the year following the assessment year, since the levies are not due until the last Tuesday in December and some boards of review adjourn in December or later. This is 15 to 16 months into the property tax cycle.

The county treasurer prepares a property tax bill for each property listed in the collector's books. The bill is mailed by May 1 of the year following the assessment year. For counties that use a two installment method, the first installment is due by June 1, and the second in installment is due by September 1. Once the treasurer begins receiving money from either installment, he or' she distributes the monies to the appropriate taxing districts.

Soon after September 1, the county treasurer prepares a list of properties for which taxes have not been paid. This delinquent tax list is published in a newspaper, and notices are sent to the owners of the properties. These notices specify that the treasurer will apply to the circuit court for a judgment against the property for delinquent taxes. If taxes remain unpaid, the court will order a lien to be sold at the tax sale in the amount of the unpaid property taxes, interest, penalty, and fees.

The tax sale usually occurs in late October, approximately 22 months into the property tax cycle, with the county clerk and county treasurer presiding. A lien on the property is sold through a bidding process in which bidders, also called tax buyers, state the percent of interest for which they are willing to purchase the lien, starting at 18 percent per 6 months, and going lower until the lowest bidder purchases the lien. The tax buyer pays the amount of the lien and receives a certificate of purchase from the county clerk. The county treasurer then distributes revenues from the tax sale to the taxing districts.

Once the lien is sold, the property owner may redeem it by paying to the county clerk the amount of the lien, interest, penalties, and fees. The amount of the lien and interest is then paid by the county to the tax buyer, who must surrender the certificate of purchase. A tax buyer may eventually obtain a tax deed for the property if the tax lien is not redeemed.

The table shows the budget and levy cycle.

1 Prepares tentative budget.

2 Publishes notice of public hearing; puts tentative budget on display 30 days before public hearing.

3 Holds public hearing.

4 Passes budget with changes in form of ordinance.

5 If necessary, makes truth-in-taxation publication and holds hearing.

6 Gives certificate of levy to county clerk by the last Tuesday in December.

1 Calculates tax rates and computes aggregate tax rate for each combination of taxing districts.

2 Extends taxes on total F, AV in each taxing district and enters the amounts in the collector's books.

3 Prepares and delivers collector's books to county treasurer by December 31.

1 Prepares and mails tax bills by May 1.*

2 Collects first installment for real estate by June 1.*

3 Distributes tax money proportionately to taxing districts as money is collected.

4 Collects second installment for real estate by September 1.*

5 Prepares delinquent tax list and sends a notice of application for judgment on real estate.

Pronounces judgment for sale of a lien on real estate due to nonpayment of taxes. Rules on tax objections.

Administers sale of lien on real estate due to nonpayment of taxes.