Property Taxes
Property Taxes are assessed in the forms of Real Estate, Business Personal Property and Manufacturer's taxes. Unlike virtually every other tax corporations pay, property taxes are based on an Assessor's opinion of fair market value. The opportunity, therefore, is in building cases that lower the assessment — and in turn — the tax you pay. Assessors are not involved in a conspiracy to charge excessive property tax. They are well-intentioned government officials that deserve to be treated with great respect. Even so, sometimes methods used by Assessors to determine fair market value are subject to debate. In a situation where this is true, a case must be made to overcome the presumption of correctness of the Assessor's value. That's where UGBB can step in to lend a hand.
Real Estate Tax:
Assessors use one of three methods to determine the fair market value of commercial real property. The information used to make this determination includes data specific to the property and other market indicators such as new construction, sales prices of comparable property, the condition of your property, income generated by your property, and any other factors relevant to the property's value.
- Cost Approach — First, the value of the land is estimated, as if vacant. The Assessor then adds the amount it would take to replace the property's structure with one of similar utility, including current costs of materials and labor, profit, overhead, permit fees, and the like. If a structure is not new, the Assessor then approximates depreciation from all causes, and subtracts that from the calculation of replacement cost.
- Market Approach — A property is evaluated based on comparable properties that have recently sold, then adjusted for differences, such as improvements, or better location. Where there are frequent sales and similarities in properties, this can be the most reliable approach for residential property, but is oftentimes not as useful for commercial properties.
- Income Approach — This approach generally works well for apartment buildings, shopping centers and office buildings. The Assessor estimates potential gross income from rentals, and then subtracts an amount for vacancies and operating expenses. The amount of net income is converted to a value for the property, using a process called capitalization to establish what a buyer would pay on the market for the property. Correctly identifying each of the variables makes enormous differences in assessments.
Business Personal Property Tax and Manufacturer's Property Tax:
Assessors use rendition values to determine the fair market value of your business personal property and manufacturing equipment. Businesses submit lists (a rendition) of personal property or equipment with the cost and date of purchase of the items. A depreciation factor is applied to the cost based on the life expectancy of the items and purchase date. This process generates an estimated fair market value at the assessment date — an estimated value that oftentimes severely overstates the true market value.
How Our Firm Can Help
If you feel your company is paying too much in real, personal property or manufacturer's tax, contact us regardless of where you are in the tax cycle. This is true whether you just received your assessment and want to file an appeal, received a bill that seems too high after the assessment appeal cycle has passed, or during review of the tax budget want to consider how taxes can be reduced. Also — If your business is considering buying a company, property or equipment, you should include property tax inquiries as a part of due diligence review. A purchaser may face liability for the tax owed by the seller if not identified before the acquisition — or on the positive side — a purchaser or seller can develop strategic advantages in savings or improved purchase terms.
A comprehensive review will provide a thorough evaluation of all issues impacting a client's property valuation. Our review will position us to approach the Assessor at the proper time. Know that Assessors have greater flexibility to reduce values and assessments on a pre-notice basis than they do on an appeal basis. Assessors are also more likely to make a beneficial change under appeal than when approached for a refund of tax at a date subsequent to the appeal deadline. Sometimes erroneous billings take place and can be corrected outside of the appeal cycle. A proactive approach to property taxes is the best way to reduce your property tax liability.
Our firm's comprehensive review includes:
- Review of real estate/real property assessments; determine if market indicators dictate a property tax appeal.
- Review of personal property or business equipment return/declarations for compliance and over-reporting.
- Review of each item of reported property to determine fair market value.
After review the following steps may be required:
- Further investigation of the case and/or preparation of a certified appraisal.
- Presentation of the case to the Assessor's office for informal review.
- Representation at the local Board of Equalization - and to higher tax appeal venues such as the State Tax Commission or even the Supreme Court if necessary. In Missouri, cases presented in the latter venues require representation by a lawyer. UGBB clients enjoy an advantage because we can handle cases from beginning to end unlike tax consulting enterprises which operate without attorneys on staff.
Much of the value we bring to the table comes from building your appeal case simultaneously with our review. In addition to considering applicable law, facts particular to your property related to age, use, economic conditions, neighboring properties, and various industry factors are a few that are accumulated and considered. Then the approach used by the Assessor is deliberated. At times the Assessor is brought into the matter early to save time and cost. It may be that a different approach is more appropriate than that utilized by the Assessor, or perhaps the method used by the Assessor is appropriate, but the data used needs to be corrected. The cost-benefit analysis of an appeal project is better deliberated — and sooner than later — under our approach.
Contact UGBB
Our lead tax practice attorney, David K. Adam, has an accounting background to supplement his law license, and served as a CFO, business developer and tax consultant for over twenty-five years. He has worked with companies ranging in size from small firms to multi-nationals. He cooperates with the UGBB team to provide services ranging from investigations, to interpretation of tax codes, to aggressive advocacy and representation at hearings. UGBB can be retained on an hourly or contingency basis. Contact David K. Adam to schedule a Tax Appeal or SALT consultation.
