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November 6, 2019

Tangible Personal Property – Filing Deadlines Are Coming!

Every business has tangible personal property (TPP) which includes machinery and equipment, furniture and fixtures, computers, inventory, and supplies. If your business is located in a state that taxes business personal property, it is your responsibility to file your declarations timely. Failure to do so can result in costly penalties and may waive your appeal rights. In jurisdictions that offer automatic exemptions, failure to file can also constitute failure to file to apply for the exemption. 

These tax revenues tie into local budgeting for government services, public education and infrastructure projects. Over the years, there has been an increased number of taxing jurisdictions (states, counties, cities) contracting with third-party vendors to perform business personal property tax audits on their behalf. Outsourcing the audit function is a growing trend and will allow for more frequent audits to pump up local coffers.   

The way personal property is reported can have an appreciable impact on your tax assessment. Keep in mind that TPP is assessed on a specific “snapshot” date. Rules vary widely by jurisdiction as do valuation dates. Depending on your business’ location (state and jurisdiction), your personal property tax returns could be due as early as January. 

Take Stock of Your Situation Now

Nobody likes surprises when it comes to taxes, so now is a great time to assure that you are up to date with your filings. Here are key preliminary questions:         

  • Are you aware of your company’s tangible personal property filing obligations? 
  • Do you know if your company is in compliance with the jurisdiction’s personal property tax regulations?
  • If you do have tangible personal property obligations, have you researched whether your state and local government have options to alleviate the burden of TPP taxes (exemptions, abatements, credits, etc.)?

Plan for Computing and Reporting Value

You will be required to provide detailed information on a “rendition form” that gives the Appraisal District the description, location, cost and acquisition dates for business personal property that you own. Take a quick look at last year’s form now to get a general feel for what will be required this year. You will want to consider these key points when it is time to complete the rendition form:

  • Identify the assets at each location on the assessment date and determine if the asset is reportable as personal property.
  • Prepare the rendition based on the original cost by year of acquisition and apply the appropriate depreciation factor to arrive at fair market value.
  • Identify and remove assets that have been disposed of. Your business will continue to pay taxes on those assets as long as they remain on the books. This is a common error.

Your Tax Administrative Function Is Crucial

Managing declarations, exemptions and compliance deadlines can have a real impact on what you pay. Companies often over-report as they tend to pick up assets that are both real and personal from the fixed asset ledger. Over-reporting translates to overpaying!

We have found that including the following tasks in a structured process can help you to reach the most advantageous outcome.

  • Maintain an accurate calendar to ensure filing deadlines are adhered to. Valuation notices are often put to the side “for later;” don’t let later become too late.
  • Monitor receipt of rendition forms so that the correct form is used.
  • Keep current on changes in the personal property tax filing process (e.g., new online requirements).
  • Calculate tax estimates for accrual purposes.

Be sure to take advantage of and benefit from credits, abatements and exemptions such as the following:

  • Eligible Manufacturing Personal Property Tax Exemption (EMPP) –  Businesses with personal property predominantly used in industrial processing or direct integrated support may qualify; form must be submitted timely
  • State Essential Services Assessment (SESA) – A state-specific tax on eligible personal property owned by, leased to or in the possession of an eligible claimant on Dec. 31 of the year immediately preceding the assessment year.
  • Freeport Inventory Exemption – An exemption or tax break on inventory that only stays within a state or location for a short period of time before being moved out of the state in question. 

Note that there are expansion, relocation, capital investment and job creation incentives that are offered for those who qualify, but there may be an application that must move through a competitive scoring process. Therefore, it is important to apply early and have the required documentation to prove that the property meets the exemption requirements.   

It is worth restating – be sure you have noted filing deadlines on your calendar with appropriate reminders! Valuation notices are often put to the side with the thought to look at them later when you are not so busy. The time to be active is when the valuation notice is received. Remember, if you wait until you receive your actual tax bill, it’s generally too late to protest.

Additional Resources

Your Team

Don’t hesitate to connect with the author, Vicki Rico, if you have questions about whether your business is in compliance or to confirm that you are paying only your obligation. You can reach Vicki directly at vrico@cbiz.com and (314) 995-5584. You may also find some examples of real-case tax savings in our Property Tax eBook to be useful.

2019 Individual Tax Planning Supplement

 

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