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Nov

Does Your Property Tax Assessment Reflect COVID-19's Long-Term Challenges?

Here are a number of approaches to defending against excessive tax assessments.

Countless companies have seen their top and bottom lines decimated by COVID-related shutdowns, travel restrictions and changing consumer preferences since the start of the pandemic. Yet for many taxpayers, property tax values have changed little or even increased.

Many of these taxpayers have been surprised to receive property tax bills that do not reflect the real and lingering economic challenges that the retail, hospitality, office and other industries have, are, and will continue to face. These taxpayers – and even those in industries better suited to weather the storm – should give special attention to ensuring they receive fair and reasonable assessments.

Observe Valuation Dates, Notices and Appeal Deadlines

With a large percentage of employees working remotely, together with an inconsistent postal service, it is more important than ever to have dedicated employees and knowledgeable property tax professionals reviewing property value assessments annually and filing timely protests when warranted. Failure to receive a tax valuation notice rarely excuses a missed protest deadline, so it is vital to know and comply with applicable deadlines.

Many property tax bills issued in 2020 were based on statutory valuation dates that preceded the emergence of COVID-19. For instance, assessors working under a valuation date of Oct. 1, 2019, or January 1, 2020, were quick to tell taxpayers to "wait until next year" before assessments could reflect any impact from COVID-19.

Not surprisingly, some assessors are now arguing that the pandemic was temporary and that its worst effects have passed. In some jurisdictions, assessors simply carried forward the prior year's cost-based value with no adjustments to account for additional depreciation or functional and economic obsolescence. In other cases, assessors have relied on pre-pandemic sales during the relevant tax cycle to justify increases over the preceding tax year.

Many locales had few sales in the early stages of the pandemic, and in these cases, the assessor may downplay or entirely ignore the actual impact of COVID-19 on market values. In contesting assessments in each of these cases, it is helpful to not only demonstrate the immediate difficulties that began in March 2020, but also the pandemic's lingering effects on the taxpayer's current and future operations.

Although the pandemic has affected all industries, certain sectors face unique challenges that will persist well beyond the initial virus surges and vaccine rollouts. These include, but are not limited to, brick and mortar retailers competing with ever-expanding e-commerce, office buildings competing with flexible work options including remote work, and hotels competing for elusive business travel in a cost-cutting environment. Some of these challenges are trends that began long before the pandemic, such as the slow death of enclosed malls as consumers increasingly favor lifestyle centers and online shopping.

COVID-19 Influences by Property Sector

Retail. Since the early 2000's, e-commerce's share of total retail sales has increased each year. The pandemic accelerated that trend, arguably by years, when people who had long resisted shopping online no longer had the same in-store options, and experienced online shoppers became more comfortable buying things like groceries and large-ticket items online.

These evolving shopping habits certainly affect the desirability and value of retail real estate, especially of those buildings constructed before the scope of today's e-commerce world could be contemplated. Landlords must now think outside the box when re-tenanting shopping centers, often filling vacancies with restaurants, service and entertainment concepts. These uses can create parking, zoning and other challenges for centers built for traditional retail.

In the case of big box stores, companies such as Walmart are looking at converting portions of existing stores to warehouse or fulfillment space for e-commerce. All these changes to keep up with the rapidly evolving marketplace shine a light on the functional and economic obsolescence present in many retail properties.

Office. Office landlords are also facing rapid market evolution, including an accelerating trend toward more remote and flexible work options. The pandemic made Zoom meetings ubiquitous and gave employees a taste, and perhaps a future expectation, of more work-from-home opportunities.

In light of the Delta variant's spread, many large companies have delayed their anticipated returns to the office, with Google now postponing its return until at least January 2022. Although some of the pandemic's effects on office occupancy have already occurred, the full impact will continue to play out as leases expire and companies reevaluate the volume and design of office space they require.

Hospitality. The hotel and travel industry suffered some of COVID-19's most immediate and devastating financial casualties. Leisure and business travel ground to a near halt, with hotel stays and flight counts falling to once-unimaginable lows. Corporate travel has yet to make a meaningful recovery and remains at a fraction of pre-pandemic levels. Throughout the country, corporations are cutting back on travel budgets as they weigh its costs and health risks against alternatives such as video conferencing.

Business travel and events are unlikely to return to pre-pandemic levels until 2024, according to a recent American Hotel & Lodging Association survey. Although the leisure travel industry benefitted from pent-up demand during the summer of 2021, the Delta variant has undermined that temporary resurgence. And even with the recent increase in leisure travel, airplane traffic is still well below 2019 levels.

These are just a few of the industries that will continue to see COVID-19 weigh down their businesses and property values. Property and business owners should closely review their property tax values to make sure assessments adequately reflect the specific challenges affecting their properties, to include the pandemic's immediate, ongoing and future financial impact.

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Aaron D. Vansant is a partner in the law firmDonovanFingar LLC, the Alabama member of American Property Tax Counsel, the national affiliation of property tax attorneys.

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Apr

Property Tax Planning Delivers Big Savings

Published Property Tax Articles

Ask the right questions, understand your rights and develop a strategy to avoid costly mistakes.

When it comes to property taxes, what you don't know can hurt you. Whether it is failing to meet a valuation protest deadline, ignorance of available exemptions or perhaps missing an error in the assessment records, an oversight can cost a taxpayer dearly. Understanding common mistakes — and consulting with local property tax professionals — can help owners avoid the pain of unnecessarily high property tax bills.

Think ahead on taxes

Many owners ignore property taxes until a valuation notice or tax bill arrives, but paying attention to tax considerations at other times can greatly benefit a taxpayer. For example, it's good practice to ask the following questions before purchasing real estate, starting a project or receiving a tax bill:

Does the property qualify for exemptions or incentives? Every state offers some form of property tax exemptions to specific taxpayers and property types. Examples include those for residential home-steads, charitable activities by some nonprofits and exemptions for pollution control equipment. Similarly, governments use partial or full property tax abatements in their incentive programs for enticing businesses to expand or relocate to their communities. While many of these programs are industry-specific, it is important to consider all of the taxpayer's potential resources and the costs and benefits of pursuing each.

In most cases, a taxpayer must claim an exemption or obtain an abatement in order to receive its benefits. Failing to timely do so may lead to the forfeiture of an applicable exemption. If the taxpayer becomes aware after the deadline that it may have qualified for an exemption, it is still prudent to speak with a local professional.

Once the exemption is in place, review the assessment each year to ensure it is properly applied. Additionally, taxpayers and their representatives should closely follow legislative action affecting the exemptions that may be available.

How will a sale or redevelopment affect the property's tax value? For instance, will the sale trigger a mandatory reassessment or perhaps remove a statutory value cap? If a change in use removes an exemption, will it trigger rollback taxes or liability equal to the amount of taxes previously excused under the exemption? Will the benefit of an existing exemption be lost for the following tax year?

Taxpayers that fail to ask these questions risk underestimating their tax bill, which can quickly under-mine an initial valuation analysis and actual return.

Learn whether the purchaser or developer must disclose the sales price or loan amount on the deed or other recorded instruments. If so, avoid overstating the sales price by including personal property, intangible assets or other deductible, non-real estate items. Assessors often use deed and mortgage records in determining or supporting assessed value, and it can be an uphill battle trying to argue later why a disclosed sales figure is not the real purchase price.

Don't assume, without further inquiry, that the tax value will stay unchanged following a sale; nor that it will automatically increase or decrease to the purchase price. In determining market value, the assessor may consider (or disregard) the sale in a variety of ways depending on the jurisdiction, transaction timing, arm's-length condition and other factors.

Perhaps the assessor will change the cost approach assumptions to chase a higher purchase price, or disregard a lower sales price suspected of being a distressed transaction. A local, knowledgeable adviser can help the taxpayer set reasonable expectations for future assessments following a sale or redevelopment.

Plan to review, challenge

Before the valuation notice or tax bill arrives, make a plan to review it and challenge any incorrect assessments within the time allowed. An advocate who thoroughly under-stands local assessment methodologies and appeal procedures can be invaluable in helping to craft and execute a response strategy.

The first hurdle in any property tax protest is learning the applicable deadlines. This can be more difficult than it appears, as local laws don't always require a valuation notice. For instance, some states omit sending notices if the value did not increase from the prior year. Additionally, many states reassess on a less-than-annual basis, although there may be different periods within the reassessment cycle in which appeals can be filed.

It is critical to understand the reassessment cycle and protest periods in every jurisdiction in which a taxpayer owns property. Missing a deadline or required tax payment can result in the dismissal of a valuation appeal, regardless of its merits.

The owner, or the company's agent, should understand not only appraisal methodology but also legal requirements governing the assessor. Is there a state-prescribed manual that dictates the application of the cost approach? Does the assessor use a market income approach to value certain property types?

In some jurisdictions, assessors reject the income approach to value if the owner fails to submit income in-formation by a specific date. In others, submitting income information may be mandatory.

With mass appraisal, assessors often make mistakes that will go undetected if not discovered by the taxpayer's team. Has the assessor's cost approach used the correct build-ing or industry classification, effective age of improvements, square footage, type of materials, number of plumbing fixtures, ceiling height, type of HVAC system, etc.?

Even one small error could skew the final value and should be timely brought to the assessor's attention, whether or not in a formal protest setting.

In addition to correcting the error for future assessments, the owner should determine whether it is entitled to a refund for previous taxes paid and, if so, timely file any refund petitions.

With countless jurisdictions and varying assessment statutes, it is unreasonable to expect a property owner to master property tax law. Yet with proper planning and local advisors, taxpayers can avoid pitfalls they may have otherwise overlooked.

Aaron Vansant is a partner at DonovanFingar LLC, the Alabama member of American Property Tax Counsel, the national affiliation of property tax attorneys.

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Southeast Real Estate Business Aaron Vansant

Feb

Missing Property Tax Deadlines Costs Money

Published Property Tax Articles

Put filing deadlines and other key tax dates on the calendar to preserve your rights to appeal and protect incentives.

Timing can be everything when it comes to property tax appeals. Failure to file an appeal on time will almost certainly lead to its dismissal, and paying taxes too late can lead to the same fate. Those aren't the only important dates to keep in mind when it comes to property taxes, however. Knowing the correct assessment dates, exemption filing periods and other relevant time elements can be critical for a taxpayer looking to minimize its property tax liability.

At a basic level, all taxpayers should know when to file returns, when assessors determine values, when protests and appeals must be filed, when taxing entities issue tax bills and when payment is due. This may seem simple enough, but there is often more than meets the eye. These dates vary from state to state, county to county and even municipality to municipality. Many jurisdictions revalue real property annually, while others do so on a less frequent cycle. In some jurisdictions, such as Florida, a taxpayer may receive a discount for paying property taxes early. The following are some examples of timing issues that a taxpayer should keep in mind.

Assessment, Valuation Dates

Each jurisdiction assesses real and personal property as of a certain date each year. Many states, including Florida, Georgia and Tennessee, use a valuation date of Jan.1. In Alabama, the valuation date is Oct. 1 of the year proceeding the tax year, such as a valuation date of Oct. 1 2017, for the 2018 tax year, with a tax bill due Oct. 1,2018, and tax payments deemed delinquent if not paid by Dec.31,2018. Events occurring at or to the property after the assessment/valuation date are typically excluded from consideration when determining the taxability or value of the property for the relevant tax year.

The assessment or valuation date can have significant implications for the owner's property tax liability. For instance, a casualty event could result in vastly different assessments depending on whether the property damage occurred a few days before or a few days after the applicable valuation date.If a purchaser's new use will result in the property losing an exemption or being assessed at a higher assessment ratio, there might be an opportunity for substantial first-year tax savings if the closing occurs after the relevant assessment or valuation date.

The assessment date will also determine which sales and rent comparable examples the assessor can consider, and which years of income information are relevant. In the case of construction in progress, knowing the valuation date and properly documenting the status of construction as of that date can greatly affect the assessed value.

The assessment date may also dictate who is entitled to receive notices, file property tax protests or claim exemptions, so it is important for a purchaser to consider these issues at closing to ensure that its rights are protected. A prudent purchaser should promptly ensure that the property is assessed in its name and request that the seller immediately forward any tax notices it receives. Tax appeals are often required to be filed in the owner's name as of the assessment date, and in such cases, a purchaser should obtain the right to appeal in the name of the previous owner.

Some jurisdictions reappraise property on an annual basis, with values subject to increase or decrease each year, while others are on longer reappraisal cycles of up to six years. In jurisdictions with multiyear reappraisal cycles,there still may be instances where a value is adjusted before the next appraisal cycle, including new construction, casualty, sale of the property or other conditions.

Assessment, Claim Deadlines

Most states have various exemptions, property tax incentives and favorable assessment classifications that, when applicable, must be claimed with the local assessor. These may include charitable exemptions, current-use valuation for timber or agricultural properties, statutory abatements and the like. In many jurisdictions, properties are broken down into classifications such as commercial or residential, which may be assessed at a higher or lower rate.

In order to receive the benefit of these exemptions or lower assessment rates, it is of utmost importance to comply with all filing deadlines. In certain instances, exemptions and other favorable assessments can be waived if the taxpayer fails to claim them within the prescribed time periods.

Taxpayers must also remember to file personal property returns on time, where applicable. Missing a deadline can result in penalties, incorrect assessments and the waiver of exemptions. The person preparing the return should confirm the correct assessment date to ensure that only those items owned on the applicable assessment date are included on the return.

Protest, Appeal Deadlines

A taxpayer must be diligent in determining when valuation notices are issued (if at all) and the correct deadlines for filing protests to dispute high valuations. The failure to do so may result in missed deadlines, waiver of appeal rights and the payment of excessive taxes. Protest deadlines can vary widely, even within the same state, and are often 30 days or less from the date of the valuation notice. In some instances such as in Alabama when the value has not increased from the previous year, no notice is even required to be sent. Therefore, it is incumbent on the taxpayer to determine when the values were issued and what date protests must be received.

Appeals beyond the initial administrative level typically have specific filing deadlines and other procedural and jurisdictional requirements that must be strictly met in order to maintain an appeal. These requirements may include paying the taxes before they become delinquent, filing of a bond and other procedural requirements that are not always intuitive, so it is important to consult with local professionals who are well acquainted with the requirements in any particular jurisdiction.

Aaron D. Vansant is a partner in the law firm of Donovanfingar, LLC., the Alabama member 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..

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Oct

Purchase Price Isn't Property Tax Value

Published Property Tax Articles

Know the many factors that often make property tax value different than the purchase price.

Don’t worry about challenging a property tax value that is less than the taxpayer’s purchase price, right? Wrong! There are numerous factors that distinguish a purchase price from a taxable assessed value, and the failure to closely review an assessment can cost a property owner dearly.

The legal standard for determining property tax values can differ from state to state, but it is generally equivalent to fair market value. That is the probable price that the property would bring in a voluntary, arms-length transaction between a willing and knowledgeable buyer and seller, in an open and competitive market, with neither party being under undue duress, as of the valuation date.

While it is possible for a purchase price to be the same or similar to market value, there are many instances where the two deviate. Here are some common examples:

A sale is not an arms-length market transaction if it occurs between related parties and isn’t exposed to the open market. A sale between a company and its subsidiary, for example, may not reflect fair market value.

Fee Simple vs. Leased Fee

For property tax purposes, fair market value is most often based on the fee simple estate, unencumbered by Leases or other third-party interests in the property. If the property is subject to an above-market lease, perhaps in a sale / leaseback transaction, the leased fee purchase price might greatly exceed the property’s fee simple valuation used for assessment purposes.

Portfolio Sales and M&A

A transfer of real estate in connection with a merger or acquisition is not a market transaction with respect to that particular property. Likewise, an assessor shouldn’t use the sales price for a portfolio of properties, which might be bundled together and marketed as a whole, to determine the market value of one small component of the transaction.

Although buyers regularly make purchase price allocations for these types of transactions, such allocations are not synonymous with fair market value standards used for assessment purposes.

Unique Sales Terms

Sellers and buyers often think outside the box to close a deal. Seller concessions come in all shapes and sizes and can drastically affect the final purchase price. For instance, a seller may agree to provide certain services or take on additional obligations after closing that would not be part of a typical market transaction.

1031 Exchanges

Buyers motivated to defer substantial income tax liability by executing a 1031 exchange before a deadline may pay above-market prices.

Special Financing Terms

The purchase price may be artificially inflated because of unusual or favorable financing terms. Institutional investors, with greater access to the capital markets, are able to obtain more favorable financing terms than the average market participant. This lower cost of capital allows the institutional investor to pay above-market prices on lower cap rates in order to beat out competing bidders, while still achieving the same return as the typical investor.

Construction Costs

Developers and expanding businesses often find their projects detailed in the newspaper, with anticipated costs or total project investment. Often these amounts include expenses not associated with the real estate, such as equipment, employee training and the like. And just because something costs a certain amount to build does not mean it can be sold for a similar price.

Declining Market

Markets heat up and markets cool down. Overpaying at the height of the market may mean a poor return, but this should not justify an overassessment.

A prudent assessor looks beyond the price to determine if a sale is a true, market-value transaction. Despite the best intentions, even the most diligent assessor cannot account for all of the factors that can skew a sale price away from market value. Referencing non-market deals for comparison will erroneously influence the sales data and can lead to artificially higher assessments. The assessor’s reliance on an assumed purchase price for the subject property can have an even more dramatic and costly effect on that taxpayer’s assessment.

Many states charge a transfer or privilege tax to record a deed, which may require the buyer or seller to disclose a purchase price. Assessors will look at these stated purchase prices and will quickly flag any that are higher than the assessed value. A taxpayer should consult with local counsel to avoid overstating the purchase price. For instance, a purchase price may include personal property, intangibles or perhaps additional real estate that should not be included in the consideration amount required to be disclosed.

Real estate brokers should not be surprised when contacted by assessors or subscription services to confirm details of a sale. Before quickly confirming a sale as a market transaction, the broker should be mindful of the issues discussed in this article. The failure to do so might significantly increase the purchaser’s future tax assessment.

All real estate investors should have a property tax review plan in place, with professionals knowledgeable of local valuation standards, rules and procedures. When purchasing or developing real estate, remember to provide your tax professional with the particulars of the transactions, including any reasons why the purchase price or investment may not indicate market value.

Always keep in mind that purchase price and market value are not synonymous, so there is no need to concede a high assessment without first looking beyond the price on the deed.

adv headshot resize Aaron D. Vansant is a partner in the law firm of DonovanFingar LLC, the Alabama member of American Property Tax Counsel (APTC) 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.

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Southeast Real Estate Business Aaron Vansant

Jan

Multifamily Investors, Don't Forget About Property Taxes

Published Property Tax Articles

The music continued to play in 2015 for the white-hot multifamily market, as many investors saw rents and occupancies climb higher and cap rates fall. Sales of apartment projects still under construction remain commonplace. Record-high sales prices seem to be the norm.

Accompanying the high prices, however, are rapidly increasing property tax valuations. Multifamily investors should be prepared for such increases, and be ready to combat overassessments. All multifamily investors should also be aware of the myriad property tax issues associated with the development, purchase or sale of their particular project.

The amount of attention property owners pay to property taxes often depends on the investor's specific situation. For instance, property taxes may indeed be the most pressing concern for a long-term owner of an apartment complex who receives a tax notice 50 percent higher than the previous year's bill, based on a lofty sales price paid for a new project down the road. Not only does this investor have to compete for tenants against a new development with better amenities; he or she now has to pay more in taxes because of that same development, effectively slashing the property's net operating income.

On the other hand, a developer might be preoccupied with his own, more immediate concerns, such as site selection, construction schedules and financing. Even so, the developer should be mindful of important property tax considerations: Are there property tax incentives available, such as affordable-housing exemptions, brownfield abatements and many others? What is the valuation date for assessment purposes? How do assessors assess the value of construction in progress? Will a change in use trigger any roll-back taxes, or increase the tax rate?

Careful property tax planning is of vital importance to purchasers of multifamily properties. A purchaser of a newly constructed apartment complex must determine how an assessor will value the property after closing. Will the assessor base the value on construction costs, sales of comparable properties, income information or a combination thereof?

Unfortunately, some investors wrongly assume that property tax values will remain unchanged following a transaction. Although a sale will not necessarily result in a new tax value, tax assessors are increasingly trying to catch up to sales prices that exceed current assessed market values.

Underestimating property taxes at the time of the purchase can significantly reduce the investor's actual return. For that reason, a purchaser should carefully scrutinize any tax estimate based on an assessed value that is lower than the purchase price.

Purchasers of low-income housing tax credit (LIHTC) properties should consult local counsel to confirm whether the jurisdiction allows assessors to consider rent restrictions and tax credits in determining fair market value. In some jurisdictions, local tax laws may compel the assessor to value an LIHTC property much higher than the actual sales price.

In states that require the deed to show the purchase price, assessors frequently rely upon these deed amounts in determining fair market values. The declared transaction value on the deed too often includes consideration not attributable to the real property, such as value for personal property or intangibles, although assessors rarely take this into account. Similarly, assessors may not look behind a sale to consider factors that distinguish the acquisition from a market transa<.1:ion, such as an allocated purchase price as part of a portfolio sale.

As the multifamily market continues to sizzle, lower rates of return diminish the margin for error when estimating property taxes. Investors must recognize the importance of appropriate property tax planning, or risk an unpleasant surprise at tax time that could jeopardize their property's cash flow.

By consulting knowledgeable local professionals, investors can equip themselves to make better-informed decisions when estimating taxes. A seasoned tax expert can review tax notices for accuracy and fairness, and navigate any local rules and deadlines to challenge unfairly high assessments.

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National Real Estate Investor Aaron Vansant

May

A Valuable Lesson

Published Property Tax Articles

Look beyond value to ensure correct property tax assessment.

Many taxpayers pay close attention to property tax values, and rightfully so. Property owners can realize significant tax savings by successfully challenging excessive assessed values.

Yet taxpayers often overlook equally important assessment issues that can be costly if ignored. A prudent real estate investor always confirms that its real property is assessed correctly, meeting the local assessment authority's requirements and deadlines. That prudent investor also makes a point to understand the tax assessment consequences of any purchase, sale or improvement of real property.

Know Your Responsibilities

What can go wrong with an assessment, aside from the valuation? In one common scenario, a new property owner may miss the deadline to protest a property tax assessment because tax notices went to the previous owner. Having the property correctly assessed in the owner's name is usually necessary to receive copies of tax bills and valuation notices, so a buyer should confirm whether the first property tax bill and valuation notices after closing will be sent to the buyer or to the previous owner. A missed protest or payment deadline will not be excused because the new owner did not receive such notices, especially if the taxpayer failed to properly have the property assessed in its name.

In some jurisdictions, the buyer may need the seller's written authorization to file a value protest if the applicable valuation or lien date preceded closing of the sale. If that is the case, the buyer should obtain the necessary authorization, at closing if possible. The document should authorize the new owner to file the protest in the name of the seller if required.

As part of due diligence, the purchaser should understand how the property has been assessed in the past and what effect the purchase will have on its future assessment. Don't assume the assessment will be unaffected by the sale.

Here are several other property tax issues to consider when purchasing or developing real property:

Is the sales price likely to affect the tax value?
When does the tax authority send valuation notices, and when is the deadline to file a protest?
Will the purchaser's use of the property constitute a usage change that will trigger a higher assessment?
Is the property subject to exemptions or abatements? Will the new owner qualify for exemptions, and what are the required steps to secure them?
Is the property tax proration calculated correctly? If based on an estimate, will the taxes be re-prorated to reflect the final tax bill?
If part of a larger parcel, when will a new tax parcel be created? Who will pay the taxes until separate parcels are created?
Are all of the existing improvements properly assessed, and if not, what is the risk of an escape assessment, or a retroactive correction in assessed value that may require the payment of back taxes?
Does the state assess and tax construction work in progress?

A well-drafted contract can address some of these issues. For example, the contract may determine the party responsible for paying any rollback taxes based on the change in use, such as a change from agricultural use to retail.

If new construction occurs, the taxpayer should know of any legal requirements to have the improvements assessed. For instance, Alabama law requires the owner to assess any new improvements constructed during the preceding tax year. Failing to do so can add a 10 percent penalty to the tax value of the improvements. Further, the county assessor can go back up to five years and issue an escape assessment for the unassessed improvements, plus additional penalties and interest.

Personal Property

Real estate investors must also investigate the personal property assessment procedures in each state where they do business. Taxpayers should review personal property returns for accurate information, such as the acquisition date and cost. Regularly review the taxpayer's list of personal property to remove items sold or discarded before the valuation date. Timely file all exemptions, and review tax bills annually to confirm the benefit of any such exemption.

A prudent real estate investor must pay close attention to assessment requirements and procedures or risk unexpected taxes, penalties and interest, or missed opportunities to protest excessive property tax values. By consulting knowledgeable local professionals, an investor can ensure that its real and personal property are being correctly assessed and that the assessor has applied all exemptions or value adjustments.

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Southeast Real Estate Business Aaron Vansant

Aug

Know The Process

Published Property Tax Articles

Keep the belt tightened to combat rising property taxes.

"Property values will likely increase over the next few years, so it is as important as ever for property owners to ensure that their property is fairly assessed."

In Alabama, as in much of the country, many property owners tightened their belts during the Great Recession, looking for ways to reduce operating costs for tenants and themselves. For some owners, a little bit of property tax relief provided a silver lining to the loud of plummeting property values that followed the crash Ben Bernanke and other economists assure us that better times lie ahead, however, property owners should remain vigilant in monitoring properties for over-assessment as the recovery plays out.

First and foremost, taxpayers should familiarize themselves with the general property tax laws and procedures in each market in which they own or in tend to own real estate. Though generally created and governed by state law, the property tax appeal process is often speckled with local nuances and specialized interpretations of law.

Learn key dates, including the valuation date, when assessors distribute notices, and the appeal deadline. How do assessors determine market value? Must an owner pay the full tax bill to preserve the right to appeal? Does the property qualify for any tax exemptions or alternative valuation methods? Local counsel can be an efficient and effective way to monitor these and other property tax considerations.

Perhaps in response to a growing number of tax protests, tax assessment officials are increasingly adding procedures and requirements concerning valuation disputes. These local rules range from requiring specific methods of filing protests - whether on a certain form or by mail, fax or email- to establishing early deadlines for submitting a property's financial statements for consideration of the income approach to valuation. Although the legality of some of these additional requirements is unclear, it is important for the property owner to observe these rules to avoid unnecessary appeals and litigation.

Knowing the correct deadlines is essential, and is more challenging than it may seem. For example, Alabama taxpayers have 30 days after the valuation notice date to file a protest. Each of Alabama's 67 counties sends out valuation notices on its own schedule, typically between April and midsummer. Georgia's 159 counties have similarly staggered notice periods and deadlines. To further complicate things, Alabama does not require valuation notices if the property value is unchanged from the previous year. Nonetheless, the taxpayer has only 30 days from the notice date to file a protest.

As in many other states, Alabama assessors send tax notices to the property's owner of record. This means that tenants - which often pay the taxes and have protest rights under their leases - generally do not receive notices from the assessor. In such cases, the tenant needs to remind the owner to forward valuation notices as soon as they are received, and should independently confirm the notice dates and values with the taxing jurisdiction. In an expanding economy, the valuation date can significantly affect the property's assessed value. For example, Alabama assessments in any given year reflect the property's value as of Oct. 1 of the previous year, so 2013 taxes are determined by the value as of Oct. 1; 2012. Accordingly, an increase in market values in the first quarter of 2013 should have no bearing on the value used to determine 2013 taxes. When reviewing an assessment for accuracy, a taxpayer should consider all factors affecting the property's value. Taxpayers are often focused on the big picture in ad valorem tax disputes such as the net operating income, rent roll, occupancy, capitalization rates and the like.

There is more to be mined in less obvious areas, however. Is the property subject to any title restrictions, such as use limitations or conservation easements? Are there any environmental impairments? Is the property specialized for the particular use of one owner, thereby limiting its market value to potential buyers? Is the property's value affected by "super adequacy," which occurs when the cost and quality of improvements exceed market requirements but fail to contribute to the property's value? An example of the latter would be a government building with security features well in excess of those a private business would require - or pay for. Property values will likely increase over the next few years, so it is as important as ever for property owners to ensure that their property is fairly assessed.

adv headshot resize Aaron D. Vansant is a partner in the law firm of DonovanFingar LLC. the Alabama member of American Property Tax Counsel (APTC) 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..

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Alabama Property Tax Southeast Real Estate Business Aaron Vansant

American Property Tax Counsel

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