The question of tax exemption for the Allerton gift

At the time of Robert Allerton’s gift of his estate to the University of Illinois, Carl Glasgow was serving as Piatt County’s State’s Attorney.  He served as State’s Attorney from 1936 until 1964. According to Mr. Glasgow’s obituary, at the time of his death in 1980, he had served the “longest consecutive term of any State’s Attorney in Illinois.” Soon after the Park was established, SA Glasgow took a stand against the University of Illinois. The University requested the County to deputize additional men for the security needed for the House and the Park. Mr. Glasgow argued that such deputizing was not possible based upon the law and referred the matter to the Attorney General.

When Robert Allerton deeded his private estate and farm holdings to the University of Illinois, the University had agreed to pay the real estate taxes that were due in 1947 for the year 1946. However, after the deeding, the University objected to paying the taxes on the grounds that not only was the University a non-profit organization but also an extension of the State and therefore tax exempt.

The bulk of the land holdings lay within Willow Branch Township. In fact, the Allerton land generated one-fifth of the township tax revenues that supported the school, fire and road districts. Without the real estate tax from the Allerton holdings, the township faced a serious shortfall of income.

The University took a similar tax exempt position in other Counties where sizable farm holdings had been donated or willed to the University. In 1944, Senator Wright gifted land in DeKalb County to the University. A similar tax exemption was filed by the University in Vermilion County.

During Robert’s residency in Willow Branch Township, he had contracted with the Willow Branch Township Road Commissioner to tar and chip the roads. Robert paid the Township for labor and materials. The University of Illinois assumed this arrangement would continue but Mr. Glasgow took a different position. Again SA Glasgow raised the question of the University’s use of tax supported services when the Park and the farms were not supporting the local taxing bodies with tax revenue.  The University requested that the $2,377.00 to tar and chip the roads be deducted from its tax bill. State’s Attorney Glasgow agreed to these terms, reducing the tax bill by the agreed upon amount. However, the University still did not pay the real estate taxes claiming tax exemption.

In 1949, State’s Attorney Glasgow along with three other State’s Attorneys, found the University of Illinois in delinquency of unpaid real estate taxes and filed to sell the unpaid taxes at the Delinquent Tax Sale.

In Illinois, unpaid read estate taxes are “sold” at an annual “tax sale” in each county according to provisions in the Illinois Compiled Statutes, Chapter 35 regarding Property Taxes. When real estate taxes remain unpaid to the County, investors (tax buyers) “purchase” the unpaid tax bills. The County is assured its income stream from real estate taxes and does not have to carry the lien for the unpaid real estate taxes. Investors either receive a return of the initial investment plus interest, or at the end of the redemption period, receive the deed to the property.  At the tax sale, tax buyers bid for the interest rate that can be charged to the property owner to redeem the taxes. The tax buyers pay the tax bills to the counties. The property owner must then redeem the taxes from the tax buyer by paying the delinquent tax bill amount plus the interest. The maximum interest rate is set by Illinois statute at 18%. At the sale, it is not the property being auctioned. The bidding is for the interest that can be charged to the property owner to repay the tax bill. The bidding begins at 18% and works downward. The tax buyer’s risk is guaranteed profit. Either the property owner pays the taxes plus interest to the tax buyer or, at the end of two years, the tax buyer files a Tax Deed for the property. This tax deed holds precedence over any other claim to the property: bank mortgage, other liens or claims against the property. For this reason, many banks are willing to pay the delinquent taxes in order to protect the mortgage lien. The other piece to this delinquent tax business is that every six months, the interest rate multiplies. Example: Delinquent taxes purchased at tax sale for 10% interest would become taxes plus 40% interest at the end of the two year period. If the original tax bill was in the amount of $1500.00, in the first six months at 10%, the property owner would owe $1650.00 to redeem the taxes from the tax buyer. In the second six month, the amount increases to $1800.00. In the third six months, the redemption amount would be $1,950.00. At the end of two years, if the taxes are redeemed, the tax buyer will have made a 40% profit. Returning to the previous example, once a tax deed is granted, a tax buyer can sell the property at many times over the initial investment. This is the pay dirt for a tax buyer. Granted, the money is tied up for two years at this rate, but it is a lucrative business. It is also one ripe with sadness and misfortunes.  

Mr. Glasgow’s move, along with the County Collector’s of Champaign, Dekalb and Vermillion Counties, to sell the unpaid taxes at the delinquent tax sale was a bold and brilliant one!

Additionally, the lawsuit filed in Champaign County against the University appealed to the Illinois Supreme Court. Prior to the Court’s ruling, the University agreed to make payment in lieu of taxes to Piatt County. This payment was negotiated between the State’s Attorneys on behalf of the County townships to compensate for lost tax revenue. Each year the University files with the respective Counties for the payment in lieu (from the French meaning in the place of – roughly pronounced ‘in loo’). The Park itself and the Woodland acres were deemed tax exempt since they were used exclusively for public and educational purposes. The income generating farm lands in agricultural production to provide income were not exempt. Weighing heavily in the University’s decision was the public opinion going against the University for Future Gifts.

One such gift made in 1960 by local resident Maxwell Hott of his mansion on State Street in Monticello had a dramatic impact upon Allerton Park and House finances. The subject of another future posting.

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