Updated december 2020

The coronavirus epidemic and its impact on the valuation of property

The epidemic and resulting closure of businesses has had an enormous effect on the economy.  But, one aspect which is often overlooked is the effect it has had on the value of operating businesses.  We believe it has created an opportunity for many property owners in Nevada to seek a reduction in the taxable value of their property, which in turn, may reduce the tax assessment.

Generally, the taxable value of property is determined using a modified replacement cost approach.  But, the assessor has to reduce that value if it exceeds full cash value, which is usually calculated using an income capitalization approach.  For operating businesses, the assessors usually rely on the revenue and expenses for the preceding calendar year, which this year will reflect the impact of the epidemic and Governor Sisolak’s order closing businesses.  It is, therefore, important to evaluate whether a projected value based on an income approach is likely to warrant an adjustment to the taxable value of your property.

It’s also necessary to evaluate how Nevada’s statutory tax cap is affecting the taxes actually assessed on your property.  The tax cap limits the amount property taxes can increase from year to year and it may already be reducing the taxes assessed on your property.  Consequently, it’s necessary to determine whether the likely taxes to be assessed on a taxable value adjusted for the effects of the coronavirus will result in tax savings in excess of the savings already realized as a result of the tax cap.  If it will, being proactive in addressing your property tax situation can result in meaningful tax savings.

The deadline for filing an administrative appeal to the county boards of equalization is January 15, 2021.  Our property tax attorneys know the critical legal issues and valuation factors that affect the tax treatment of property and are prepared to assist you in evaluating and, if appropriate pursing, a reduction in your property tax assessment.

Paul D. Bancroft
McDonald Carano
American Property Tax Counsel (APTC)

Nevada Property Tax Update Archive

Updated june 2020

Nevada property tax bills and the effect of the coronavirus

Tax bills for fiscal year 2020-21 will be issued in July of 2020.  The values on which those bills are based were issued by the assessors in December of 2019 and the time to appeal those values ran in January of 2020 – before the impact of the coronavirus epidemic was evident.  There is no provision that allows property owners to now challenge the taxable values for tax year 2020-21 based on the intervening impact of the coronavirus epidemic. 

The taxable values for tax year 2021-22 will be issued by the assessors in early December of 2020.  Those values will need to be critically reviewed to ensure they reflect the loss of value resulting from changed market conditions caused by the coronavirus epidemic and the resulting closure of businesses.  If those values do not adequately account for the affect the epidemic has had on market value, the values can be challenged by appealing to the county board of equalization.  The deadline for filing an appeal is January 15, 2021.

Our property tax attorneys know the critical legal and valuation factors that affect the tax treatment of property in Nevada and are prepared to assist property tax owners in evaluating and , when appropriate, challenging that tax treatment.

Paul D. Bancroft
McDonald Carano
American Property Tax Counsel (APTC)

Updated march 2020

Coronavirus has closed Las Vegas; will it affect the taxable value of real estate?

Last month, Nevada experienced a dramatic change in the market conditions which affect the value of real property.  At the beginning of March, unemployment in Las Vegas was at 3.9% and housing sales were strong.  In the previous month the median sales price of existing single family homes had hit a record high, finally eclipsing the previous high set in June, 2006.  However, on March 18, in response to the coronavirus epidemic, Governor Sisolak issued an order closing all non-essential businesses.  For the first time in nearly six decades the casinos in Las Vegas went dark and their employees were sent home.  Nevada is seeing record numbers of unemployment insurance claims and the Economics Policy Institute predicts that the unemployment rate in Las Vegas will be 19.7% in Las Vegas by July 2020.  This dramatic shift in market conditions will affect the market value of real property; but the question on the minds of most property owners is whether it will affect the taxable value of their property?

The short answer is “yes” - the change in market conditions caused by the coronavirus will affect the determination of taxable value.  Assessors in Nevada are required to calculate the initial taxable value of property using a modified replacement cost approach and the land value included in this approach should be derived from market transactions negotiated after the Governor’s edict.  More importantly, the initial taxable value calculated using the modified replacement cost approach must be reduced if it exceeds full cash value.  Full cash value is market value.  For commercial properties, full cash value is usually determined using an income approach to value.  In applying this income approach the assessors and boards of equalization typically review the revenue and expenses for the trailing 12-month period, which for many businesses will reflect lost income due to the coronavirus epidemic.  Usually, less income correlates to a lower taxable value.

However, relief in the form of a reduced taxable value and the corresponding reduction in tax, won’t be available until tax year 2021-22, which commences on July 1, 2021.  The taxable values for the tax year which will commence on July 1, 2020 (tax year 2020-21), were issued by the assessors in December of 2019 and the time to appeal those values ran in January of 2020 – before the impact of the coronavirus epidemic was evident.  There is no provision that allows property owners to now challenge the taxable values for tax year 2020-21 based on the intervening impact of the coronavirus epidemic. 

The taxable values for tax year 2021-22 will be issued by the assessors in early December of 2020.  Those values will need to be critically reviewed to ensure they reflect the loss of value resulting from the changed market conditions.  If those values do not adequately account for the affect the coronavirus has had on market value, the values can be challenged by appealing to the county board of equalization.  The deadline for filing an appeal is January 15, 2021.

Paul D. Bancroft
McDonald Carano
American Property Tax Counsel (APTC)

Updated december 2019

Challenging a property’s valuation is an increasingly complicated decision

County assessors in Nevada mailed their tax year 2020-21 notices of value in early December of 2019. Many of these notices reflect double digit increases in valuation. These values can be challenged by filing an appeal to the county board of equalization. The deadline for doing so is January 15, 2020. However, an appeal is only worthwhile if it results in tax savings and the determination of whether a reduction in a property’s valuation will result in tax savings has become more complicated by the tax cap.

Despite an increase in a property’s valuation, the amount taxes can increase from year to year is limited by a tax cap that applies to the tax liability, not the taxable value. The tax cap is calculated by (a) increasing the taxes paid in the preceding tax year by an applicable tax cap factor and (b) adding the tax attributable to “any improvement to or change in the actual or authorized use of the property” that was not included in the assessment for the prior year. The portion of the tax which would have been assessed in the absence of the tax cap is treated as an abatement from tax.

For example, last year we handled a hotel property in Clark County which was assigned a taxable value of $22,769,877. Before determining if a valuation appeal was warranted we evaluated the effect of the tax cap. Tax in the amount of $221,048.83 would be assessed on a taxable value of $22,769,877, but in this instance the tax cap would limit the tax actually assessed to $128,659.75. The difference, an amount of $92,389.07, would be abated by the application of the tax cap.

For a valuation appeal to result in tax savings, the value of the hotel property would need to be reduced below the value which would result in a tax of $128,659.75. Here, a taxable value of $13,253,030 would result in a tax of $128,659.75. This is often referred to as the “tax cap value.” For the hotel property, we would need to reduce the taxable value below the tax cap value of $13.2 million in order to generate tax savings in excess of the savings resulting from the tax cap abatement.

For many properties a low tax cap value obviates the need for a valuation appeal, but in this instance we believed the facts would support a market value for the hotel property which would be significantly lower than the tax cap value. After a contested hearing, the county board of equalization agreed; it reduced the taxable value of the property to $8 million for tax year 2019-20.

Tax in the amount of $70,605.50 was ultimately assessed on the reduced taxable value. As a result of our appeal the property owner realized a tax savings of $58,054.25. In addition, the tax assessed on this reduced valuation will become the tax base for applying the tax cap in subsequent tax years. Consequently, even if the assessor’s office increases the taxable value of the property in the following tax year, any increase in the tax actually assessed will be limited by the tax cap.

The advent of the tax cap in Nevada has complicated the question of whether or not a valuation appeal is warranted. While the tax cap often obviates the need for an appeal, it is important to critically examine the tax treatment of property annually to ensure the property owner is paying no more than their fair share of taxes. Our property tax attorneys know the critical legal and valuation factors that affect the tax treatment of property in Nevada and are prepared to assist property owners in evaluating and, when appropriate, challenging that tax treatment.

Paul D. Bancroft
McDonald Carano, LP
American Property Tax Counsel (APTC)

Updated september 2019

Tax bills have been issued, but it’s not too late to challenge the assessment.

In Nevada, the annual property tax bills were mailed in July. Since then I’ve received calls from anxious property owners saying “this isn’t what I expected; is there anything I can do about it?” At this point some remedies are no longer available, but it is worthwhile to critically review the assessment because there are still some avenues for relief that can be pursued.

In reviewing an assessment it is important to understand that the actual tax assessed on a parcel is the result of two separate calculations. First, a gross property tax is calculated by multiplying the taxable value of a parcel by the assessment rate (35%), which is set by statute, and the tax rate for the district in which the parcel is located.

Of the three components used to calculate the gross property tax, only the taxable value can be challenged by a property owner appeal. However, for most parcels, the time to appeal the taxable value has expired. The only exceptions are situations where the secured roll published by the assessor in December of 2018 did not include the parcel at issue or the particular value that the assessment is based on. This usually occurs where a parcel has been divided to create new parcels or where there has been new construction. The taxable value of parcels that fit these exceptions can still be challenged. The petition can be filed with the county board of equalization until January 15, 2020.

Second, the gross property tax can potentially be limited by the tax cap. In Nevada, the amount taxes can increase from year to year is limited by a tax cap that applies to the tax liability, not the taxable value. The tax cap is calculated by (a) increasing the taxes paid in the preceding tax year by an applicable tax cap factor (in Clark County, the tax cap factor for the current tax year is 3% for owner occupied residential property and certain low income residential rental properties and 4.8% for all other property) and (b) adding the tax attributable to “any improvement to or change in the actual or authorized use of the property” that was not included in the assessment for the prior year. Most properties have not experienced an improvement to or change in use, so a property owner can simply compare the current year assessment to the assessment made in the preceding tax year; if the taxes have increased by more than the applicable percentage an appeal should be considered.

The tax cap also limits the taxes assessed on some new parcels; parcels that did not exist in the preceding tax year. These new parcels are identified as either new parcels for development, which do not receive any benefit from the tax cap, or remainder parcels, which do benefit from the tax cap. New parcels for development are either (a) vacant parcels which were created by a subdivision map creating individual lots for residential, commercial or industrial development or on which there has been new construction sufficient to identify the use of the property or (b) improved parcels whose primary use has changed. If neither of these conditions apply, the new parcel should be treated as a remainder parcel and, as such, it might be entitled to a tax cap abatement.

If the assessment of a parcel does not reduce the gross property tax by a tax cap abatement and the property owner believes it should, a petition can be filed with the county assessor on or before June 30, 2020.

In summary, property tax bills should be critically reviewed because some avenues for relief are still available. Reductions in the taxes assessed can be achieved by challenging the valuation of new parcels and new construction or by questioning the manner in which the tax cap abatement has been applied.  

 
Paul D. Bancroft
McDonald Carano
American Property Tax Counsel (APTC)

Updated MARCH 2019

Valuation Testimony before the Boards of Equalization

Property tax is based on the principle that equality is achieved by applying a uniform tax rate to the taxable value of each parcel. As a result, the higher the taxable value the greater the tax. Consequently, in most appeals to the boards of equalization the dispute is over the value of the property. The testimony regarding value is critical and, in preparing for the appeal, thought must be given to who will provide that testimony.

In Nevada the appraisal of real property is regulated by the Division of Real Estate pursuant to NRS Chapter 645C. Pursuant to this chapter an “analysis, opinion or conclusion… relating to the nature, quality, value or use of… real estate for or with the expectation of receiving compensation” constitutes an appraisal. NRS 645C.260. And, only appraisers who hold the appropriate certificate, license or permit issued by the Division may testify regarding an appraisal. Id. One who testifies without the appropriate authorization from the Division is potentially guilty of a misdemeanor (NRS 645C.260) and subject to a fine of not less than $5,000 (NRS 645C.215).

In addition to appraisers, property owners have traditionally been allowed to testify about the value of their own property. Nevada follows the general rule that the owner of a property is presumed to have special knowledge of the property and, therefore, may testify to its value without qualifying as an expert witness.  City of Elko v. Zillich, 683 P.2d 5, 8 (Nev. 1984). This principle also allows officers of corporate entities to testify regarding the value of property held by the corporate entity. Dep’t of Highways v. Wells Cargo, Inc., 82 Nev. 82, 411 P.2d 120 (1966). In either instance the limitations of NRS Chapter 645C should not apply because the property owner is not offering the valuation analysis “for or with the expectation of receiving compensation.”

An appraiser and the owner of the property can testify before the boards of equalization regarding value, but it is also important to understand who cannot testify regarding value. An appeal to a county board can be filed by an authorized representative of the property owner (NRS 361.362), but that representative or agent cannot testify regarding the value of the property. There is no exception to Chapter 645C for an agent or representative of the property owner. The boards of equalization admonish agents who start to testify regarding value and regularly notify the Division of Real Estate regarding conduct they perceive as appraising property without the appropriate authorization. See NAC 361.729.

In short, the best practice is to retain a qualified appraiser. However, retaining an appraiser is not always cost effective or practical due to the short time frame allowed for administrative appeals. In these instances the owner of the property should be prepared to testify.   And, since a corporation can only speak through its employees and officers, the appropriate corporate representative, one with actual personal knowledge about the property, should be prepared to testify.

Paul D. Bancroft
McDonald Carano
American Property Tax Counsel (APTC)

Updated December 2017

Whether to challenge a valuation is an increasingly complicated decision.

County assessors in Nevada mailed their tax year 2018-19 notices of value in early December 2017. Many of these notices reflect double digit increases in valuation. These values can be challenged by filing an appeal to the county board of equalization. The deadline for doing so is January 15, 2018. However, the partial abatement from property tax, which is commonly referred to as the tax cap, has made the decision of whether to challenge a property’s valuation more complicated.

Despite an increase in a property’s valuation, the amount taxes can increase from year to year is limited by a tax cap that applies to the tax liability, not the taxable value. The tax cap is calculated by (a) increasing the taxes paid in the preceding tax year by an applicable tax cap factor and (b) adding the tax attributable to “any improvement to or change in the actual or authorized use of the property” that was not included in the assessment for the prior year.

The applicable tax cap factor is determined annually for each county. It is the greater of the following two criteria:  (a) the average percentage change in the assessed value of all taxable property in the county over the preceding 9 years, or (b) twice the percentage increase in the CPI for the immediately preceding calendar year.  But, in no event can the applicable percentage be less than zero or more than 8%. The official percentage will not be announced until later this spring, but for Clark County the tax cap factor for tax year 2018-19 should be 4%.

In a rising market, the cumulative effect of calculating the tax based on the tax cap, instead of a property’s valuation, can be dramatic. For example, we successfully reduced the taxable value of an industrial property to $11,500,789 for tax year 2013-14. Now, five years later, the valuation of the property has increased by over 51%, but the net tax has only increased by 10% - an average annual increase of approximately 2%.

The advent of the tax cap in Nevada has complicated the question of whether or not a valuation appeal is warranted. Despite an increase in a property’s value, the tax cap often obviates the need for an appeal. But, when an appeal is warranted the tax cap will often extend the benefit of the reduction to future tax years. Our property tax attorneys know the critical legal and valuation factors that affect the tax treatment of property in Nevada and are prepared to assist property owners in evaluating and, when appropriate, challenging that tax treatment.
 
Paul D. Bancroft
McDonald Carano
American Property Tax Counsel (APTC)

UPDATED SEPTEMBER 2017

Common Area Amenities: The Sun City cases lay the foundation for successful appeals.

Homeowners associations often hold and manage common area amenities for the benefit of the residents of their respective communities. Those amenities range from parks and pathways, to swimming pools, recreation centers and golf courses.   The land and improvements that comprise the amenities are typically subject to restrictions on use and alienability that ensure the amenities will be maintained for the benefit of the residents in perpetuity.

In Nevada, county assessors value common area amenities using a replacement cost approach, which is reduced by statutory depreciation. The county assessors do not typically reduce the replacement cost value by additional obsolescence attributable to restrictions on the use and alienability of the property. However, the property owner is entitled to have the value reduced if it exceeds full cash value, which theoretically is a value which would consider the impact of restrictions on use and alienability.

In 1997, the Nevada Supreme Court addressed the tax treatment of common area amenities in the Sun City Summerlin Cmty. Ass’n v. State ex rel. Dep’t. of Taxation, 113 Nev. 835, 944 P.2d 234 (1997). The court held that “[a]lthough the restrictions imposed on the properties do not render them valueless, the restrictions are relevant to valuation of the properties.” In other words, the presence of restrictions on use and alienability do not mandate a particular result (i.e., the property is valueless), but the restrictions must be considered. It converts the legal argument over whether the restrictions must be considered into a valuation issue; do the restrictions make the property less valuable?

Now, 20 years later, the Supreme Court has resolved a second case regarding the common area amenities in Sun City Summerlin. Sun City Cmty. Ass’n, Inc. v. Clark County (Sup. Ct. Case 69411). In this sequel, the Supreme Court reaffirmed that the mere presence of restrictions on use and alienability do not warrant assignment of a “flat, arbitrary value to improvements,” which in this case was $10,000 per parcel. Instead, the determination of value must be based on “the statutory and regulatory methods of finding taxable value.”

Although the community association walked away from both these cases with no reduction in taxable value, the cases point the way for future challenges. They support the proposition that restrictions on use and alienability must be considered in determining value. But, to succeed, the impact these restrictions have on value must be quantified through standard approaches to valuation. With the benefit of these cases and a well-crafted appraisal, successful appeals challenging the valuation of common area amenities can be achieved.
 
Paul D. Bancroft
McDonald Carano
American Property Tax Counsel (APTC)

 

UPDATED SEPTEMBER 2016

Nevada Apportions Value of Buildings Leased to the Federal Government

In Nevada, property owned by the federal government is exempt from property tax, while property leased to the federal government is not.  However, many properties leased to the federal government are built to specifications required by the government and upon completion are leased to the government for long terms.  Under the construction contracts for these buildings it is common for the federal government to own a portion of the finished improvement.  This split ownership affords the property owner a basis for reducing the property tax value of the improvement.

In Nevada, improvements to real property are valued at replacement cost, less depreciation.  The determination of replacement cost is made using the cost manuals published by Marshall & Swift.  And, instead of a market derived depreciation, the legislation requires that improvements be depreciated at the rate of 1.5% per year for fifty years.  The determination of replacement cost, less depreciation, determined in this manner typically includes the value of the entire improvement.  However, if the terms of the construction contract are brought to the attention of the assessor, the value of the government-owned improvements can be treated as exempt from property tax; thereby reducing the value assessed to the property owner.

Paul D. Bancroft
Fennemore Craig P.C.
American Property Tax Counsel (APTC)

 

UPDATED March 2016

Nevada’s Partial Abatement from Property Tax: When is the benefit of an abatement too good?

In Nevada the tax cap limits the amount by which property taxes assessed against a parcel can increase from one year to the next. In enacting this protection for property owners the Legislature established two separate tax caps. There is a fixed tax cap percentage of 3% which applies to owner occupied residential property and some low-income residential rental properties. And, there is a general tax cap percentage (that fluctuates between zero and 8%) which applies to all other properties. The balance struck by the Legislature between property owners desire for a predictable, modest growth in taxes and the need of taxing entities for increased revenue has proved stable, in part, because the general tax cap has always been higher than the residential tax cap. Thereby ensuring some growth in revenue for taxing entities. However, now, for the first time, we will see the general tax cap percentage in Las Vegas fall below the fixed percentage applied to residential properties – causing both tax caps to fall.

The general tax cap percentage is the greater of (a) the average percentage change in the assessed value within a county over the preceding ten years, or (b) twice the Consumer Price Index for All Urban Consumers, US City Average (all items); but in no event can the applicable percentage be greater than 8%. Prior to the recession the applicable percentage was 8%, because the percentage change in assessed value consistently resulted in a ten year average growth rate in excess of 8%. However, since the recession the 10 year average growth rate has dropped below zero and the tax cap has been set based on the CPI. There was a negligible increase in the CPI in 2015, consequently, the applicable tax cap percentage in Las Vegas is likely to be two-tenths of one percent for tax year 2016-17.

The fixed tax cap for owner occupied residential property (and certain low income residential rental property) only applies if the general tax cap is 3% or higher. If the general tax cap percentage drops below 3%, the lower, general tax cap applies to owner occupied residential property. Consequently, taxes on all property in Clark County which is subject to the tax cap will be limited to an increase of no more than 0.2% from the tax paid in the prior tax year.

Property owners cannot complain; the tax cap provides a level of predictability and a general tax cap of 0.2% ensures the increase in taxes will be nominal. However, it also limits revenue growth for governmental entities that rely on property taxes and a tax cap that limits growth of revenue to a nominal amount challenges the balance struck by the Legislature. Consequently, even though the Legislature will not convene until 2017, there is already talk of the need to modify the tax cap. So, while property owners can benefit from the current low tax cap rate that benefit may not last. 

Paul D. Bancroft
William McKean
Fennemore Craig P.C.
American Property Tax Counsel (APTC)

 

UPDATED MARCH 2015

"Prop 13" Style Referendums in Nevada

The Nevada 2015 legislative session commenced on February 2, 2015, for a 120-day session set to conclude on June 1, 2015. The Nevada Legislature only meets every other year (as one of the only six states with biennial sessions), and its sessions are limited to 120 days. Included on the agenda are two California style “Prop 13” initiatives that should be of interest to property tax practitioners in Nevada.

Both initiatives are aimed at replacing Nevada’s existing statutory cap on property tax increases. This current tax cap (or partial abatement) was enacted by the Nevada legislature in 2003, and now codified at NRS 361.471 to 361.4735. In the case of a principal residence, the statute abates property taxes that exceed a maximum cap of 3% from the preceding year. NRS 361.4723. In the case of a commercial or rental property, property taxes are abated to the extent they exceed a maximum cap 8% from the preceding year. NRS 362.4722. These statutory caps apply to the taxes only and not to the taxable or assessed values as established by the county assessors.

The first of the two proposed initiatives is Senate Joint Resolution (SJR) 12. This proposal would limit property taxes to 1% of a property’s “base value,” defined as the property’s taxable value as established for the 2013-14 tax year. Any future increase in a property’s taxable value would be limited to the lesser of 2% per year or inflation, with future decreases determined by reference to the consumer price index. A property’s taxable value would be reset to full cash value upon transfer of at least 50% of ownership.

The second of the two is SJR 13, which is similar to its sister proposal in that it would limit cumulative property taxes per year to 1% percent of base value, also defined as taxable value as established for the 2013-14 tax year. Under this proposal, however, values could change by up to 3% per year (except in the case of sale which would reset taxable value to the full cash value).

In order for either initiative to become effective, it must be passed during the current legislative session, again in the 2017 session, and then be approved by voters at the next general election.

Paul Bancroft & Bill McKean
Fennemore Craig, P.C.
American Property Tax Counsel (APTC)

 

UPDATED December 2014

In Nevada The Deck Is Stacked Against Property Owners

The Council on State Taxation (“COST”) recently published The Best and Worst of International Property Tax Administration (September 2014). This article provides a comparative analysis of the fairness of the respective property tax systems in the various states and several foreign countries. It does this by comparing objective factors, such as the time a property owner has to review a valuation before filing an appeal, and assigning each of the factors a letter grade from “A” to a failing “F” grade. In this ranking, Nevada received an overall grade of “D+.”

Nevada’s overall grade was a step up from the “D” that it was assigned for the sub-category of procedural fairness. Procedural fairness requires, among other things, that property owners be afforded “a realistic time to appeal, a reasonable burden of proof, de novo review to an independent arbiter.” Other states joined Nevada at the bottom of the ranking for procedural fairness, but no state in the nation received a lower grade than Nevada for procedural fairness.

The property tax system cannot be changed without legislation, but property owners can protect themselves by being diligent. Most counties in Nevada have mailed their 2015-16 notices of value. A property owner who is dissatisfied with the county assessor’s valuation must file an appeal with the county board of equalization by January 15, 2015. A failure to file a timely appeal bars any further challenge to the valuation. The time for a property owner to review the valuation of their property and file an appeal is short – much shorter than the time frame recommended by COST. Nonetheless, by being diligent one can avoid the consequence.

Paul D. Bancroft, Esq.
Lionel Sawyer & Collins
American Property Tax Counsel (APTC)

 

UPDATED September 2014

Nevada Moves Away From Central Assessment Of Telecommunication Companies

Nevada, like most states, has drawn a distinction between property assessed by local county assessors and property that is centrally assessed at the state level and, historically, companies providing a telephone service were subject to central assessment.  Twenty years ago all companies that provided a telephone service would have been centrally assessed.  However, in the intervening years changes in the law and changes in the telecommunication industry have resulted in the movement of companies and their property from central assessment to local assessment.

The primary legislative change occurred with the passage of S.B. 383 in 1999.  This bill, among other things, added subsection 8 to NRS 361.320.  Subsection 8 excludes certain property from central assessment.  Specifically, the property of companies engaged in providing “commercial mobile radio service, radio or television transmission or cable television or other video services.”

At the same time, companies that at one time only provided telephone services began to provide bundled services; offering telephone, television, and broadband services over the same fiber optic cable.  This convergence of services transforms companies who traditionally provided telephone services into companies that fit into the subsection 8 definition of companies excluded from central assessment.

As a result of this transformation, a number of companies that provide telephone services, as well as other services, have moved from central assessment to local assessment and the local county assessors have been able to address the valuation issues.  Consequently, the remaining question is whether any company providing a telephone service in Nevada should be centrally assessed?

Paul D. Bancroft, Esq.
Lionel Sawyer & Collins
American Property Tax Counsel (APTC)

 

UPDATED June 2014

Nevada Supreme Court takes another look at the valuation of common areas

Real estate developments often include property, such as parks, that are set aside as common areas for use by the homeowners. Typically these parcels are owned by a nonprofit community association and the use and alienability of the parcel restricted by deed. The restriction on use and alienability is relevant to the valuation of a common area parcel and, when the common area does not include improvements, has typically resulted in the assignment of a nominal value. However, when the common area parcel is improved it has been more difficult to recognize the impact the restriction on use and alienability has on the value of the common area.

This issue was recently revisited by the Nevada Supreme Court in County of Clark v. Sun City Summerlin Community Association, Case 60776 (March 25, 2014). In that case, the common areas in Sun City Summerlin included a golf course, clubhouses, recreational centers, parking lots, and a maintenance facility. The land area of these common area parcels was $0; the parties recognized the restriction on use and alienability rendered the land valueless. However, the improvements were assigned a value of $19.5 million. This was based on the replacement cost of the improvements, less statutory depreciation at 1.5% per year. The State Board of Equalization recognized the market value of the improvements, like the value of the land, was limited by the restriction on use and alienability and, therefore, reduced the value of the improvements to a nominal value.

On appeal, the decision of the State Board to assign the common area parcels a nominal value was reversed. This decision was warranted because the nominal value the State Board had assigned the common area was not supported by evidence in the record (the property owner had not submitted an appraisal) and the State Board had not explained why the replacement cost approach did not reflect all depreciation and obsolescence. In other words, the presence of restrictions on the use of a parcel does not automatically mean a nominal value is appropriate. Instead, the value of the improvements must be supported using the standard approaches to value, including the cost approach.

Although the attempt to reduce the value of the common area at issue in this case was ultimately unsuccessful, the Supreme Court's decision does not prevent success for other taxpayer's seeking similar relief in the future.

Paul D. Bancroft, Esq.
Lionel Sawyer & Collins
American Property Tax Counsel (APTC)

 

UPDATED MARCH 2014

Nevada State Board Of Equalization Approves “Nights-In-Nights-Out” Method Of Apportioning Aircraft Value

The Nevada State Board of Equalization recently heard several appeals relating to the valuation and assessment of privately-owned aircraft and issued favorable decisions for the taxpayers. The State Board’s decisions simplify and increase the predictability of aircraft valuation to be used in the future.

In these cases, the taxpayers made two arguments. First, the taxpayers argued that aircraft, which travel between multiple states, are susceptible to property tax assessments in multiple jurisdictions and that to avoid the potential of double taxation, and a violation of the United States Constitution, the value of the aircraft needed be apportioned to reflect the amount of time the aircraft is actually used in Nevada. Second, the value of centrally assessed aircraft was already being apportioned and to ensure uniformity under the Nevada Constitution the taxpayers argued that their locally assessed aircraft needed to be apportioned as well. The taxpayers urged the Nevada State Board of Equalization to adopt a “nights-in/nights-out” method of apportioning the value of aircraft to Nevada.

Although many legal arguments were made, the State Board affirmed the need to apportion the value of aircraft used in multiple jurisdictions and adopted the “nights-in/nights-out” methodology for allocating the value of the aircraft. This has created a simple, predictable manner for determining the value of aircraft used in multiple jurisdictions. Simply put, assessors should calculate the taxable value of the aircraft in the same manner as other personal property (using a modified replacement cost approach) and then multiply its depreciated value by a percentage calculated by dividing the number of nights that the aircraft spent in Nevada by the total number nights in the year.

Although the issue of tax apportionment of private aircraft has not been completely settled, Nevada taxpayers who own such property will likely face a simpler and more favorable tax treatment in the future.

Paul Bancroft
Lionel Sawyer & Collins
American Property Tax Counsel (APTC)

 

UPDATED June 2013

Nevada's Partial Abatement Law is Complicated, but it Provides an Opportunity to Leverage the Benefit of a Current Valuation Appeal

There was a time when the taxes assessed on a parcel could be calculated by simply multiplying the taxable value of the property by the assessment rate and the tax rate. What was a relatively straight forward calculation became more complex with the adoption of the partial abatement from tax, or tax cap. The tax cap limits the amount by which property taxes assessed against a parcel can increase to no more than an applicable percentage, but that percentage is separately calculated for each tax year and for each county in Nevada.

The applicable percentage is the greater of (a) the average percentage change in assessed value within the county over the preceding ten years or (b) twice the Consumer Price Index for all Urban Consumers, US City Average (All Items); but in no event can the applicable percentage exceed 8%. Prior to the recession the applicable percentage for property in Las Vegas was 8%, because the percentage change in assessed value consistently resulted in a ten year average growth rate in excess of 8%. However, since the recession the percentage change in the assessed value has been negative, driving the ten year average growth rate to 4.4%. The ten year average growth rate is now less than twice the Consumer Price Index, so the applicable rate for the current tax year in Las Vegas is set at 6.4%; twice the Consumer Price Index.

Nevada's tax cap allows a property owner to leverage the benefit of a current tax appeal. A successful valuation appeal this year will establish a new base. If property values begin to appreciate, the tax cap will limit the annual increase to no more than the applicable percentage.

The Nevada property tax appeal season is highly compressed and taxpayers unaware of the deadlines can easily miss an opportunity to challenge their property's value. The secured roll values for tax year 2013-14 will not be released until early December and a taxpayer dissatisfied with the assessor's valuation must file an appeal by January 2012. Because of this tight timeframe, it is important for taxpayers to be proactive and consult with local counsel before the secured roll is published to identify potential avenues for successfully challenging the valuation.

Paul Bancroft
Lionel Sawyer & Collins
American Property Tax Counsel

 

UPDATED September 2012

Nevada's Partial Abatement Law is Complicated, but it Provides an Opportunity to Leverage the Benefit of a Current Valuation Appeal

There was a time when the taxes assessed on a parcel could be calculated by simply multiplying the taxable value of the property by the assessment rate and the tax rate. What was a relatively straight forward calculation became more complex with the adoption of the partial abatement from tax, or tax cap. The tax cap limits the amount by which property taxes assessed against a parcel can increase to no more than an applicable percentage, but that percentage is separately calculated for each tax year and for each county in Nevada.

The applicable percentage is the greater of (a) the average percentage change in assessed value within the county over the preceding ten years or (b) twice the Consumer Price Index for all Urban Consumers, US City Average (All Items); but in no event can the applicable percentage exceed 8%. Prior to the recession the applicable percentage for property in Las Vegas was 8%, because the percentage change in assessed value consistently resulted in a ten year average growth rate in excess of 8%. However, since the recession the percentage change in the assessed value has been negative, driving the ten year average growth rate to 4.4%. The ten year average growth rate is now less than twice the Consumer Price Index, so the applicable rate for the current tax year in Las Vegas is set at 6.4%; twice the Consumer Price Index.

Nevada's tax cap allows a property owner to leverage the benefit of a current tax appeal. A successful valuation appeal this year will establish a new base. If property values begin to appreciate, the tax cap will limit the annual increase to no more than the applicable percentage.

The Nevada property tax appeal season is highly compressed and taxpayers unaware of the deadlines can easily miss an opportunity to challenge their property's value. The secured roll values for tax year 2013-14 will not be released until early December and a taxpayer dissatisfied with the assessor's valuation must file an appeal by January 2012. Because of this tight timeframe, it is important for taxpayers to be proactive and consult with local counsel before the secured roll is published to identify potential avenues for successfully challenging the valuation.

 

UPDATED December 2011

Upcoming Nevada Property Tax Appeals Season Provides Taxpayers with a Unique Opportunity

Most Nevada counties will mail their 2012-13 property tax notices in early December 2011. In many cases, however, because of the methodology county assessors use to value property, property tax values will not fully reflect the continued decline in market value. For savvy taxpayers, the next few years represent a unique opportunity to reduce their long-term tax liability. Because of Nevada's partial abatement law, or tax cap, a successful appeal this year will yield tax savings now and in the future. When property values begin to appreciate, the tax cap will limit the annual increase in tax liability to no more than 8 percent over the prior year. Thus, it is important for taxpayers to consult with local counsel to identify potential avenues for reducing tax liability.

The Nevada property tax appeal season is highly compressed and taxpayers unaware of the deadlines can easily miss an opportunity to challenge their property's valuation. A taxpayer dissatisfied with the county assessor's notice of valuation must file an appeal with the county board of equalization by January 17, 2012. Failure to file a timely appeal bars any further challenge to the property's valuation.

 

UPDATED September 2011

Nevada Attempts to Eliminate the Use of Distressed Sales in Appraisals

In Nevada nearly 70% of existing residential sales and over 33% of commercial sales are distressed sales. For certain commercial property, such as land and office, distressed sales account for a sizeable portion of all sales transactions and, thus, have a significant impact market value.

Legislation was introduced this year in Nevada to prohibit the use of distressed sales not only in residential appraisals, but also in commercial appraisals. This would have required appraisers to categorically dismiss the use of distressed sales as comparable sales. Fortunately for taxpayers, the bill missed a procedural deadline for passage and died in committee. For commercial property owners, the elimination of distressed sale transactions would have a negative impact on the evidence available to challenge property tax assessments.

Nevada was not the only state to consider such legislation. Maryland and Illinois attempted to prohibit the use of such sales in residential appraisals only; Missouri's proposal, like Nevada's, prohibited the use of distressed sales in preparing residential and commercial appraisals. To date, none of these bills have passed.

One of problems with eliminating distressed sales is that it violates USPAP. In response to legislative actions, the Appraisal Institute recently introduced proposed guidelines regarding the use of distressed sales as comparable sales. The guidelines specifically caution against completely dismissing foreclosures and short sales as potential comparable sales. The guidelines have not yet been adopted, but their introduction certainly highlights the complexity of property valuation in today's market.

 

UPDATED MARCH 2011

Exemption Statute for Religious Organizations Applies to Church in the Development Phase

Most states typically require that property either be in “use,” “actual use,” or “actually occupied” by a charitable or educational institution to qualify as being exempt from property tax. For many charitable and religious organizations, current economic conditions have caused significant shortfalls in fundraising projections, which in turn have caused delays in starting or completing building projects. As a result, many of these same organizations, whose property would otherwise be exempt, are left with significant tax liabilities. Before a church or religious organization can claim an exemption under Nevada law, it must satisfy the requirement that the property be “actually occupied.” The Clark County Board of Equalization recently ruled in of favor of a Catholic parish which held regular services at a nearby high school but which had not actually constructed a church building. The County Board found that the church “actually occupied” the land for religious purposes because it had (1) obtained the canonical approval to establish a parish; (2) engaged architects to design the church; (3) rented modular buildings to conduct parish administration and educational classes on the site; and (4) performed Easter observances on the site.

 

UPDATED December 2010

Nevada to Send out Notices of Value for the 2011-12 Tax Year

Property values in Nevada continued to decline in 2010. Most Nevada counties will be mailing out their 2011-12 tax year notices of value in early December 2010. These notices in many cases, however, will not fully reflect the decline in market value due to the methodology used by county assessors to value property. The Nevada property tax appeals season is highly compressed and taxpayers unaware of the deadlines can easily miss an opportunity to challenge their property's valuation. A taxpayer dissatisfied with the county assessor's notice of valuation must file an appeal with the county board of equalization by January 18, 2011. Failure to file a timely appeal bars any further challenge to the property's valuation. State law requires that all county board of equalization hearings be completed by the last day of February. Taxpayers aggrieved by the county board of equalization's decision may file an appeal to the State Board of Equalization no later than March 10, 2011.

 

UPDATED June 2010

Members of the Nevada State Board Equalization Have Absolute Immunity for Performance of Quasi-Judicial Acts

The Nevada Supreme Court recently ruled that the Nevada State Board of Equalization performs a quasi-judicial function when deciding to equalize property valuations and its individual members are afforded absolute immunity from lawsuits based on their performance of this quasi-judicial act. The taxpayers in the case were aggrieved that the State Board refused to equalize their properties. The State Board determined. that because the taxpayers had not followed the administrative procedures for equalization, relief it lacked jurisdiction. Taxpayers filed a lawsuit in state court alleging, inter alia, claims for relief under 42 U.S.C. 1983. The Supreme Court found that the State Board performed similar functions to judges, and that the administrative process was judicial in nature (i.e., procedural safeguards to protect parties in the adjudication, the process is adversarial, etc.). The Court also invoked policy considerations, such as the importance of permitting board members full discretion to decide issues according to their merit, without fear of personal liability. "The prospect of individual State Board members being subjected to litigation from every disgruntled property owner is likely to result in having State Board members who are reluctant or unable to perform their duties and will hinder the state's ability to recruit and retain qualified members." Marvin v. Fitch, 126 Nev. 18, --- P.3d ----, 2010 WL 2145447 (Nev.2010.).

 

UPDATED December 2009

Nevada to Send out Property Tax Bills for the 2010-11 Tax Year

The Nevada property tax appeals season is very compressed. Taxpayers unaware of the deadlines can easily miss an opportunity to challenge their property's valuation. Most Nevada counties will be mailing out their 2010-11 tax year notices of value between the middle and end of December 2009. Nevada law requires that the values be posted prior to January 1, 2010. A taxpayer dissatisfied with the county assessor's valuation may file an appeal with the county board of equalization by January 15, 2010. Failure to file a timely appeal bars any further challenge to valuation of the property. State law requires that all county board of equalization hearings be completed by the last day of February. Taxpayers aggrieved by the county board of equalization's decision may file an appeal to the State Board of Equalization no later than March 10, 2010.

 

UPDATED MARCH 2009

New possessory Interest Tax for Car Rental Facilities in Las Vegas

In recent years several airports, such as in Anchorage, Baltimore-Washington, Kansas City, Fort Lauderdale-Hollywood, Houston, and Phoenix, have constructed consolidated car rental facilities to enhance the ground transportation services available to passengers.

These consolidated car rental facilities have also become a significant source of revenue for local and state governments. The issue before the Nevada State Board of Equalization was whether the leasehold interests of the rental car companies operating at the McCarran Consolidated Car Rental Facility ("Car Rental Facility") in Las Vegas were subject to the possessory interest tax. Nevada law, allows a county assessor to assess a tax on privately held leasehold interest, possessory interest, or beneficial interest of real property owned by federal, state, and local governments. Nevada's possessory interest tax is limited in that it does not apply to: (1) property located upon a public airport; or (2) property owned by a public airport authority that is not located upon a public airport but that is used for the purposes of a public airport.

The Car Rental Facility is located approximately three miles from the main terminal at McCarran International Airport. At the time of the appeal, two years of the assessment were before the State Board. We successfully argued that the Car Rental Facility is operated and managed as an extension of the airport terminal. It handles baggage, check-in, parking, and ground transportation services. Clark County Aviation manages the property as it does concessionaires in the main terminal by imposing McCarran Airport regulations and federal regulations on the car rental companies. In addition, the lease agreement with the Clark County Aviation defined the "Airport" to include the Car Rental Facility. As a result, the Clark County Assessor's Office settled the case just moments before the scheduled hearing by agreeing to refund taxes paid for two years and to discontinue assessing a possessory interest tax on the leasehold interest of the car rental companies.

 

UPDATED June 2008

The value of parcels dedicated for school or park use is $1,000 per acre

It is common in Nevada for developers to provide certain concessions to cities and counties in exchange for governmental approval of property development. The most common concession requires schools and parks to be constructed by the developers and then donated to some governmental entity. Recently the State Board of Equalization addressed the proper full cash value of such dedicated parcels. Due to the legal restrictions on the parcels, the Board concluded that the parcels should be valued at no more than a nominal amount, which the Board determined to be $1,000 per acre. Even though no construction had yet begun on the school or park, the Board determined sufficient legally enforceable restrictions were in place to require such a diminished value.

 

UPDATED December 2007

Nevada to Send out Property Tax Bills for the 2008-09 Tax Year

The Nevada property tax appeals season is very compressed. Taxpayers unaware of the deadlines can easily miss an opportunity to challenge their property's valuation. Most Nevada counties will be mailing out their 2008-09 tax year notices of value between the middle and end of December 2007. Nevada law requires that the values be posted prior to January 1, 2008. A taxpayer dissatisfied with the county assessor's valuation may file an appeal with the county board of equalization by January 15, 2008. Failure to file a timely appeal bars any further challenge to valuation of the property. State law requires that all county board of equalization hearings must be completed by the last day of February. Taxpayers aggrieved by the county board of equalization's decision may file an appeal to the State Board of Equalization no later than March 10, 2008.