Since PT Barnum pioneered “piggybacking” in the 1870’s and the Chicago Great Western Railroad popularized commercial intermodal by modifying truck trailers and loading them onto trains in the 1930’s, intermodal has grown to become so intertwined with modern railroading that some statutes and court decisions offer intermodal and transload facilities the same favorable treatment as railroads under certain circumstances.
Where can railroads and their intermodal partners look to benefit from these statutes and decisions? Railroads and their partners operating in Illinois needn’t look too far. The Illinois Property Tax Code may offer favorable property tax treatment to intermodal and transloading facilities that qualify as railroad “operating property” – even if those facilities are owned and operated by non-railroad entities.
Railroad “Operating Property” Defined
The taxation scheme set forth in the Illinois Property Tax Code (“Code”) classifies all railroad property as one of two categories: “operating property” or “non-carrier real estate.” Non-carrier real estate is subject to local assessment and taxation, while operating property is exempt from local assessment and taxation and instead taxed directly by the Illinois Department of Revenue (“Department”) pursuant to the Code. 35 ILCS 200/11-80.
The Code broadly defines railroad “operating property,” as “all tracks and right of way, all structures and improvements on that right of way … and all other property … connected with or used in the operation of the railroad.” 35 ILCS 200/11-70(b) (emphasis added). Under Department administrative decisions and case law, “operating property” generally “encompass[es] all real property owned or used by the railroad for railroad purposes, and includes structures and improvements used in the transaction of the railroad’s business.” Hynes v. Union Pacific, 95-RR-003 (Ill. Dept. of Rev. 1995) citing Chicago & A. R. Co. v. People, 98 Ill. 350, 358 (1881). Railroad tracks are not required to be present on a property for classification as “operating property.” Id.
