"Penalties for failure to file a personal property return on time can range from 5 percent to 50 percent of the taxes attributable to the personal property. This penalty can be waived only upon a proper showing of good and sufficient cause - which does not include inadvertence, mistake, reliance upon advice from a tax professional or lack of knowledge of the filing requirement - or if the year for which the return was filed was both the first year that a return was required to be filed and the first year for which the taxpayer filed a return."

By David Canary, Esq., as published by The Daily Journal of Commerce, January 9th, 2007

Jan. 2 is the date when all property subject to taxation is identified and required to be listed in real and personal property tax returns. All taxable real and personal property is valued for assessment purposes as of Jan. 1. And ownership and responsibility for payment of taxes are determined as of Jan. 1.

Now that the bowl games are over and the Christmas lights have been taken down, property owners are well advised to take stock of the status and use of their real and personal property as of Jan. 1 in preparation for filing their real and personal property tax returns by the March 1 deadline.

Non-exempt personal property subject to assessment, taxation

Every year, the Oregon Tax Court hands down numerous opinions enforcing penalties on up to 50 percent of the taxes upon businesses and individuals that failed to file personal property tax returns. In some cases, the taxes and penalties assessed go back five years, and the tax court has no jurisdiction to waive penalties because of a taxpayer's lack of knowledge of the filing requirement.

So let's be clear. All personal property not exempt from property taxation shall be valued and assessed at its real market value as of jan. 1. Personal property held for personal use is exempt. Licensed motor vehicles are exempt. Inventory held for sale in the ordinary course of business is exempt. And certain farm machinery and equipment is exempt. Assessment of personal property worth less than $12,500 may be canceled upon filing a verified statement with the county assessor.

Every person and every managing agent or officer of any firm, corporation or association owning, or having in its possession, non-exempt personal property on Jan. 1 must file a personal property tax return with the county assessor by March 1 of each year, but the assessor, upon written request filed before the deadline, shall allow an extension to April 15.

As between a mortgagor and mortgagee, or a lessor and lessee, the actual owner and the person in possession may agree between themselves as to who files the return and pays the tax. However, both parties will be jointly and severally liable for the failure of either party to timely file a personal property return, including penalties.

The personal property return is required to contain: a full listing of the personal property owned or in the taxpayer's possession as of Jan. 1; a statement of its real market value; a separate listing of those items claimed to be exempt as imports or exports; a listing of the additions and retirements made since the prior Jan. 1, indicating the book cost and the date of acquisition or retirement; and the name, assumed business name and address of each general partner (or, if it is a corporation, the name and address of the registered agent). The return shall be annexed an affidavit or affirmation of the person making the return that the statements contained in the return are true. Return forms may be obtained from the office of the county assessor.

Penalties for failure to file a personal property return on time can range from 5 percent to 50 percent of the taxes attributable to the personal property. This penalty can be waived only upon a proper showing of good and sufficient cause - which does not include inadvertence, mistake, reliance upon advice from a tax professional or lack of knowledge of the filing requirement - or if the year for which the return was filed was both the first year that a return was required to be filed and the first year for which the taxpayer filed a return. The imposition of the penalty for late or non-filing of a personal property tax return may be appealed to the county board of property tax appeals.

IPR presents tricky problems

Owners of principal and secondary industrial property must file an industrial property return (IPR). An IPR is a combined return of both real and personal property. The IPR and instructions specifying the information to be included in the return are available on the Oregon Department of Revenue's Web site (search for "industrial property return form").

Essentially, the IPR requires the same sort of information as the personal property return: listing of assets, statement of value, book cost and date of acquisition or retirements. However, unlike a personal property return, an IPR requires a great deal more detail. For example, in addition to reporting the cost of acquiring a piece of machinery, the industrial taxpayer must report the cost of transportation, engineering, installation and special foundation, piping and wiring. Then there is the tricky problem of correctly reporting the cost and value of rebuilds, remodels, upgrades and capital maintenance to industrial plants. And, of course, as with personal property, failure to file the IPR by the March 1 deadline subjects an industrial taxpayer to late a filing fee and penalty.

Owners, lessors and lessees of personal or industrial property are well advised to begin preparing now for the march 1 filing deadline that is fast approaching.

David Canary has specialized in state and local tax litigation for the past 18 years. He has worked for the past 13 years as an owner in the Portland office of Garvey Schubert Barer and prior to that was an assistant attorney general representing the Oregon Department of Revenue. He has the distinction of trying several of the largest tax cases in Oregon's history. He is the Oregon member of American Property Tax Counsel and an active member of the Association of Oregon Industries' Fiscal Policy Council. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

"The decrease in a business' property taxes can be substantial. For example, the property taxes saved or paid in each of the above three examples easily exceed several million dollars. Do I have your interest now?"

By David Canary, Esq., as published by The Daily Journal of Commerce, December 12, 2006

A host of property-tax issues impacted the Oregon business community last year, and more issues will soon arise

For those of you who have faithfully followed this column, you know I have devoted it primarily to property tax issues. How relevant are those issues to the business community? How relevant are property taxes to the decisions that companies make on a day-in, day-out basis?

Because this is the time of year for retrospection, let's get some answers by looking back on some of the issues discussed in this column and compare them to what happened in our business community in 2006.

The unintended consequences of using Measure 37

In a March column, I discussed the potential unintended consequences of filing a Measure 37 claim. For properties that receive special assessments, such as farm- or forestlands, county assessors keep track of the amount of property taxes that are deferred for the years that those properties are assessed at below-market values. When such a land is taken out of special assessment and used for a higher and better use - say, a residential subdivision - those deferred taxes become due.

Last month, the Seattle-based Plum Creek Timber Co. filed the largest Measure 37 claims on record. The company filed Measure 37 claims seeking permission to develop 32,000 acres of forestland in two coastal Oregon counties into home sites - or to be paid for the difference in value of the land as forestland. Let's hope the company took into account the hundreds of thousands of dollars in deferred property taxes it may be subject to as a result of filing its Measure 37 claims.

Contamination adversely affects values

In an April column, I discussed the fact that, under Oregon's system of assessment at the lower of a property's real-market or maximum-assessed value, environmentally contaminated property is assessed at its market value less the present value of the future cost to cure, or clean up, the contamination. Those costs can be substantial.

Late in November a substantial decrease in property taxes on land located along Portland's South Waterfront was questioned. Upon investigation, the decrease was found to be justified because it took into account the substantial costs to clean up the contamination on the site.

Two-Year Exemption for Construction of Commercial Property

In my June column, I discussed a ruling in which the Oregon Tax Court held that a property-tax exemption for commercial facilities under construction applied to condominiums that were built for resale.

This fall, in a controversial - yet correct - decision, Multnomah County exempted from assessment some South Waterfront a Pearl District residential condominiums that were under construction as of January 1 of the assessment year but were to be sold later that year. At the same time, other homeowners paid the full amount of their taxes.

Should you care about property taxes? For a company that has made substantial investments in plant, property and equipment over the years, property taxes can be a substantial expense of doing business.

Our Legislature has provided for a number of exemptions and special assessments to either encourage development and capital investment or to preserve certain types of property. Over-valuation of property by the assessor can occur for a myriad number of reasons. the savvy property owner not only knows and takes advantage of the allowable exemptions but is ever vigilant about overassessment.

The decrease in a business' property taxes can be substantial. For example, the property taxes saved or paid in each of the above three examples easily exceed several million dollars. Do I have your interest now?

Looking ahead to 2007

First, please note that to pursue an appeal in 2007 you must file an appeal of your 2006 taxes with your county's board of property tax appeals by Jan. 2, 2007. Otherwise, you will have to wait another year to contest your assessment.

Second, in 2007 you can expect the Legislature to consider proposals to completely overhaul Oregon's public finance system. Proposals will range from reductions to the capital gains, estate and property taxes to the creation of a substantial rainy-day fund and a restructuring and reduction of state income taxes. These measures will precede a proposal to embed a sales tax into Oregon's constitution that cannot be increased except by a vote of Oregon citizens. Of course, because of Oregon's initiative process, you can expect any new taxes the Legislature proposes to be challenged. 2007 will be interesting.

Consequently, this column next year will discuss not only relevant property-tax issues that affect a company's bottom line but also changes proposed to Oregon's state and local tax systems. Until then, have a great holiday season.

David Canary has specialized in state and local tax litigation for the past 18 years. He has worked for the past 13 years as an owner in the Portland office of Garvey Schubert Barer and prior to that was an assistant attorney general representing the Oregon Department of Revenue. He has the distinction of trying several of the largest tax cases in Oregon's history. He is the Oregon member of American Property Tax Counsel and an active member of the Association of Oregon Industries' Fiscal Policy Council. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

"Managed properly, property taxes are an area where owners produce significant savings without significant expense."

John E. Garippa, Esq., as published by Real Estate New Jersey, February 2006

As we begin 2006, it's appropriate to think about planning for the coming year relating to property taxes. Too often, planning in this area resembles a fire drill, performed at the very last minute. Many times, property owners assume that property taxes are a fixed expense not requiring annual management. However, if managed properly, property taxes can be an area where owners produce significant savings every year without a significant outlay of expense.

Every commercial property owner needs to put tools in place that will allow annual examination of their property's income and expense. On January 1st of each year, enter on an Excel spreadsheet all income and expense information for each property owned last year and in previous years. This enables owners to easily compare this year's income and expenses against those of prior years.

Also, market cap rates and vacancy rates should be utilized to see what changes have taken place in the valuation of a property. For example, if studies indicate greater vacancy rates in the comparable area than in the owner's property, the owner should argue for the utilization of the market vacancy in developing the property's assessment. This, of course, results in a lower property value. On the other hand, if the property demonstrates greater vacancy than the market, this calls for the owner to argue that the property suffers from obsolescence issues.

Retain competent appraisers and consultants to give advice as to what current cap rates and vacancy rates ought to be. At the same time, property owners will want to examine local markets to find comparables indicating what that property would rent for if exposed in the market. This last exercise is critical because taxing authorities base assessments on current market figures, not necessarily the actual income currently derived from a property.

Competently performing the tasks outlined puts property owners in a good position to evaluate property tax assessments aftera ll valuation notices are received on or about February 1 of each New Year. All property owners receive valuation notices reflecting the latest assessment on their properties. What will not be disclosed on the notice is the overall percentage level of assessment in the taxing jurisdiction.

Few taxing authorities assess properties at 100% of present market value except when a municipality-wide revaluation takes place. That means, in all other years, the percentage level of assessment falls below 100% of market value. While actual assessments may not change from year to year, the overall level of assessment within a jurisdiction always does.

Diligent examination of these changes allows the owner to reach accurate conclusions on the merits of a property tax appeal. Any owner can call their local board of taxation or contact the New Jersey Division of Taxation to find out the applicable percentage level of assessment for their property.

New Jersey sets the absolute deadline for filing an appeal as April 1st. Missing this deadline means the owner must await next year's assessment to file an appeal. If owners utilize the tools discussed here, a competent property tax professional will quickly determine if an appeal is appropriate. An ill-advised appeal often results in an increase in assessment if the property is determined to be undervalued. Thus, competency and significant due diligence become critical.

Using the tools describ ed above also allows the property owner to quickly answer Chapter 91 requests filed by the local tax assessor. Under New Jersey law, a tax assessor can annually demand income and expense information for property within their jurisdiction. Failure to respond to these notices within 45 days causes disallowance of any tax appeal for that year. Many legitimate tax appeals are dismissed just for this failure to respond in a timely manner.

These tools also aid in the successful prosecution of an appeal as it goes forward. By demonstrating changes in the property from year to year, legitimate areas of obsolescence and market weakness can be shown to the assessor, producing lower valuations.

Whether an owner has a large, multi-state portfolio or only a single property, employing these tools holds down excessive property taxation. The larger the property portfolio, the greater the opportunity for mismanagement. Ongoing management and record-keeping insures a timely ability to manage property tax expense. The first step is proper planning as the New Year begins.

The views expressed here are those of the author and not of Real Estate Media or its publications.

John E. Garippa is the senior partner in the law firm of Garippa Lotz & Giannuario with offices in Montclair, NJ and Philadelphia, PA, and was also the president of American Property Tax Counsel, the national affiliation of property tax attorneys. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it.