The recent Beth-El All Nations Church case shows just how far state and local tax collectors will go to collect taxes – even when the taxes are not owed.

Facts set out by the court:

An employee of the City of Chicago mistakenly addressed a notice to Beth-El All Nations Church at 1534 East 63rd Street, instead of Beth-El’s true address, 1534 West 63rd Street. The notice was pretty important: it advised the Church of its right to redeem title to the 63rd Street property after the parcel was sold for delinquent taxes. Despite the misaddressed notice, the City acquired a tax deed to the 63rd Street property in 1998. Finally, after Beth-El’s failed attempts to challenge the tax deed through state postjudgment proceedings, the City sought to oust Beth-El from the property in 2006.

The opinion goes on to explain that:

The Church was not, however, deemed to be tax-exempt during the period from 1986 to 1995, and so real estate taxes, totaling over $ 100,000, were assessed by Cook County against the property. Because of the delinquent taxes, the property was sold at a “scavenger sale,” a sale authorized by Illinois law for properties that have been tax delinquent for more than two years, if annual forfeiture sales have not satisfied the delinquency.

After quite a bit of legal wrangling, the Church persuaded the District Court to issue an injunction to prevent the City of Chicago from taking control of the Church property. The District Court stated “In this country, even a church is entitled to its day in court. That did not happen in this case.”

The Seventh Circuit Court of Appeals disagreed and overturned the lower court’s injunction. The Seventh Circuit Court noted that the Church property was tax exempt and there were no taxes owing, but the federal court was not the proper forum and since the Church did not raise the proper argument in its state court wranglings the federal court injunction was not proper.

The end result: the City of Chicago will probably obtain possession of the Church property for taxes that were not owed.

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