Hopefully, It Won’t Take Ten More Years for a Resolution (The Trouble Fighting State and Local Tax Agencies)

In 2008, taxpayers in Cook County, Illinois (Chicago) received property tax assessments and believed they were done improperly, including violating the Equal Protection Clause of the Fourteenth Amendment. They challenged it through the county appeals process, but got nowhere. They filed a lawsuit in state court, and the county argued that you can’t challenge the property tax based on the federal constitution in state court. So they filed suit in federal court in 2018, and that case was dismissed because of the Anti-Injunction Act (which prohibits most tax-related suits in federal court). They appealed the federal dismissal, and earlier this year the Seventh Circuit Court of Appeals reversed and remanded the case.

In that earlier decision, the Court held that not only didn’t Illinois have a “plain, speedy and efficient” method of appealing, they had no method of appealing. “Efficiency is no good to the taxpayers if it means that they cannot bring their equal protection claim in state court.”

And the defendants agree with the taxpayers that they cannot. In their brief, the defendants assert that the taxpayers err in presuming that they can raise their constitutional claims, sharply admonishing that “[t]hey are not free to do so.” Instead, the defendants argue, “the only matter at issue in a Section 23-15 action is whether the assessment of the real estate property was correct.” By the defendants’ own admission, then, the section 23-15 procedures provide no forum for the taxpayers to raise their constitutional claims. Nor have the defendants been able to point to any alternative channels in which these taxpayers can raise their federal constitutional claims in Illinois courts.

That case was decided on January 29th, with the case remanded to the District Court for further proceedings. One would expect that the District Court would then start the process of hearing the case. However, that wasn’t the case.

The District Court put a stay on proceedings, based on the County planning on filing a writ of certiorari (to have the Supreme Court review the case). “The taxpayers now petition for a writ of mandamus, asserting that the district court exceeded its authority when it entered the stay. A writ of mandamus is an extraordinary remedy, not lightly invoked, but it is available in an appropriate case for a litigant who can show that it has no other adequate means to attain relief to which it is clearly entitled.”

The spirit of our mandate in this case was clear. After concluding that the taxpayers lacked a plain, speedy, and efficient remedy in the state courts, we remanded the case to the district court for it to resolve the taxpayers’ claims. Then, mindful that the taxpayers had already spent a decade trying to litigate these claims in state court, and judging the Supreme Court unlikely to grant certiorari, much less to reverse our judgment, we expressly denied the defendants’ request that we stay our remand pending their petition for a writ of certiorari. The district court was powerless to reconsider our decision on this matter and grant what we had withheld.

You may have read about “Writ of Mandamus” in regards to the Michael Flynn case. Luckily, this case is apolitical, and we can see a case where it’s inarguable that mandamus is needed. Basically, lower courts are required to follow orders of higher courts. If a Court of Appeals denies a stay, the District Court can’t substitute its own judgment.

Why am I writing about this case? Because I wanted to illustrate the costs involved and time-frames in fighting local tax agencies. This case began in 2008. It is now 2020. This case will almost certainly not be resolved until 2021, thirteen years after it began. The legal fees are almost certainly in the many thousands of dollars, and there are more to come. At least a resolution shouldn’t take another ten years.

A few years ago, I had a client audited by New York State. New York assessed roughly $10,000 in tax to the client. We believed that New York was wrong on their interpretation of the tax law in question. The client spoke with an attorney in regards to fighting the case, and found it would cost somewhere more than $20,000 to move forward. Spend $20,000 to save $10,000 doesn’t make sense, and we ended up settling with New York State for a somewhat lesser amount (with all penalties being removed).

Still, that case and the Gilbert Hyatt/California Franchise Tax Board case (which began in the early 1990s and is still ongoing) have disillusioned me in regards to most state and local tax agencies. Unfortunately, the decision I’m highlighting today just reinforces my beliefs.

Comments are closed.