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Property Tax Bills Arrive, as Does the Deadline to Appeal

Frustrated by your assessment? You've got until Dec. 31 to fight it.

"To successfully appeal, you need to prove that the actual price for which you could sell your property, its "real" real Market value, is below the assessed value. How do you determine the real market value?"

By David Canary, Esq., as published by Daily Journal of Commerce, November 14th, 2007

Your property tax bills have arrived in the mail and, understandably, you're upset with the amount you're paying on your real and personal property. But there is some good news: You have a right to appeal.

So, what are you appealing? Unfortunately, not the tax itself. The amount of property tax you pay cannot be the basis for an appeal. A property tax is the product of multiplying two numbers, the tax rate and the assessed value of the property. Measure 5 limits the tax rate to 1.5 percent of real market value plus any local option property tax. Only in very limited circumstances may property owners challenge the rate.

What you are appealing is the property's assessed value. The assessed value is the lower of two figures: the maximum assessed value (MAV) or the real market value (RMV) of the property.

Under 1997's Measure 50, except for six exceptions, assessed value cannot increase more than 3 percent per year — which becomes the property's maximum assessed value. Real market value, on the other hand, is the amount the property would sell for between a willing buyer and a willing seller in the open market in an arm's length transaction.

Both the real market value and the assessed value appear on the property tax bill. Typically, the assessed value will be below real market value, in which case you are being assessed on the property's maximum assessed value.

To successfully appeal, you need to prove that the actual price for which you could sell your property, its "real" real Market value, is below the assessed value. How do you determine the real market value? First, if you recently bought the property for less than the assessed value, the sale price is a good indication. However, don't base your appeal upon the assessed value of other properties. The Oregon Tax Court has ruled that the assessed value of other properties isn't a sufficient legal basis for seeking a property tax reduction.

An examination of the income generated by your income-producing property may give you an indication that the assessed value is too high. Income may be generated by lease or rental rates of commercial real estate or, in the case of owner-occupied industrial property, by the cash flow generated by the operating facility. If the income generated from the property is far below the expected rate of return of the debt and equity capital invested in the property, this may indicate that the property is over-assessed because it suffers from functional or economic obsolescence.

The best evidence of the property's real market value is an appraisal by a qualified expert for property tax purposes. It may be that your property has been appraised already for other purposes — insurance, partnership buyout, or estate planning purposes. These appraisals may give you an indication whether the assessment of your property is inappropriately high. But appraisals for property tax purposes require that the appraiser render an opinion of the real market value of the fee simple interest of the property as of January 1 st of the tax year. An insurance appraisal that estimates insurable or replacement value is not sufficient. Likewise, an appraisal for estate planning or investment purposes may not fit the requirements necessary for an appeal.

A competent appraiser will determine the real market value of the property by use of one or more of the three approaches to value: the cost approach, the sales comparison approach, and the income approach. The cost approach adds the land value to the depreciated cost of the property's improvements. The sales comparison approach compares the sale price of comparable properties with the property being appraised and makes adjustments for any differences between the two. Finally, the income approach capitalizes either the market rental rate or the cash flow of the property by an appropriate rate of return that reflects the return on, and return of, the investment.

Taxpayers who own residential or commercial properties must first appeal their assessments to the County Board of Property Tax Appeals. Owners of the industrial property can either appeal to county bard, or appeal directly to the Magistrate Division of the Oregon Tax Court. However you chose to proceed, please remember that your appeal must be filed no later than December 31, 2007.

Canary90David 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. or 503-228-3939.

New Opportunity for Hotel Property Tax Reductions
Cha-Ching

American Property Tax Counsel

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