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Property Tax Resources

Aug
03

Property Owners Celebrate Fair Taxation Ruling by Pennsylvania Supreme Court

"Nearly every state constitution requires uniformity in taxation, meaning that two like properties should receive the same assessment, no matter how they are owned, occupied, built or financed."

Commercial property owners around the country are cheering a recent Pennsylvania Supreme Court decision that breathes new life into constitutional guarantees of uniformity in taxation.  Overruling a decade of lower court decisions, the ruling reestablishes the primacy of constitutional uniformity protections to taxpayers in the strongest possible language, fittingly issued just one day after the July 4 holiday.

Nearly every state constitution requires uniformity in taxation, meaning that two like properties should receive the same assessment, no matter how they are owned, occupied, built or financed.  Yet commercial property owners across the nation have been under attack by assessors attempting to alter appraisal theory in order to pin higher assessments and higher real estate taxes on specific owners.

These assessors have been singling out occupied commercial properties by setting assessments based on financing mechanisms that fail to meet standard appraisal definitions of market sales, incorrectly basing taxable value on data relating to sale-leasebacks, turnkey leases and contract rights arid duties associated with tenant financing.

In Pennsylvania and Ohio, the only states that provide school districts a statutory right to file increase appeals, the school districts have been targeting specific commercial owners for higher assessments using this same flawed methodology.  These selective or “spot” appeals disrupt constitutionally required uniformity in assessment.  Many Pennsylvania school districts have been paying contingency fees to behind-the-scenes consultants to select properties for appeal.

Commercial Portfolio Owners Beware

The consultants’ favorite repeat targets are national real estate portfolio owners that cannot vote in local school board elections.  The practice has gained traction over the past five years, with national companies being forced to defend against an ever-increasing number of increase appeals in which school districts seek discovery of the property owner’s confidential real estate information and then use it against the owner to justify an increase in assessment.

This practice violates fundamental fairness and puts targeted commercial owners at a competitive disadvantage with commercial owners whose assessments are not increased.  It also shifts more of the tax burden from residential to commercial owners, since most school districts are loathe to sue voting residential owners to increase their assessments.

In Valley Forge Towers Apartments LP vs. Upper Merion Area School District, the school district filed increase appeals only against commercial property owners and not against residential owners.  The district selected properties for appeal after consultation with Keystone Realty Advisors, a New Jersey tax consultant that employs trained appraisers and takes a 25 percent contingent fee on any increase in taxes resulting from its recommended appeals.

Four apartment building owners that had been targeted for these appeals challenged the school district’s selection of only commercial owners for appeals as violating the Pennsylvania Constitution’s uniformity in taxation requirement.  Both the trial court and the first-level appellate court denied the taxpayers’ challenge, holding that the school districts goal of increasing revenue justified the selective nature of the appeals.

The Pennsylvania Supreme Court reversed those rulings.  The court stated that all taxpayers must be uniformly treated, whether they are residential or commercial owners, and that no assessment scheme can systematically treat residential and commercial taxpayers differently.

The court stated no less than 13 times that all real estate is a single class.  The court observed that this constitutional tenet has been in place since 1909 and was reaffirmed by the court on multiple occasions, and that the court had no intention of discarding it.  The court then stated that the government may not create sub-classifications of property for different tax treatment, a point it repeated nine more times in its decision.

What the Ruling Means Going Forward

The ruling makes it abundantly clear that all real estate must be taxed uniformly, and that this constitutional protection is for the benefit of the taxpayer:

“First, all property in a taxing district is a single class, and as a consequence, the uniformity clause does not permit the government, including taxing authorities, to treat different property sub-classifications in a disparate manner,” the court stated.  “Second, this prohibition applies to any intentional or systematic enforcement of the tax laws and is not limited solely to wrongful conduct.”

The court then remanded the case to determine if there was a systematic disparate treatment of the Valley Forge taxpayers.  It will be unnecessary to show that the school intended to treat the taxpayers differently from other taxpayers.

The principal takeaway from the case is that all taxes must be uniformly assessed, and that any purposeful or unintentional systematic assessment that treats taxpayers in a disparate manner is unconstitutional.

The Pennsylvania Supreme Court’s decision underscores the need for a real estate taxation standard that treats residential and commercial properties uniformly.  In current practice, assessors around the country assess commercial and residential properties using different standards.  Residential property is taxed on a fee-simple, unencumbered basis: that is, the property is assumed to be vacant and available for purchase as of the assessment date.

Commercial property, on the other hand, increasingly has been assessed on the assumption that it is occupied by a successful business.  In those instances, the assessment reflects the way that the business finances its occupancy, whether it chooses to lease the building or own it outright.  Commercial property frequently trades as part of an ongoing business or with long-term leases, deed restrictions or other use restrictions in place.  But to be uniform, property taxes must rely upon a single interest valued for tax purposes.

The only interest that is uniform across all categories is the fee-simple, unencumbered value.  As the Valley Forge decision makes clear, there can only be one standard because all real estate is a single class.

Now, across the country, tax professionals can use the Valley Forge decision to bring fairness to commercial property owners.

Sharon DiPaolo

Sharon DiPaolo is a Partner in the law firm Siegel Jennings Co, L.P.A., which has offices in Cleveland and Pittsburgh.  The firm is the Ohio and Western Pennsylvania member of American Property Tax Counsel. Sharon can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

May
31

Tax Resolution Conundrum

Pittsburgh resolves to reduce taxpayers' inflated property assessments.

Politics makes strange bed fellows. Pittsburgh's city council recently ordered its finance director to draft policies that protect taxpayers from assessment appeals by the city, and even to file appeals on taxpayers' behalf.

Unlike many states, Pennsylvania allows the three entities that levy real estate taxes (counties, schools and municipalities) to appeal annual real estate assessments, just as taxpayers do.

Taxpayers file appeals when they believe their property is over-assessed, in order to reduce their assessment and their real estate taxes.

When taxing authorities file annual appeals, they seek to increase assessments and taxes. The city of Pittsburgh has historically filed appeals following the sale of a property assessed at a lower value than the sale price. This practice, where taxing authorities essentially sue individual taxpayers (and voters) to increase real estate tax payments, is common in Western Pennsylvania.

In a strange twist, first-term city councilman Dan Gilman recently introduced legislation to limit the city's ability to file increase appeals and, in some cases, to even direct the city to file appeals to decrease property assessments. The resolution passed and the mayor signed the measure on Feb. 23.

The resolution starts off with two self-limiting provisions. First, it bars the city from appealing the assessment of a property for two years after the property sells. Second, the resolution prohibits the city from using a property's sale price as the basis for an appeal seeking an assessment increase.

These provisions restrict the city from doing what it is permitted to do by Pennsylvania statute, which states that "[Any county, city, . . school district . . which may feel aggrieved by any assessment of any property . . shall have the right to appeal" an assessment the same as the property's owner.

The resolution further limits the city to appealing a property's assessment once every three years. Pennsylvania's statute allows taxing authorities to appeal annually.

David "J.R." Sachs, president of A-1 Van Service recently battled Pittsburgh taxing authorities over his property's assessment, and believes the new resolution is a good idea.

After Sachs purchased three dilapidated buildings and contaminated land along the banks of the Allegheny River in 2013, the school district appealed his assessment, seeking an increase to the purchase price. Sachs saw his assessment mushroom from $489,800 to $540,000 following the appeal, while the assessments of neighboring properties without recent sale prices remained unchanged.

The new resolution "gives people a chance to invest in their properties and improve them before getting hit with a tax increase," Sachs says.

Perhaps most unusual is the resolution's requirement directing the city to generate a list of properties with assessments 50 percent or more greater than their market value, and to "appeal values downward on behalf of those owners." This provision turns current practice on its head.

In a taxpayer-initiated appeal seeking an assessment reduction, the city's legal department has historically defended the assessment and fought against reductions. Now, the city will be required to file appeals seeking reductions on behalf of taxpayers.

This last provision is not entirely unprecedented in Pittsburgh. In 2005, Allegheny County, where Pittsburgh is located, conducted a countywide reassessment following a court mandate, releasing the new assessment figures but refusing to certify the assessment. Instead, the county resisted implementing the assessments in litigation that wound up in Pennsylvania's Supreme Court.

During this litigation, in April 2006, Allegheny County filed 11,000 appeals on behalf of taxpayers who saw their assessments rise since the prior reassessment in 2002 as a result of previous appeals by school districts or municipalities. Allegheny County brought these appeals to hearing and requested reductions. City and school district representatives appeared and defended the assessments.

The city's recent initiative may have unintended consequences, according to Pittsburgh lawyer, Michael I. Werner of ZunderWerner, LLP. Werner has extensive experience representing property owners in appeals of their property assessments. "When the county did the same thing in 2006, property owners were confused. In some instances, the owners did not want the county to file appeals on their properties," he says. "This put us in an odd position: Because the owner was not the appellant, we were unable to withdraw the appeals. The county was trying to help, but they inadvertently created new obstacles for many property owners."

"It is a noble thing they are trying to do, but it raises the question of whether a city employee, who does not know the specific property and who does not have an attorney-client relationship with the property owner, is in a position to properly represent that owner's interests," Werner says. "City-initiated appeals to reduce an assessment should only be filed at the request of the property owner."

The city's resolution also calls for its finance director to collaborate with the Pittsburgh school district and Allegheny County to implement and expand its new policies. Given the history, it seems unlikely that the school district will join the city, either in self-limiting its appeal rights or in filing appeals seeking lower assessments.

Pennsylvania school systems are strapped for cash due to the state legislature's budget impasse: lawmakers are more than eight months past deadline to pass the 2015-2016 budget, and many school districts have been forced to take out loans to meet operating expenses. Increasingly, school districts have become more aggressive in filing increase appeals as they seek new sources of revenue.

What happens next is open for debate. Even though Pittsburgh's mayor ratified the resolution on Feb. 23, one councilwoman introduced a measure on Feb. 22 to repeal it. The new proposal remains in committee. All assessment appeals for properties in Pittsburgh were due March 31, and hearings will begin in May and June.

sdipaolo150Sharon DiPaolo is a partner in the law firm of Siegel Jennings Co., L.P.A., the Ohio and Western Pennsylvania member of American Property Tax Counsel, the national affiliation of property tax attorneys. She can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

 

Apr
14

Washington County Pennsylvania 2017 Property Tax Reassessment

Sharon DiPaolo, an attorney for Siegel Jennings tax law firm, discusses the upcoming property tax reassessment for Washington County Pennsylvania in 2016/2017 and what you can do to file an appeal. 


Dec
10

A Fair Share of Taxes

Frequent reassessments benefit Pittsburgh-area property owners.

Pittsburgh-area properties are being reassessed more frequently than in the past – and that is good news for property owners.  Periodic reassessment helps to keep property assessments current with actual values and ensure that everyone pays their fair share.

Unfortunately, frequent reassessments are not the norm throughout Pennsylvania.  Pittsburgh and surrounding counties are the exception, with Allegheny County (in which Pittsburgh is located) having four reassessments in the last 15 years.  Nearby Indiana County is undergoing a reassessment now for tax year 2016, its first since 1968, and neighboring Washington County is undergoing a reassessment for tax year 2017.

Pennsylvania lacks a mandatory revaluation cycle.  A revaluation or reassessment is a thorough analysis of every property in the entire county, with the objective of bringing each property’s assessment into line with its current market value.  Revaluations are often conducted by outside firms, usually with the assistance of the local assessment office.  Occasionally, in-house assessment offices conduct reassessments.

Without a mandate to reassess, some counties go decades without a reassessment.  Rural Franklin County, for example, last reassessed in 1961.   Assessors there attempt to keep properties equalized by placing newly constructed assets on the tax rolls for what they believe the properties would have been worth in 1961.

The more time that passes, however, the more tenuous this methodology becomes.  Further, assessors are prohibited from “spot assessing,” or changing assessments on existing properties without a countywide reassessment.  Thus, as different parts of the county appreciate at different rates, the equality of assessment becomes more and more skewed.

Blair County, west of Pittsburgh, decided to undertake a reassessment for tax year 2017 after commissioning a study from the attorneys at Weiss Burkardt Kramer.  Comparing actual sales in the county to assessments, the study concluded that Blair County’s more than 50-year-old assessments do not meet the constitutional uniformity requirement.

Says attorney M.  Janet Burkardt, a partner at Weiss Burkardt Kramer: “If assessment systems are not periodically adjusted, they become regressive so that properties appreciating at a higher rate are taxed at less than their fair share, and properties appreciating at a lesser rate or those who have depreciated in value, pay more than their fair share in taxes.”

Because properties that benefit from unfairly low assessments rarely appeal those values, inequities become locked in over time.  For instance, in one county where revaluation had not occurred in decades, major office buildings were, on the whole, dramatically under-assessed.

Some under-assessed buildings paid such low taxes that they enjoyed a competitive advantage in attracting tenants.  A neighboring office building, despite paying dramatically higher taxes than its competition, had no recourse to appeal because it was also under-assessed and could not meet the test that its market value was too high.  The solution? A county-wide reassessment.

The longer a county goes between reassessments, the harder the next reassessment becomes.  First, big increases in assessments spark taxpayer outrage, tempting county leaders to push the problem off to another day.

Infrequent reassessments are also more time-consuming and expensive; reassessments in Pennsylvania usually stem from litigation, which is expensive and inefficient.  Less frequently, county leaders prompt the reassessment, as Indiana County did when it had reached the statutory cap on its tax rate.

In marked contrast, Erie County, to Pittsburgh’s north, was the first county to impose a reassessment cycle on itself.  “Our goal in reassessing is to gain uniformity and accuracy,” said Scott Maas, Erie County’s chief assessor.  “We meet with property owners informally and we welcome the opportunity to update our data and make corrections.  We want to get it right.” Maas initiated the county’s periodic reassessment cycle and oversaw the 2003 and 2013 reassessments.

Pittsburgh’s record four reassessments in 15 years followed years-long litigation in two different cases that went all the way to the Pennsylvania Supreme Court.  Ultimately, the Supreme Court ordered the reassessment.  Pittsburgh’s reassessment in 2013 sparked 100,000 appeals; for 2015, only a few thousand taxpayers appealed, demonstrating that most properties’ assessments have been resolved to the property owners’ satisfaction.  If Pittsburgh were to continue to reassess in the next three to five years, building on this fresh data and satisfactory values, the likelihood is that there would be minimal appeals year-to-year.

Frequent reassessments benefit property owners.  When the appeals process corrects errors, the data under under-lying the assessments improves and yields more accurate values in the next reassessment.  Pennsylvania law requires that reassessments be revenue-neutral, meaning that rather than local governments enjoying a windfall when assessed values increase, governments must reduce tax rates, so many property owners see a reduction in taxes when reassessments occur.

Most importantly, reassessment yields more uniform assessments.  Uniformity of assessment is required by Pennsylvania’s constitution.  When assessments are uniform, everyone pays their fair share.  Pennsylvania’s Supreme Court spoke to this in 1909: “While every tax is a burden, it is more cheerfully borne when the citizen feels that he is only required to bear his proportionate share...”

sdipaolo150Sharon DiPaolo is a partner in the law firm of Siegel Jennings Co., L.P.A., the Ohio and Western Pennsylvania member of American Property Tax Counsel, the national affiliation of property tax attorneys. She can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

 

Jan
09

Finding Relief - Property Tax Appeals for Industrial Assets Yield Rewards

While it is common knowledge that tax relief is available for newly constructed industrial facilities that bring jobs and infrastructure to a region, business owners often overlook the opportunity to reduce property taxes on their existing facilities. That’s a pity, because successful property tax contests are a source of found money that goes straight to the company’s bottom line.

Those savings can be significant. In Pennsylvania, a 2.5 million-square-foot manufacturing plant that had not challenged its assessments in more than a decade was overvalued by $30 million. An appeal ultimately yielded $500,000 in annual tax relief.

Public perception vs. reality. Tax appeals for industrial properties present unique challenges. In rural areas, the property owner is often the region’s largest employer and the largest taxpayer in the jurisdiction, so that reducing the assessment also reduces funds available to local schools. Development costs are both widely publicized and somewhat misleading, because investment in equipment, site preparation, training arid other items frequently exceeds the real estate’s fair market value. News stories about that $100 million plant can come back to haunt the owner who tries to argue for a more realistic assessment.

Moreover, for properties developed with the help of government incentives or tax abatements, an owner seeking a tax reduction may run into community resentment when local media report on the contest.

Expect a fight. Taxing jurisdictions will fight hard against a tax contest. Authorities typically delay the litigation, often from a sense of outrage rather than anything else. When an appeal seeking hundreds of thousands of dollars of tax relief stretches into multiple years, winning a favorable ruling becomes progressively more difficult for the property owner. At trial, the case is typically decided by a local judge, who is mindful that a reduction would have a negative effect on local districts. The property owner must strike a delicate balance, continuously pushing the litigation forward while staying sensitive to its larger impact.

“Face-to-face meetings, both internal and external, are essential when managing property taxes for a large industrial property owner”, said Christine Rohde, manager of property tax and incentives at Alcoa Inc., where she oversees tax protests. When possible, I make every effort to inspect our sites and meet with plant management to explain the process and answer questions. Meeting personally with out-of-state assessors helps build relationships and allows both parties to work through the valuation issues to arrive at assessments that are fair to all concerned.

The property owner’s tax counsel must also push the litigation. Courts seldom specify a timetable for bringing the case to trial and jurisdictions will try to delay the process by asking for continuances. Tax counsel must produce an appraisal promptly, call the jurisdiction’s counsel regularly, invite representatives of the jurisdictions to inspect the facility and ask the judge to schedule conferences or pre-trial meetings. As Rohde noted, tax counsel should meet face to face with the jurisdiction’s representatives whenever possible and be prepared to travel to the property repeatedly.

Valuation challenges. Differences among industrial properties - heavy manufacturing, light manufacturing, office/flex, warehouse and distribution centers - greatly affect valuation, so hire professionals with demonstrated expertise in appraising the specific category of the industrial property in question.

Owner-occupied properties, which have no rental income to capitalize, present another challenging situation. Or the property may have a mix of uses, as with a corporate headquarters campus that has offices, research and development space and training facilities.

Finding comparable properties for the appraisal can be an issue as well. A special-purpose property, such as an ethanol plant, cannot be easily used by another user. Even generic manufacturing space is subject to external obsolescence or incurable factors that affect valuation and are beyond the physical boundaries of the property. External obsolescence might reflect a scarcity of a natural resource used in the manufacturing process, or extended travel time to the closet interstate highways, either of which can severely impair value.

If the property is the only one of its kind in the state, the appraiser may seek comparable sales out of state. The assets being used as the basis of comparison are often attracted by economic incentives to places where they would not otherwise go perhaps far from suppliers or interstate highways. These locational issues detract from fair market value and the associated comps can reduce the assessment and property taxes for the contested property.

The checklist. Evaluate industrial property for potential tax appeals annually, and know the jurisdiction’s idiosyncrasies. Can the property owner meet informally with the assessor? Does the taxing authority have a reputation for being litigious?

Keep the property owner’s public relations department involved, and be mindful of how an appeal is presented and perceived. Get an appraisal from the most experienced professional in the property type and one who presents well on the stand. And finally, push the appeal through to conclusion.

sdipaolo150Sharon DiPaolo is a partner in the law firm of Siegel Jennings Co., L.P.A., the Ohio and Western Pennsylvania member of American Property Tax Counsel, the national affiliation of property tax attorneys. She can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

 

May
08

Property Assessments Present Opportunities to Reduce Taxes

The tax assessor's notice arrives in the mail with the seemingly inevitable increase in your property's assessment. Is this just another expense line item creeping upwards? Should you start budgeting now for an increase in next year's real estate taxes?

Not so fast. Taking the time to review the notice with an experienced property tax professional could reveal opportunities for significant savings.

What Can I Gain?
Successful appeals can generate thousands or even hundreds of thousands of dollars in tax savings per year. Property taxes are one of the few expense line items that a property owner can manage with an eye toward not just keeping the expense flat, but in many cases actually reducing taxes compared with the current and prior years. Yet property taxes are often overlooked as a controllable expense. As Robert L. Gordon, a partner who specializes in property tax with the law firm of Michael Best & Friedrich LLP in Wisconsin, says, "One of the things I continue to see is that clients who are sensitive to the smallest increments in their income taxes, and engage in highly sophisticated planning to manage their income taxes, will at the same time accept property tax assessment increases as an inflexible cost that cannot be managed or addressed."

For many companies, a reduced assessment is the equivalent of "found money" and is a great boost to the bottom line.

Why Assessments Change
Typical conditions triggering an assessment change include new construction, renovation or demolition. More unusual cases can occur in places like California, where a change in ownership will generate a change in the assessment. Another reason for assessment change is error correction, as when an assessor finds that they had missed the existence of a building in previous assessments.

But the No. 1 reason for assessment changes is periodic district-wide reassessments. Most states have mandatory reassessment cycles while a few do not (see table).

 Sharon-Di-Paolo-chart

In Pennsylvania, which doesn't require periodic reassessment, assessments can get far afield from actual market value, contends attorney M. Janet Burkardt, managing partner of Weiss Burkardt Kramer LLC, which advises Pennsylvania counties on reassessment. "Not reassessing regularly means taxing inefficiently, because counties are not capturing changes in value," Burkardt says. "The more often a county reassesses, the more equitable and uniform the values."

Pennsylvania, Oklahoma and California are examples of states that lack mandated reassessments. States that do reassess vary widely in frequency: Florida, Minnesota, Arizona, Kansas and Washington, D.C., are some states that reassess every property, every year. Some others – Wisconsin, for example – require annual reassessments, but in practice those don't always happen.

Don't Miss an Opportunity to Appeal
Even if an assessment goes unchanged in a given year, there may still be opportunities to reduce real estate taxes. In many states, like Pennsylvania, there is a ratio calculation that does change annually. For example, a property in Butler County, Penn., generated the same $100,000 assessment in 2012 and in 2014. By application of this ratio calculation for each year, the property is on the tax rolls at a fair market value of $523,000 and $740,000 for these years, respectively. If the property is worth $600,000, that would mean an appeal opportunity in 2014, but not in 2012.

Practices vary widely by state and even within states, so reviewing all assessments annually can turn up opportunities that might otherwise be missed.

What Will it Cost?
Filing fees for property appeals are modest, and in many jurisdictions the initial appeal is free. Fees in other places average about $100. The cost of the appraisal will vary based on the property's type, uniqueness, and the relative ease or difficulty of the valuation calculation. Commercial appraisals can range from $2,500 to $25,000 or more. Legal fees vary, but it is common for property tax attorneys to work on a contingency-fee basis, where there is no fee unless an appeal achieves tax savings.

Experience Matters
Asking an experienced property tax professional to evaluate assessment notices pays off. Working with a professional who knows the nuances of the jurisdiction, the law, how the system works in practice, which appraiser is right for the job, and who has a working relationship with the government employees that administer that system can be the difference between winning and losing appeals. Finding the right person to evaluate your assessments on a regular basis is the first step toward realizing tax savings.

dipaolo web Sharon F. DiPaolo is a partner in the law firm of Siegel Siegel Johnson & Jennings, the Ohio and Western Pennsylvania member of American Property Tax Counsel, the national affiliation of property tax attorneys. She can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

Feb
12

Pittsburgh Taxpayers Face Double Jeopardy on Assessments

Pittsburgh-area commercial property owners who received dramatic increases in their 2013 real estate assessments may see those taxable values go even higher. This wave reflects the growing nationwide issue of changes in property values and how they are assessed.

In the case of the Steel City, Allegheny County's first revaluation in 10 years dramatically increased assessments, which had remained static even during market highs in the mid-2000s and the crash in 2008 and 2009. While the overall increase in county assessments was 35 percent, commercial owners bore the brunt of the increase, seeing their assessments rise 54 percent overall.

More recently, however, local legislators enacted an unusual deadline extension that has effectively put property owners — especially commercial owners — at risk for even higher assessments.

Note that, rather than rely upon a central tax authority, each of Pennsylvania's 67 counties sets its own assessment. Because the state lacks a mandate for periodic revaluation, counties normally only undertake revaluation when a taxpayer files suit but will occasionally do so on the county's own initiative. Historically, reassessments are so infrequent in Pennsylvania (sometimes a decade or more passes between reassessments) that property values spike when a county eventually does reassess, which leads to public outcry and confusion.

Following publication of the new 2013 assessments for Pittsburgh-area properties, property owners filed 100,000 appeals before the original deadline on April 1, 2012. Then, in early 2013, Allegheny County's chief executive asked the county council to reopen the filing of 2013 appeals until April 1, 2013, ostensibly to help property owners.

At the time, the chief executive told local reporters that the deadline extension would give taxpayers another opportunity to appeal. What he didn't say, however, is that extending the deadline also opened the door for school districts to file appeals.

Increases in Store for Property Owners
Reopening the appeals process hurt more property owners than it helped. Most taxpayers who needed to appeal had already filed, but Pennsylvania law gives school districts a right of appeal as well. When the county council voted to reopen the deadline and allow new appeals, thousands of school appeals followed. School districts filed most of the 7,000 new appeals in 2013.

What's more, Pittsburgh's office market was hot in the latter part of 2012. The districts tracked sale prices in the last three quarters of 2012 and subsequently appealed to increase the property owners' new assessments based on these sale amounts. Most of these appeals to increase valuations target commercial owners.

Of the new appeals filed by property owners, the vast majority are attempts to re-hear appeals that were previously filed. Those are likely to be thrown out by the courts. That will leave mostly school-initiated appeals.

As of this writing, administrative hearings are complete for the original 100,000 appeals, and administrative decisions that caused the taxpayer or school district to be unhappy with the outcome are already pending in court. Hearings on the 7,000 new appeals are underway.

What to Do
When a taxing district files an appeal, state law requires it to send notice of the appeal to the address listed in county records as the property's Change Notice Mailing Address, which is published on the county's website (alleghenycounty.us). Some of the county records are outdated as to owners' addresses and, in those instances, some new owners are unaware of appeals on their properties.

New owners should check the address the county has on record for their properties and watch for notices sent to this address in the coming months. If a school district does appeal, the property owner would be wise to seek counsel, appear at hearings and defend his property's taxable value, otherwise risk having his assessment increased even more.

dipaolo web Sharon F. DiPaolo is a partner in the law firm of Siegel Siegel Johnson & Jennings Co., LPA, the Ohio and Western Pennsylvania member of American Property Tax Counsel, the national affiliation of property tax attorneys. She can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

Jan
01

Buying Property? Beware Of Inflated Assessments

"The first step toward making a tax-informed decision on a real estate purchase is to consult with a property tax professional knowledgeable in the market..."

By Sharon DiPaolo, Esq., as published by rebusinessonline.com, January 2013

Someone buys a commercial property after months of research and negotiation, and soon afterward the property's real estate taxes skyrocket. The pattern — or at least the degree of the tax increase — often catches even sophisticated buyers unaware because rules that govern real estate assessments vary from state to state and town to town.

Investors who blindly assume that real estate taxes will remain flat after a sale risk disastrous consequences. Tax increases of 50 percent or more are not uncommon following a sale. A clear understanding of how the taxes could change can significantly influence what a buyer is willing to pay for real estate.

"It happens every day," says J. Kieran Jennings, managing partner of Cleveland-based law firm Siegel Jennings, which specializes in commercial property tax. "The phone rings and it's the new owner of a property who has just been hit with a huge tax increase, wanting to know what happened. Sometimes we can fight the tax increase after the fact, but it's always better to know what to expect before you buy. We prefer to get the phone call before the purchase, when we can help plan."

Know the market

Real estate taxes are based on a property's assessment, but tax rules vary widely by location. Some states ban the assessor from changing a property's assessment to match the sale price. Other states automatically raise the assessment to the sale price. Some states have a hybrid system in which a taxing district can file an appeal to increase the assessment after a sale. Knowing the rules of the particular jurisdiction is critical to proper tax planning.

Pennsylvania, for example, has a hybrid system. Pennsylvania law prohibits the county assessor from spot assessing, or independently changing the assessment of only one property. Under another Pennsylvania statute, however, taxing districts can file appeals to increase specific assessments, and many districts use sales to cherry-pick which properties to appeal.

Within Pennsylvania, and even within a particular county, school districts diverge in their practices of filing appeals. In Pittsburgh alone, one district might file appeals on all properties with sales greater than a certain percentage of the assessment, while another district might not file any appeals where the sale price is less than $1 million. A few districts have decided not to file any appeals.

Across the state line, in Ohio, the situation is a little different. Ohio has 88 counties and county auditors set assessments. "It boils down to knowing the county," says Jennings. Ohio has a six-year reappraisal cycle when every property gets a new assessment, and a three-year update cycle when the assessment can be modified.

Owners should expect the sale to be taken into account in a reappraisal year. Mid-cycle, the county auditor also can change an assessment to reflect a sale price. Just as in Pennsylvania, districts can file increase appeals, and many do. Generally, Pennsylvania and Ohio see more increase appeals by taxing districts than do other nearby states.

In New Jersey, the law is similar to Pennsylvania's, but the practical effect is different. "It's a trap for the unwary," says Philip J. Giannuario, a property tax lawyer with Garippa Lotz & Giannuario in New Jersey.

Giannuario cautions property owners to investigate the tax climate carefully before buying. Under New Jersey law, assessments are set by towns. A town's assessor cannot use a recent sale as a reason to change a property's assessment.

Just as in Pennsylvania, such spot assessments are banned. The towns can, however, opt to file assessment appeals to increase the assessments of properties that sell. With more than 650 towns in the state, Giannuario says that whether a particular town actually files increase assessment appeals depends on the town. The key is to know each town's practice.

Budget for worst-case scenario

The first step toward making a tax-informed decision on a real estate purchase is to consult with a property tax professional knowledgeable in the market. Based on the nuances of the particular jurisdiction, if an increase in an assessment is a possibility the tax professional can help the buyer to project a budget as if the assessment were raised to the potential sale price. That analysis could reduce the sum that the potential buyer is willing to offer for the property.

Knowing the worst-case scenario also can help the buyer notify tenants about potential outcomes so that they, in turn, can budget or even escrow funds. A little preparation goes a long way and is an easy step to avoid surprises down the road.

sdipaolo150Sharon F. DiPaolo is a partner in the law firm of Siegel Jennings Co., L.P.A., the Ohio and Western Pennsylvania member of American Property Tax Counsel, the national affiliation of property tax attorneys. She can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

Jan
16

Industrial Park Wants Full Reassessment Review

Tim Schooley, Pittsburgh Business Times Reporter covers the case lead by APTC Pennsylvania Member - Sharon DiPaolo, Esq., as published by Pittsburgh Business Times January, 2012

The owners of the Robert J. Casey Industrial Park on the North Side are petitioning the Allegheny Court of Common Pleas Judge R. Stanton Wettick to ensure commercial property owners have to same opportunity to appeal their reassessments as residential property owners in Allegheny Count, according to a court filing.

The petition to intervene in the ongoing legal challenge of the reassessment values for Allegheny County is the latest plea to argue for uniform standards to tax the value of real estate in Allegheny County in a legal battle in which the issue of uniformity has been upheld by Wettick.

The family ownership of the eight-parcel industrial park saw its reassessed value jump by 340 percent, according to court documents, rising from a little more than $2.6 million in its 2011 assessed value to a reassessed value for 2013 of $11,864)00.

Sharon F. DiPaolo, a lawyer who represent the owners of the Robert J. Casey Industrial Park, argued in her petition that Allegheny County currently provides no information online regarding comparable sales to determine new assessments or other pertinent information used.

"The interests of commercial property owners are not adequately represented by the current parties and intervenors in the instant action", she wrote.

Of major concern for DiPaolo and her client is the ability to pursue an informal hearing before the Board of Property Assessment Appeals and Review, where a broader a discussion of a property's relative worth can be discussed, rather than a formal appeal before the county's board of viewers.

So far, the reassessment appeals process has been negotiated over between Allegheny County, the plaintiffs, who represent residential property owners, and Pittsburgh Public Schools, which convinced Wettick to delay implementation of the new assessed values

until 2013 so that reassessment appeals can be established to determine how to reset tax rates.

According to court documents, the reassessed values of commercial properties in Pittsburgh rose by 71.08 percent while the city's residential property increased by 46.89 percent.

"If this process were to be adopted, a commercial property owner which files an appeal before the Board of Property Assessment Appeals and Review could be entirely deprived .... by its adjudication by a taxing body's unilateral request to move the appeal to the board of viewers," wrote DiPaolo. "If this procedure were to be adopted, it would violate commercial property owners' right to due process."

At a hearing on Thursday morning, Judge Wettick agreed to consider the petition for next Thursday's scheduled hearing, said DiPaolo.

She added that the owners of the industrial park as well as other commercial property owners expressed the concern that the scale of the increased assessments on their real estate could force them out of business.

She emphasized the importance of the informal review process for commercial property owners, noting a commercial appraisal costs $5,000 to $10,000. A successful voluntary review can result in immediate tax relief, she added, further explaining that a burden of proof shifts to the taxing body after a successful informal review as well.

"If the commercial owners have to pay on their new assessments before it gets adjudicated it's really going to hurt," she said.

Tim Schooley covers retail, real estate, small business, hospitality and media. Contact him at This email address is being protected from spambots. You need JavaScript enabled to view it. or (412) 208-3826.

dipaolo web Sharon F. DiPaolo is a partner in the law firm of Siegel Siegel Johnson & Jennings, the Ohio and Western Pennsylvania member of American Property Tax Counsel, the national affiliation of property tax attorneys. She can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

Nov
16

Prepare now for Allegheny County Real Estate Assessments

"If the county has no direction as to what address the taxpayer prefers, it uses the property address as a default. Commercial property owners will often want their change notices to go to corporate headquarters and not to the property address..."

by Sharon DiPaolo, Esq., as published by Pittsburgh Post-Gazette, November 2011

There are a few simple things Allegheny County property owners can do now to prepare for their 2012 property assessments.

For city properties, new assessments will be mailed in December 2011. Informal hearings will be held in December 2011 and January 2012. The deadline to file formal appeals is Feb. 3, 2012.

No specific timetable is available for properties outside of the city, but based upon Allegheny County's progress in the reassessment project, notices will likely be mailed in late spring 2012 with a similar timetable for informal and formal appeals.

Even before receiving their new assessments, property owners can get ready now:

Check Your Addresses. The county maintains two addresses for every tax parcel -- the Change Notice Mailing address and the Tax Bill Mailing Address. If the county has no direction as to what address the taxpayer prefers, it uses the property address as a default. Commercial property owners will often want their change notices to go to corporate headquarters and not to the property address. Residential property owners will likely prefer to receive notice of changes in their assessments at the property address, rather than, say, their mortgage company.

To check your addresses go to http://www2.county.allegheny.pa.us/RealEstate/Default.aspx, type in your property address or parcel -- the two addresses for your property are listed on the bottom of the General Information tab.

To change your addresses, go to http://www.county.allegheny.pa.us/re/addrchg.aspx, and complete the Request for Address Change Form, and follow the directions for submission.

Important: The website instructions state that to change the Tax Bill Mailing address, one must notify both the Department of Real Estate and the County Treasurer's office -- the form itself omits the instruction that one must also make the submission to the County Treasurer's office.

Gather Your Information. Getting your information organized now will allow you to hit the ground running when you receive your preliminary notice.

For commercial properties, this means assembling the last three years of income statements, last three years of rent rolls, the lease (for a single-tenant property), and details concerning the structure (building size, acreage, year built and site plans) for owner-occupied properties.

Residential property owners should assemble information regarding sales of homes in their immediate neighborhood, any repair estimates for their home and photos of any problems with their home.

dipaolo web Sharon F. DiPaolo is a partner in the law firm of Siegel Siegel Johnson & Jennings, the Ohio and Western Pennsylvania member of American Property Tax Counsel, the national affiliation of property tax attorneys. She can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

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