By: Brittany Flaherty Theis

In Kraft Foods, Inc. v. Illinois Property Tax Appeal Board, the Second District Appellate Court recently decided a property tax appeal in favor of the Property Tax Appeal Board (“PTAB”) and against Kraft Foods, Inc. (“Kraft”). Kraft appealed from the PTAB’s decision, arguing, in part: 1.) the PTAB’s decision should be reviewed de novo; 2.) the PTAB erred as a matter of law in relying on leased-fee bulk-sale transactions; 3.) the PTAB erred in mixing and matching the comparable properties from two appraisals; and 4.) the PTAB must accept  testimony if it is un-rebutted. The City of Aurora and West Aurora School District No. 129 (the “Taxing Bodies”) intervened in the proceedings represented by Josh Whitt of Whitt Law LLC.

The property at issue was Kraft’s industrial warehouse distribution center and office space in Aurora, Illinois. The property was encumbered by a 10-year build-to-suit triple-net lease agreement under which the tenant paid for utilities, taxes, insurance, and maintenance. The Kane County Board of Review assessed the property for tax year 2007 at $13,679,281, for a fair market value of $41,103,609. After hearing from two appraisers on direct (one for Kraft and one for the Taxing Bodies) and one appraiser on rebuttal (for Kraft), the PTAB reduced the fair market value to $40 million. Kraft appealed.

On appeal, Kraft framed its first argument as one regarding improper methodology – that the PTAB erred by using an improper method of valuation by considering leased-fee bulk-sale transactions and by “mixing and matching the comparable properties from two appraisals.” The PTAB and the Taxing Bodies, however, pointed out that Kraft’s argument was actually premised on the weight that should be given to the comparable sales in evidence and that the PTAB had, in fact, considered evidence under the three basic methods of valuing real property.

The court held that Kraft was essentially arguing that the PTAB should have placed greater weight on the testimony of its rebuttal appraiser; a decision that the court would not disturb unless it was against the manifest weight of the evidence. The court also rejected Kraft’s “contention that the PTAB erred in choosing to accept some evidence and rejecting or discounting other evidence.” Contrary to Kraft’s position, just because “the trier of fact ultimately determines that one party presented more credible evidence than the other does not require it to discount all the evidence that the other party presented.” Kraft provided “no authority for the proposition that the PTAB must accept evidence from only one of the parties in a valuation dispute.” Thus, the PTAB’s conclusion that the property was worth a different amount than any of the appraisers determined did not require the court to employ a de novo standard of review and to hold otherwise would be contrary to existing precedent. Therefore, the PTAB can continue to review evidence presented by each party and determine the weight to be given to each aspect of the evidence and testimony. The PTAB does not need follow an all or nothing approach.

Kraft also argued that the trier of fact must accept testimony that is un-rebutted. The court held that if it were to accept that argument, it would remove some of the discretion of the trier of fact, which the court would not do. As in other cases, the PTAB is free to reject any or all of a witness’ testimony, even if it is not directly contradicted by other witnesses.

In this appeal, Kraft challenged many of the practices of the PTAB and the parties before it. The PTAB and Whitt Law successfully advocated against the changes that Kraft was proposing in oral argument and briefs presented to the court. Please contact Whitt Law Partner Josh Whitt with questions regarding the Kraft appeal or for assistance with a property tax appeal within your taxing district.

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