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Property Tax Resources

May
31

Devise an Exit Strategy For Older Tech Campuses

As high-tech companies downsized in the US, their campuses were left with significant excess space.

"Therein lies the problem for property owners and tax assessors: What is the market value of these older high-tech campuses that were built without an exit strategy as single-user, special purpose properties?..."

By David Canary, Esq., and Cynthia M. Fraser, Esq., as published by Real Estate Forum, May 2012

In the 1970s and 1980s, the explosive growth of technology in the US touched off a construction frenzy of special-purpose, high-tech buildings in campuses designed for single users.

Dubbed flex manufacturing space, these buildings provided large floor plates to accommodate research and design, manufacturing and assembly, storage and distribution. Flex campuses came with fully integrated and interconnected utility systems, with office space typically arranged in what came to be known as cube farms.

These campus headquarters were built at a time when it was desirable and economically feasible for all of these functions to be under one roof, or one location, to facilitate internal communication, maintain control and security of specialized processes and promote internal efficiency.

By the early 2000s, however, demand for these sprawling hightech campuses declined. It became more cost effective to move manufacturing and assembly functions overseas and to reduce transportation costs by locating near emerging global markets. As high-tech companies downsized their operations in the US, their campuses were left with significant excess space.

Therein lies the problem for property owners and tax assessors: What is the market value of these older high-tech campuses that were built without an exit strategy as single-user, special purpose properties? An investigation into the market value of one of these campuses must begin with an analysis of the property's highest and best use.

There are only three scenarios for highest and best use of any improved property, and they are (a) continuation of the existing use; (b) conversion to an alternative use; or (c) demolition of the improvements and redevelopment of the site. A single property may also incorporate some combination of these alternatives. What follows are key points to consider with each approach.

Continuation of existing use. This valuation scenario assumes the owner would be selling or leasing excess space. There may be legal prohibitions and physical limitations to this alternative, however. Although communities embraced these campuses for the jobs they brought to the local economy, zoning ordinances enacted to establish these projects often contain provisions insuring that the properties maintain their campus-like setting, including limitations on ingress and egress, the percentage of accessory uses not directly connected to the high-tech use, signage and parking ratios that are inconsistent with a multi-use property. Frequently, utilities, security systems and the physical configuration of the campus are interconnected, making it impossible to convert the property to a multi-use or multi-tenant facility. In some cases, it is not financially feasible for the owner of a hightech campus to sell or lease excess space because the revenue generated from a sale or leasing would not justify the expense required to convert to a multi-use facility. These costs include tenant improvements, separate metering of utilities and leasing costs. Thus, the excess space becomes functionally obsolete and it is more cost effective to let it go dark.

Converting to an alternative use. An owner/user could consider vacating the entire campus and selling it on the open market. However, potential users for these types of properties are limited due to the property's excessive size (typically 700,000 to two million square feet), age and condition, large floor plates, outmoded technology and lack of demand due to globalization. A campus property may sell if the price is low enough to justify a significant expenditure in converting the campus to an alternative, multi-tenant use. In 2007, for example, real estate developer Benaroya purchased Microchip Technology Inc.'s wafer manufacturing facility, a 700,000-square-foot, 10-building campus in Puyallup, WA, for $30 million, far less than Microchip's asking price of $93 million. Thereafter, Benaroya reportedly invested $45 million to convert the facility into a multi-tenant, state-of-the-art business and technology center. Today, a significant portion of Benaroya's renovated facility remains vacant. Thus, the financial feasibility of converting a high-tech campus property to an alternative use is problematic.

Demolish the improvements and redevelop the site. Because the previous two alternatives may not be legally permissible, physically possible or financially feasible, a number of large high-tech campus properties have been shuttered or demolished. Reported examples are Motorola's manufacturing plant in Mesa, AZ, and IBM's research park in Poughkeepsie, NY. For these reasons, high-tech campuses have been described as white elephants. Their current use is no longer in demand, and they are not suitable for conversion to an alternative, or second generation, use. The valuation and the assessment of these campuses must account for their inherent functional and economic obsolescence, which directly affect their market value.

dcanary Cfraser

David Canary is Of Counsel to Garvey Schubert Barer, the Washington, Oregon and Idaho member of American Property Tax Counsel. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it.. Cynthia M. Fraser is an owner at Garvey Schubert Barer. She can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it.. They are based in Portland, OR

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Nov
14

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.

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Oct
09

Taxpayers beware! Property Bills Come This Month

"When you receive your tax statement, determine if the property belongs to you and if you are responsible for the payment of taxes."

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

By statute, county assessors must deliver property tax statements to taxpayers by Oct. 25 of each year- just before Halloween. This requirement applies to all property, real or personal, whether owned by homeowners or utilities. To avoid any unpleasant surprises, it is important that taxpayers understand and carefully review their tax statements.

If you don't receive a tax statement for property you own and you're responsible for the payment of taxes, contact the county assessors office to determine if the assessor is unaware of a recent change of address or ownership.

When you receive your tax statement, determine if the property belongs to you and if you are responsible for the payment of taxes. If there has been a recent sale of the property, the assessor may not have noted the change of ownership, Taxpayers have a duty to now the assessor of changes in title and changes in address. Do not assume the new owner, or lessee of the property (in the case of a triple net lease), will pay the property taxes.

Review the real market value and assessed value appearing in the upper left corner of the tax statement. The assessor calculates a real market value for both land and improvements for the current and previous tax years. Below the total real market value is the assessed value for the total account for the current and previous years.

The assessed value may be less than the total real market value, but it may not be more. This is because Measure 50 requires the assessor to calculate two values — the real market value and the maximum assessed value. The lesser of the two values is the assessed value — the value upon which you pay taxes. If the assessed value is less than the real market value, generally, the real market value has no effect upon the property taxes you pay. Next, it is important to compare the assessed value for the current tax year to the assessed maximum assessed value cannot increase more than 3 percent above the property's assessed value from the prior year. There are exceptions, and the taxpayer must investigate to determine if they apply.

A property's maximum assessed value may exceed the 3 percent cap if the new property or improvements were added. Minor construction or general ongoing maintenance and repair does not constitute new property or an improvement.

Further, the improvements must have been made since the last assessment. Improvements made to the property three or four years ago cannot be added to the tax roll under Measure 50 although assessor may add them as omitted property.

Finally, it is the real market value of the new property or new improvements not the cost that is added to the tax rolls under this exception. This is particularly important if the improvement was a major but necessary repair that did not necessarily add value to the property.

Partitioned or subdivided property may be reassessed by the assessor and with some limitations, the reassessment may increase the assessed value by more than 3 percent. Likewise property that has been rezoned may be reassessed and the assessed value increased, but only if the property is used consistently with the rezoning. However, the total assessed value of properties subject to a lot line adjustment should not be affected by the adjustment by more than 3 percent.

The value of property that is added to the tax roll for the first time as omitted property, or property that becomes disqualified from exemption of special assessment, may increase the previous years assessed value by more than 3 percent under Measure 50. Finally, taxpayer that own or lease business personal property should carefully review their tax statements to determine if any penalties have been assessed. Taxable personal property must be listed, and reported to the assessor by March 1 of each year. If the personal property return is not filed timely, the taxpayer may face penalties up to 50 percent of the taxes due.

Under new legislation, upon application to either the assessor or the Board of Property Tax Appeals, under certain circumstances a taxpayer may obtain a waiver of the penalties. Taxpayers who believe their property has been improperly assessed should contact the assessor immediately. The assessor has the discretion to change the tax roll after it's finished, provided the change reduces the value of the property. But only payers who are vigilant and know their rights scan avoid those nasty Halloween surprises.

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..

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Jun
13

Industrial Obsolescence

Income approach to value helps reduce assessments on aging manufacturing plants

"Industrial property exists for only one reason —— to manufacture goods and provide an income for the owner. When income declines due to external factors, the market value of the plant drops. Because the trended cost investment method only looks at past investment, it can't account for the current economic reality."

By David Canary, Esq., as published by National Real Estate Investor, June 2007

Have you ever wondered why your local tax assessor has such a high opinion of the value of industrial plants in your area? This is particularly perplexing when global competition drives down the price of finished goods, energy prices skyrocket, the plant gets older and justifying further capital investment becomes difficult because of razor-thin margins.

The assessor thinks industrial properties are worth hundreds of millions of dollars because he uses the trended investment cost method to value the plant. The assessor adds up to value the plant. The assessor adds up the historical costs invested in the plant over the last 30 years, trends that cost to current dollars and depreciates the result based upon the plant's remaining physical life.

This method is a backward-looking valuation approach that does not measure the eternal economic factors that makes industrial property less competitive or even obsolete. The trended investment cost method bears no relationship to the price at which an owner could sell a plant on the open market. Yet, market value is the basis for all property tax assessments.

Industrial property exists for only one reason —— to manufacture goods and provide an income for the owner. When income declines due to external factors, the market value of the plant drops. Because the trended cost investment method only looks at past investment, it can't account for the current economic reality.

A preferred valuation method

The only way for industrial plant owners to obtain fair tax assessments is to argue for the use of the income approach o value their plants —— the same valuation approach investors use to determine the price they will pay for any investment.

Utilizing either a discounted cash flow or a direct capitalization method, the income approach projects the future income stream of the plant, capitalizes or discounts the income by the market rate of return on invested capital, taking into account current and future expected market conditions, as well as the risks and liquidity of the investment.

Canary2007_graphThe business value reflects all the factors of production —— land, buildings, machinery and equipment, skilled labor, managerial expertise and goodwill. It is incumbent upon owners to show assessors how to separate the value of the real and personal property from the value of the business for assessment purposes.

Bear in mind that all factors of production fall into one of three categories: working capital, intangible assets and fixed assets. Working capital and intangible assets are non-assessable in most states. The market value of working capital —— which includes cash, receivables, inventories, less current liabilities —— can be easily and accurately determined. Now, only market value of the intangible assets needs to be eliminated to arrive at the value of the fixed assets.

Why exclude intangibles?

Intangible assets include software, good-will, customer lists, contracts, patents and trademarks, assembled workforce and trade secrets. The owner of an industrial property invests in intangible assets one way or another. For example the owner pays wages to skilled workforce and invests in R &D, from which benefits and trade secrets result, in the hope the return will exceed its cost.

Because of economic obsolescence, a struggling industrial plant with low margins enjoys little return on intangible assets. And because the cost of creating and maintaining intangible assets is already reflected in the income stream as costs of doing business, their market value has already been accounted for in the business value. Even if intangible assets do have a value above their cost, the assessor will not complain the resulting valuation is too high.

The devil is in the details. The two components of the income approach —— the income stream and the discount, or capitalization rate —— must be accurately calculated to derive market value. A plant's budget or strategic plan already projects the future income of the plant.

For property tax purposes, it is the expected future debt-free, after-tax cash flow from the industrial plant that is discounted by the weighted average cost of capital. However, this approach must account for the current and expected market risks and liquidity of owning a single, stand-alone plant, not the cost of capital of a Fortune 500 company.

If the future income stream is realistic and the discount or capitalization rate reflects the inherent risks in investing in a single industrial plant, the resulting value will equal the price an investor will pay to own that industrial property.

There remains only the task of convincing assessing authorities that the income approach results in a far better and fairer, estimate of the plant's market value than the antiquated trended investment cost method.

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..

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Mar
13

April 1 An Important Date for Property Taxpayers

"April 1 is the last day to file for these cancellations, exemptions and special assessments, and assessing authorities do not have discretion to accept a late filing."

By David Canary, Esq., as published by The Daily Journal of Commerce, March 13th 2007

April 15th is "tax day" for federal and state income taxpayers, but April 1 is equally important to property taxpayers that wish to avoid paying property taxes for the upcoming year. There are a host of exemptions for selected types of properties for which applications or statements must be filed with the local county assessor or the Oregon Department of Revenue on or before April 1. Those exemptions include:

Cancellation of assessment for commercial facilities under construction

New buildings or additions to existing buildings are exempt from property tax assessment for up to two years while under construction. The structure must have been under construction on Jan. 1, 2007, not used or occupied before that time and constructed in the furtherance of the production of income (e.g. an industrial or commercial building or condo). In the case of a nonmanufacturing facility, the structure must first be used or occupied not less than one year from the time construction commenced.

For a manufacturing facility, any machinery and equipment located at the construction site that is or will be installed in or affixed to the structure under construction may also be exempt.

Cancellation of assessment of pollution control facilities

A pollution control facility constructed in accordance with specific Oregon statutes and that has been certified by the state Environmental Quality Commission may be exempt to the extent of the highest percentage figure certified by the commission as the portion of the actual cost properly allocable to the prevention, control or reduction of pollution.

Exemption of nonprofit student housing

Housing that is rented exclusively to students of any educational institution which offers at least a two-year program acceptable for full credit toward a bachelor's degree may be exempt from certain ad valorem assessment. The exemption applies to student housing of an educational institution that is either public or private.

Exemption of low-income housing

Property owned or being purchased by a nonprofit corporation that is occupied by low income residents or held for future development as low-income housing, or a portion thereof, may qualify for tax exemption.

Exemption of ethanol production facilities

The real and personal property of an ethanol production facility may qualify for exemption of 50 percent of the assessed value of its property for up to five assessment years.

Exemption of rural healthcare facilities

The real and personal property of a health care facility with an average travel time of more than 30 minutes from a population center of 30,000 or more may be exempt from property taxation if the property constitutes new construction, new additions, new modifications or new installations of property as of Jan. 1.

Additionally, the exemption must be authorized by the county governing body in which the facility is located. The exemption can be for up to three years.

Exemption of long-term care facilities

The real and personal property of a nursing facility, assisted living facility, residential care facility or adult foster home may qualify for exemption if the facility has been certified for the tax year as an essential community long-term care facility.

The state Legislature specifically declared that a property tax exemption would enable essential long-term care facilities to increase the quality of care provided to the residents because the full value of the exemption is applied to increasing the direct caregiver wages and physical plant improvements that directly benefit the facility residents and staff.

Special assessment of nonexclusive farm-use zoned farmland

Any land that is not within an exclusive farm use zone but that is being used, and has been used for the preceding two years, exclusively for farm use may qualify for farm use special assessment if the gross income derived from the farming operation meets a certain amount that depends upon the size of the farmland.

Special assessment of designated forestland in Western and Eastern Oregon

Forestland being held or used for the predominant purpose of growing and harvesting trees of a marketable species and that has been designated as forestland or land in either Western or Eastern Oregon, the highest and best use of which is the growing and harvesting of trees may qualify for special assessment if certain other requirements are met and a timely application filed.

Taxpayers that believe they qualify for cancellations of assessments, exemptions or special assessments should contact the office of the county assessor in which the property is located or contact the Oregon Department of Revenue to request application forms and instructions.

The fact that a cancellation, exemption or special assessment is granted for one year does not mean the property automatically qualifies for exemption in subsequent tax years. A number of these cancellations, exemptions and special assessments require that applications be filed with the county assessor or the state Department of Revenue each year. That is, an exemption or special assessment may be lost if an application is not filed in each successive year.

April 1 is the last day to file for these cancellations, exemptions and special assessments, and assessing authorities do not have discretion to accept a late filing.

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..

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Jan
15

Now's Time to Prep '07 Personal, Industrial Property Returns

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

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

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

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

Non-exempt personal property subject to assessment, taxation

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

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

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

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

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

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

IPR presents tricky problems

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

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

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

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..

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Dec
12

Looking Back on 2006 - and Forward to 2007

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

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

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

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

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

The unintended consequences of using Measure 37

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

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

Contamination adversely affects values

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

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

Two-Year Exemption for Construction of Commercial Property

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

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

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

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

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

Looking ahead to 2007

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

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

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

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..

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