There are two types of property taxes that businesses are subject to: real estate and personal property.
Personal property tax equates to everything that is movable; if a business is in a state that imposes a personal property tax, it has to file taxes on objects, such as furniture, fixtures, inventory and equipment.
Real estate taxes deal with the assessment value of your property. Oftentimes, however, a property is over-assessed. In fact, in my experience, only about 40 percent of properties are assessed fairly.
Of course, everyone wants to save money on taxes, and one way to do that is to appeal your assessment. Here are the steps to take to determine if your property is over-assessed and if you can lower your tax bill:
1. Ascertain your market value from the reassessment notice
Whether you own a small business or a $50 million office building, you should have a solid idea of where your property value stands by reviewing your reassessment notice. If not, you should have a professional eye take a look.
The more complex a property, the more help you’ll need.
2. Do your own research
Do you feel you have enough expertise to determine whether your assessment is fair value? If so, or even if you’d like to try, start by getting a feel for what your commercial property is worth.
There are many factors that can positively or negatively affect the value of your property. In a nutshell, you’re looking for market activity changes. Check recent sales or rents on a local assessor website, as there are lots of things that could change the market. That’s why you have to look at this every year because things like demographics and economy can change very quickly.
For example, if you own an older building in an area where there’s a moderate to high degree of development going on, the competition created by new construction could adversely affect your property value.
3. Seek out advice
It never hurts to get a second opinion, which is why you want to consult with an accountant experienced in real estate tax appeals. Make sure you bring some ideas and research to the table.
Assuming you want to proceed, choose an expert that has a lot of experience and also knows the assessors in your areas. Every county is different, so it’s important to have some background knowledge of local procedures and attitudes well ahead of time.
4. Contact the assessors
If you think your property has been over-assessed, you or your advisor should contact the assessor in your county. In our experience, it’s generally best to approach the assessor in a friendly manner, though the expert you have working for you should know the preferred protocol for the county you are contacting.
However, you don’t want to undertake this step without first preparing your research.
That being said, you don’t want to provide all of your information to the assessor upfront. The assessor is allowed to ask you leading questions, and he or she can end up using your own words against you. Approach the conversation cautiously.
5. Decide whether to appeal
If you can’t come to an agreement with the assessor, you might need to appeal.
The length of time an appeal takes usually depends on the area the building is in. For example, some areas of the country are starved for capital and aggressively go after taxpayers. Thankfully, however, most places are reasonable to work with. An assessor doesn’t want a long list of appeals.
If the property value is not supportable with their evidence, they usually would be glad to change it in most places.
Note, however, that if it is prudent to appeal, it will cost more money the longer the appeal process takes. You may have to hire an appraiser and/or local attorney, but if the cost is justified, it makes sense to do so.
If you think you have a case to appeal your real estate property taxes, I’m happy to take a complimentary look and let you know if you have a leg to stand on. I can be reached at jcmason@CBIZ.com. We have the expertise and data available to us through a variety of sources to produce comparable information.