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Property Tax Resources

May
30

A Valuable Lesson

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.

  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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May
29

What's The Basis For Your Assessment?

Assessors must value only the 'sticks and bricks,' not the business enterprise.

What can Indiana assessors value for property tax purposes? The answer is simple – the fee simple interest and nothing more. Yet assessors stray from that straightforward rule with alarming frequency.

In valuing land and improvements, assessors are not permitted to assign value to personal property; that is assessed separately. They also must refrain from assessing intangible assets – which are non-taxable – or the business operations conducted on or within a property. Profits may be subject to corporate income tax, but not property tax.

The fee simple interest is the absolute, unencumbered ownership of the real property, the sticks and bricks, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat.

A fee simple interest means the owner retains the right to sell, lease or occupy the property. If the assessor values more than the fee simple interest, he or she has gone too far. Such assessments are not only erroneous as a matter of law, but also bad public policy because they result in double or otherwise illegal taxation.

Establishing Precedent

The Indiana Board of Tax Review, which oversees property tax appeals at the state level, has recognized that the market value and market value-in-use standards do not permit “assessors to assess things other than real property rights for ad valorem taxation.” In fact, the Indiana Tax Court has dismissed assessors’ efforts to value more than a property’s fee simple interest.

In 2013, the court rejected an assessor’s reliance on above-market contract rents to establish a commercial property’s value. The taxpayer based its rents on sale-leaseback transactions, which included an investment component, and thus sold more than ownership rights in property.

In an earlier ruling, the court agreed that “one should approach the rental data from [sale-leaseback] transactions with caution, taking care to ascertain whether the sales prices/contract rents reflect real property value alone, or whether they include the value of certain other economic interests.”

Indiana law requires assessors to determine a property’s true tax value, which for property other than agricultural land means the “market value-in-use of a property for its current use, as reflected by the utility received by the owner or by a similar user, from the property.”

Too often assessors misunderstand and misapply this standard by seeking to value the taxpayer’s specific, on-site business operations.

Profitability is Irrelevant

Even if the taxpayer’s business is successful, the building in which its business is regularly conducted must be valued no differently than a similar, vacant building. Consider this ex-ample:

In an industrial park, two 10-year-old buildings sit side-by-side, identical in size, shape, condition, construction materials and workmanship. The same external or economic factors impact both properties’ values.

On the assessment date, an extremely profitable business uses Building A at full capacity and around the clock. In contrast, Building B is vacant, though it had previously served the same general purpose as Building A. Despite the owner’s best efforts, no business is conducted on the property.

Objective, reliable market evidence undisputedly indicates that the true tax value of the fee simple interest of Building B is $1 million as of the date of value.

What is the indicated value of the fee simple interest of Building A? It’s (fee) simple: $1 million.

How can that be, especially when business is going gangbusters inside Building A? The answer is that we are not valuing that business activity. In an arm’s length transaction, assuming a fair sale occurs, a reasonable and prudent third party looking to acquire either building would pay no more than the value of the sticks and bricks – $1 million – regardless of the profitability or lack thereof of business operations conducted there.

Let’s further assume that the owner of Building A was instead the third-party buyer, faced with the same choice of two identical buildings, one vacant and the other occupied for profitable uses.

Even knowing with near certainty that its business operations would be remarkably lucrative, the buyer would not pay $1 more for either property than the market would bear. According to the market, both properties are valued at $1 million.

The buyer is not acquiring a trade name or workforce, or the seller’s trademarks, trade secrets, machinery and equipment, customer lists, licenses or contracts. It is acquiring land, a building, and yard improvements, and the value of those for both buildings is the same.

Nobody said determining the fair value of property is always easy. But in Indiana it should always be fee simple.

Brent Auberry

Brent A. Auberry is a Partner in the Indianapolis law firm of Faegre Baker Daniels LLP, the Indiana member of the American Property Tax Counsel. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..  

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May
21

Texas Extends Lucrative Tax Incentive

Program is designed to help entice companies and developers to the state.

Economists anticipate unprecedented capital investment in Texas over the next few decades, and tax jurisdictions in Texas are no doubt eager to take advantage of this influx of capital. Increasing property tax rates and limited manufacturing and construction resources have hampered Texas' economic development efforts on the ever-competitive national stage, however.

So, in the spirit of the Texas Economic Development Corp.'s "Texas Wide Open for Business" marketing program, lawmakers have extended two of the state's most popular and lucrative tax incentives programs in order to entice companies and developers here. Those incentives are property tax abatements and a program to temporarily limit increases on the appraised value of capital investments at properties taxed by school districts. Many companies have already discovered that the best way to reduce the property tax burden during early project investment years is through local property tax incentives. But what do these programs offer, and who should  use them?

The recently renewed Chapter 312 of the Texas Property Tax Code, also known as the Property Redevelopment and Tax Abatement Act, allows the taxpayer and local taxing unit to create agreements exempting all or part of an appraised property value increase from taxation for up to 10 years.

This incentive promotes economic development in the state through major capital investment, job creation, job retention and the utilization of existing local vendors. Property owners often seek abatement incentives for projects ranging from retail shopping centers and distribution warehouses to natural gas processing plants and wind farms. Local taxing units that wish to provide property tax abatements must state their intent to provide the incentive, and then adopt abatement guidelines and criteria. Typically, abatement guidelines and criteria reflect the specific needs of the taxing unit. Therefore, abatement guidelines and criteria, such as minimum investment amounts and/or the number of jobs to be created, often vary from county to county. A company considering investment in Texas should research proposed sites in advance to confirm that the potential project meets local abatement guidelines and criteria.

The Texas Legislature reauthorized the use of property tax abatements until Sept. 1, 2019. In 2001, the 77th Texas Legislature  enacted House Bill 1200 Creating Texas Tax Code Chapter 313, the Texas Economic Development Act. Under Chapter 313, a qualified applicant may apply to a school district for a limitation on the appraised value of their new capital investment project for 10 years. The limitation on the appraised value applies specifically to the school district's maintenance-and-operations tax rate, while its interest and sinking tax rate; or bond rate, applies to the full taxable value of the property. This program allows Texas school districts to increase their ad valorem tax bases by attracting large-scale capital investments, and creates desirable, well-paying jobs in the process. Recently, the 83rd Legislature extended the Chapter 313 Act through 2022 and added various rule changes, including the extension of the value limitation from eight to 10 years, and the inclusion of contractor jobs as counting toward job creation requirements for a project.

The Texas Comptroller's Economic Development & Analysis Division, however, is now required to verify that an eligible project will generate sufficient tax revenues over a 25-year period to offset the school district's maintenance-and-operations tax revenues lost as a result of entering into the value limitation agreement. Additionally, the Comptroller must also find that the value limitation incentive is a determining factor in the applicant's decision to invest capital and construct the project in Texas. Reviewing any potential incentive project with an experienced tax professional; offers the best opportunity to create an effective property tax strategy.

Blas Ortiz jpgBlas Ortiz is a tax consultant with Texas law firm of Popp Hutcheson PLLC. The firm devotes its practice to the representation of taxpayers in property tax disputes and is the Texas member of the American Property Tax Counsel (APTC), the national affiliation of property tax attorneys. Mr. Ortiz can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

 

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May
05

Property Tax Assessments Spiral Out Of Control In New York

Massive assessment hikes in New York City confirm that Mayor Bill de Blasio intends to extract as much revenue as possible from real estate, one of the city’s most important industries. This will kill the golden goose underlying the city’s economic recovery.

The city released its tentative assessment roll for the 2015-2016 tax year on Jan. 15, 2015, revealing painful and substantial increases in market value for both residential and commercial properties. The city pumped up the value of residential properties by almost 11 percent, while driving up commercial assessments by 12 percent over the prior tax year.

These increases are nearly double the rate of increase effected by last year’s final assessment roll, where residential market values increased by 6.6 percent and commercial market values increased by 7 percent over the 2013­-2014 roll.

The compound effect of year-after-year increases is a crushing burden to owners and tenants, but the higher end of the commercial property spectrum was particularly hard hit in the latest assessment roll. Owners of trophy office buildings saw their market values spike by more than 31 percent over the prior year’s values.

Even worse, owners saw the market value of luxury hotels soar almost 65 percent over the previous year’s values for assessment purposes. The city is rough-handling these properties with mounting harshness on both sides of the income and expense equation.

As a result of the new citywide assessments, real estate taxes in the city continue to substantially erode owners’ and developers’ bottom lines. Based on an analysis of the most re­cent assessment roll, the percentage of income now dedicated to paying real estate taxes is so high that the city has essentially become a silent partner in these properties — without the inher­ent risks of ownership, of course.

Consider the example of a non-exempt Manhattan residential property, with annual net operating income of $1 million before real estate taxes. Factoring in the current municipal residential tax rate and the prevailing capitalization rates used by the City Department of Finance, our hypothetical property yields a taxable assessed value of approximately $3.6 million and a property tax bill of about $463,000.

That burden means the property owner in this example is paying 46 percent of his or her net income in real estate taxes alone. Even analyzing the numbers based on a gross income of $1.4 million (based on the Department of Finance’s most recent expense guidelines), city property taxes account for more than one-third of the property’s overall expenses.

The situation is similarly oppressive for commercial properties, although they currently enjoy a lower property tax rate and higher capitalization rates than their residential counterparts — at least according to the most recent New York City Department of Finance Assessment Guidelines. Utilizing a similar analysis to the residential example above, the owner of a midtown Manhattan office building with a net operating income of $1 million would be paying just under 40 percent of its net operating income and almost 30 percent of its gross income in real estate taxes.

Based on the de Blasio administration’s ever-increasing crusade for revenue, owners and developers can expect this trend to continue. However, there are a number of avenues for them to pursue in order to ameliorate the effects of this rapid and seemingly endless rise.

While the release of the 2015-2016 assessment roll may have upset many taxpayers, it also marks an opportunity. That’s because the roll’s release begins the process under which owners and developers can initiate challenges to their property tax assessments. Based on the situation described above, it is likely that most of them will be doing exactly that.

Owners must challenge their assessments by filing applications and supporting documentation to the New York City Tax Commission. The owner’s representative must prepare a detailed analysis of conditions at the property, an analysis of leasing and vacancy, and a carefully prepared set of comparable properties to support the relief sought.

The Tax Commission is the administrative agency charged with annually hearing owners’ real estate tax challenges. The agency has the power to offer a reduction in the challenged assessment. Owners who are dissatisfied with the results of this Tax Commission review are entitled to challenge their assessments in New York State Supreme Court.

JoelMarcusJoel R. Marcus is a partner in the New York City law firm of Marcus & Pollack LLP, the New York City 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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Apr
30

Fallacious Cap Rates Unfairly Increase Tax Burden

Commercial property owners must challenge burdensome and unfair property taxes, and more often than not that task requires challenging the assessor’s assumption of a market cap rate.

The process may begin as informal meetings with assessing authorities, followed by administrative appeals and ultimately, if needed, court proceedings. The parties to these dialogues all recognize that the preferred method to determine the value of commercial properties is the income approach, and will usually agree on the factual elements related to the value calculation.

The most critical element in the income approach is the cap rate, however, and that point is also the most likely source of disagreement.

Cap rates by nature are subject to opinion and manipulation, because cap rates reflect judgments of multiple factors. In defending their value opinion, assessors frequently cite a “market-derived cap rate.” While there is some validity to determining a cap rate from sales of similar properties in the same market, the method as widely used by assessors yields errant results.

Sometimes the assessor’s market-derived cap rate is supported by sales, but the assessor rarely provides an analysis of those sales, showing some performance history of the sold properties. The assessor simply matches market income against the sale price, magically determining a cap rate. The assessor then applies the rate thus determined to case after case, in a one-size-fits-all analysis. It’s all pretty impressive and takes on an air of finality, as if carried down from the mountain on stone tablets.

The fallacy is that a cap rate derived as described bears no relevance to the value of the commercial real estate under appeal.

The assessor, by law, is limited to valuing real property. But the sales used as the basis for the assessor’s market-derived cap rate are the sales of entire enterprises, and consequently indicate value for the entire enterprise. It fails to achieve the goal of finding a value indicator of the real property that houses the enterprise.

The cap rate derived from sales of going concerns is different from one derived from sales of the properties that the enterprises occupy.

Taxpayers must challenge the assessor’s market-derived cap rate to achieve equitable taxation. The flawed methodology is as inappropriate as using the sales comparison approach of going concerns to determine real property value.

The enterprise value cap rate is based on the return on the investment, in the form of property value appreciation and rental income, plus the return of the investment in the form of business revenue. In addition to tangible components, enterprise value entails tax-exempt intangibles such as advertising, a trained work force, market niches or dominance, furniture, fixtures, affiliation such as franchise rights, all of which must be separated from the real property component in a property tax assessment.

Real property value is just one component of enterprise value, so an assessor’s market-derived cap rate that fails to segregate non-real-estate components is useless in valuing the property.

Plan of attack

Prepare to challenge an assessment by analyzing the assessor’s data base used in the valuation. What sold, and at what sale price? Investors buy and sell commercial properties as going concerns, which may generate returns that are more or less than the return from the property alone.

Consider the design and function of the properties used in the assessor’s data base as compared to the subject property. For instance, an assessor in the Midwest recently valued a large corporate headquarters building using a market-derived cap rate. Its data base consisted of regional office building sales, including gross income at the time of sale, sales price, size and location. It used market rents to determine property income.

The assessors study used sales of fully occupied, multitenant buildings, then applied that information to a single-tenant structure which had been designed as a national corporate headquarters and was roughly 33 percent occupied. Typical of such studies, the data was inapplicable to the single-tenant, largely vacant subject building.

To say that the going concern cap rate for hotels is X, or that the rate for golf courses is Y, fails to shed light on the cap rate for the real property component of a property.

Market-derived cap rate studies invariably end up being used as indicators—at best—of the value of going concerns, of which one component may be real property. They may look impressive, even somewhat persuasive, but they must be carefully reviewed to determine just what they represent, otherwise the taxpayer may be saddled with a grossly excessive property tax assessment.

Wallach90Jerome Wallach is the senior partner in The Wallach Law Firm based in St. Louis, Missouri. The firm is the Missouri member of American Property Tax Counsel, the national affiliation of property tax attorneys. Jerry Wallach can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

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Apr
30

FIGHTING BACK - Big-Box Owners Contest User-Based Tax Assessments

The big-box concept changed the face of retail in the 1960s. It also skewed the way that assessors value retail property for tax purposes. To this day, taxpayers across the United States have been fighting back—and in Wisconsin, Kansas and Michigan, they are winning.

The problems arose out of financing arrangements such as prearranged sale-leasebacks or build-to-suit transactions to construct or develop a big box. Companies used these methods to keep cash available for core business purposes, and repaid the sale proceeds as rent.

These arrangements created financing rents that assessors mistakenly adopted as market rents. Further, once the above-market lease was in place, owners typically sold the lease and property to an investor at a sales price reflecting the value of the longterm, above-market lease in place to a high-credit tenant. The sales never reflected the fair market value of bricks and sticks alone, because the transaction transferred more than real estate.

Assessors then relied upon these sales without adjustment to calculate fee-simple value. Finally, assessors used the above-market rents and leased-fee sales to value owner-occupied retail stores, spreading the problem to all retail.

Guiding Principles

The concept of valuing property at its fair market value of the fee simple vanished in many locations as governmental assessors adopted this leased-fee concept, occasioning substantial valuation increases for property tax purposes. The user of the property and their contract rent trumped longstanding appraisal concepts of use and market rent. The trend eroded the requirement for a uniform and equal rate of assessment and taxation at fair market value. The same land and building could now have vastly different real property values, depending on the tenant.

For instance, a building leased to Walmart would have a higher value than if the same were leased to a local department store. How was it possible that the value of a building depended on the name of the tenant? Assessors could not distinguish between sales of properties with an income stream related to the property and sales of properties with an income stream related to the business value of the tenant.

Taxpayers successfully fought back in Wisconsin, Kansas and Michigan.

In 2008, the Wisconsin Supreme Court agreed with Walgreens that the assessor had not valued its properties in fee simple. The court focused on the issue of an above-market lease and the impact on valuation, and concluded that a “lease never increases the market value of the real property rights to the fee simple estate.”

The ruling directed assessors to use market rents, not the contract or financing rents. The court was not persuaded to move away from fee-simple valuation to a business valuation, as argued by the assessor. The assessor’s methodology could cause “extreme disparities and variations in assessments,” something the court was not willing to tolerate.

The Kansas Court of Appeals case followed in 2012, prosecuted by Best Buy, the single tenant in the building. The decision made three things clear for commercial property owners. First, Kansas is a fee-simple state. The court rejected the county appraiser’s argument for a leased-fee value. Second, build-to-suit rates are not market rents and cannot be used unless after review of the lease it can be adjusted to market rental information. Finally, market rents are those rents that a property could expect to pay in an open and competitive market. Market rent is not whatever financing arrangements a tenant can procure based on their costs and credit ratings.

Most recently, the Michigan Supreme Court addressed how these financing arrangements are impacting valuations of owner-occupied big-box retail. In 2014, the court ruled on cases brought by Lowe’s Home Improvement and Home Depot, both owner-occupants.

The court dismissed the township’s argument to consider the user of the property, rather than the use of the property. The county method would mistakenly arrive at a value in use, rather than a market value, the court found.

The court concurred with the taxpayers that the sales comparison approach to value was the most appropriate method to value owner-occupied properties, noting the approach must be developed using market sales of fee-simple interests. Leased fee sales may only be used if adjusted to reflect fee simple. The court was unimpressed by the township appraiser’s conclusion that no adjustments were necessary, with the court finding his report to be shockingly deceptive on this point.

Whether it was failing to understand basic appraisal theory or the desire to inflate values, assessors plugged bad information into market-based valuation models, and it has taken years to begin unwinding the damage and restoring basic appraisal concepts of fee simple, uniformity and equality. Taxpayers are taking the lead from Wisconsin, Kansas and Michigan, and have cases pending in many, if not all, jurisdictions.

TerrillPhoto90Linda Terrill is a partner in the Leawood, Kansas. law firm Neill, Terrill & Embree, the Kansas and Nebraska 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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Apr
01

LA's Seismic-Retrofitting Plan May Affect Property Taxes

Mayor Garcetti’s “Resilience by Design” plan may expose building owners to property tax assessments for new construction.

Los Angeles Mayor Eric Garcetti recently unveiled his plan to require owners of older buildings to seismically retrofit their properties.  The Mayoral Seismic Safety Task Force published retrofitting requirements on Dec. 8 as part of a report called “Resilience by Design.”

The question for taxpayers with regards to this report is whether building improvements mandated by the plan may trigger property reassessments that are required on new construction.  Before speculating on how the mayor’s plan will impact their properties, owners should take a close look at the relevant new and existing rules.  The question for taxpayers with regards to this report is whether building improvements mandated by the plan may trigger property reassessments that are required on new construction.  Before speculating on how the mayor’s plan will impact their properties, owners should take a close look at the relevant new and existing rules.

The Seismic-Retrofitting Plan

Mayor Garcetti’s plan targets two types of properties for earthquake upgrades: soft, first-story buildings and reinforced concrete buildings.  The first category consists of wood-frame buildings where the first floor has large openings.  These may include tuck-under parking, garage doors and retail display windows.

The second category includes concrete buildings built before the implementation of the 1976 building code.  Those structures are at higher risk of collapse because parts of the building, such as the columns and frame connectors, are too brittle and may break in strong shaking.  The weight of the concrete in these buildings makes them particularly deadly when they fail.

The Seismic Safety Task Force recommended the passage of ordinances that would require soft, first-story building owners to report if seismic retrofitting is required within one year of the ordinance’s approval, and to complete such retrofits within five years.  The proposed ordinance would also require owners of concrete buildings to report whether seismic retrofitting is required within five years, and to complete such retrofits within 25 years.  Concrete buildings would have to meet the Basic Safety Objective of the American Society of Civil Engineers (ASCE) Standard 41 or an equivalent standard.

Is Retrofitting Assessable as New Construction?

As a general rule, new construction is assessable for property tax purposes in California.  Consequently, the seismic retrofitting required under the plan would constitute assessable “new construction,” thereby raising property tax assessments on the retrofitted properties.  However, under a law approved by California voters in 2010, seismic-retrofitting is excluded from property tax assessment.

The 2010 law exempts from property tax assessment “seismic retrofitting improvements and improvements utilizing earthquake hazard mitigation technologies.”  In layman’s terms, this refers to reconstructing an existing building to remove falling hazards, such as parapets, cornices and building cladding that pose serious dangers.  It also means strengthening an existing building to resist an earthquake and reduce hazards to the life and safety of building occupants exiting the building during an earthquake.

The new law also exempts from taxation new construction performed on an existing building that the local government has identified to be hazardous to life in the event of an earth-quake.  Notably, the law excludes entirely new buildings or alterations to existing buildings that are made at the same time as the seismic-retrofitting, such as new plumbing or electrical systems.

Retrofitting Under LA’s Plan Will Likely Be Exempt

The Mayoral Seismic Safety Task Force did not take into consideration the possibility that seismic-retrofitting work performed under the task force’s proposed ordinances would be assessable as new construction, and therefore subject property owners to increased property tax assessments.  The Task Force could have done so by incorporating the seismic retrofitting construction standards specified in the law approved by voters in 2010.

Nevertheless, some fairly broad language in the property tax exemption statute will likely permit the property tax exemption for seismic retrofitting to be extended to construction work that building owners perform in compliance with Mayor Garcetti’s proposed plan.  It is also possible the city will amend the ordinances proposed by the Seismic Safety Task Force to incorporate the seismic safety standards referenced in the 2010 property tax exemption law.

Claiming the Seismic-Retrofitting Exemption

Although seismic-retrofitting work is generally exempted from property taxation, such exemption is not automatic.  The 2010 law requires owners of properties who have carried out seismic retrofitting to submit a claim form to their county assessor to receive the property tax exemption.

The owner must submit the form prior to or within 30 days of completion of the seismic-retrofitting work.  They must submit documents supporting the claim no later than six months after completing the seismic-retrofitting project.  The property owner, his contractor, architect, or civil or structural engineer may complete the claim form and provide the supporting documentation.

Once the taxpayer has submitted the claim form and supporting documents, the city’s building department must identify the portions of the project that were seismic-retrofitting components.  That will determine whether the property is exempt from a new assessment, or has undergone new construction unrelated to the seismic retrofit that will trigger a new assessment. 

Cris ONeall

Cris K. O'Neall is a partner with Cahill, Davis & O'Neall LLP, the California 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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Mar
24

Georgia Taxpayers Risk Losing Arbitration Rights in Tax Appeals

IT'S DECISION TIME

"Georgia taxpayers risk losing arbitration rights in tax appeals."

Although the Georgia General Assembly enacted statutory provisions governing property tax arbitration procedures in 2009, counties file motions to dismiss tax-payer arbitration requests.  An appellate court has yet to weigh in on the issue, but a court decision would help to avoid the repetitious filings of dis-missal motions by counties, and put an end to taxpayers having to continually fight for the right to have their appeals heard in arbitration by a licensed professional appraiser.

- - - - -   It is time for an appellate court decision that could well put this matter to rest.   - - -

The arbitration statute provides that taxpayers may elect to have their real estate property tax appeal heard by a real property arbitrator — an appraiser as classified by the Georgia Real Estate Commission and the Georgia Real Estate Appraisers Board.  After hearing evidence, in the style of baseball arbitration, the arbitrator is required to select either the board of tax assessors’ value or the taxpayer’s value as set forth in the certified appraisal.  The law makes the arbitrator’s decision binding and precludes further appeal.

County tax assessors have filed motions to dismiss and briefs in support in more than one county across Georgia contending that the arbitration provisions violate the Georgia Constitution.  The assessors seek to have the tax appeal arbitration statutory provisions declared unconstitutional and the arbitration appeals dismissed.

Here are the assessors’ main contentions, and the taxpayers’ arguments against those same points.

Judicial authority: Assessors con-tend the arbitration statute violates provisions of the Georgia Constitution that require that the judicial power of the state shall be vested exclusively in the courts.  The assessors’ position is that the arbitration statute creates a separate judicial forum that is required to declare what the law is and apply the law to the case.  They contend that in order to determine the fair market value of a property the arbitrator is required to declare and apply Georgia law.

Taxpayers respond that the Georgia Constitution is not violated because the arbitrator is not a court or a judge.  The arbitrator’s actions are authorized because the General Assembly can create administrative agencies which are permitted to perform quasi-judicial functions.

Separation of powers: Assessors argue that the statute violates provisions of the Georgia Constitution that provide for separation of powers.  The assessors contend that by enacting the arbitration statute, the legislative branch has encroached upon the powers of the judicial branch.

Taxpayers respond that the specified provisions do not apply to local governments, and that there is no prohibition against administrative officers exercising quasi-judicial powers.

Uniform valuation: The assessors further contend that the arbitration statute violates the constitutional requirement that property must be valued uniformly with other property of the same class, because the statute requires that the arbitrator must select either the value set forth by the county tax assessors or the value set forth by the taxpayer.  Similarly, the assessors contend that the arbitration statute violates the equal protection clause of the Georgia Constitution because owners of like properties are not provided equal protection of the law.

Taxpayers respond that just because an arbitrator may possibly not agree with the value set by the county board of tax assessors does not mean that the uniformity provisions of the Georgia Constitution are violated.

The Taxpayer Position

The taxpayers contend that the Georgia Superior Courts have no jurisdiction over the matter because the arbitration provisions only require that the Chief Judge be involved for the purpose of selecting an arbitrator if the parties cannot agree, and issuing an order requiring the arbitration to proceed.  The taxpayers also contend that the tax assessors have no power to sue and cannot obtain a declaration by the court that the statute is unconstitutional.  The taxpayers point out that the assessors have no constitutional rights that have been violated.

At the time of this writing it is unknown which party will prevail, but interesting questions have been raised.  Tax arbitration provisions in various forms have existed on and off in Georgia for more than a century, and if the arbitration provisions are declared unconstitutional, taxpayers will be deprived of a statutory format designed to afford relief from unjust valuations through the mechanism of a decision made by a knowledgeable professional, based on information supplied by the county tax assessors and a certified appraisal obtained by the taxpayer.

It is time for an appellate court decision that could well put the matter to rest, and save taxpayers the need to expend time and effort fighting for their statutorily established right to property tax arbitration.

StuckeyLisa Stuckey is a partner in the Atlanta law firm of Ragsdale, Beals, Seigler, Patterson & Gray, LLP, the Georgia 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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Mar
06

Tax Equation: Know When Your Property Tax Assessment Is Excessive

Restaurant owners and operators manage a long list of expenses, but one cost item that may offer significant savings– real estate taxes – often goes overlooked.  Even if the restaurant leases its space, it may have the right under the lease to protest tax assessments.

Restaurateurs often look at property tax as a fixed expense, one that warrants little attention unless there is a drastic change from one year to the next.  But failure to examine a property tax assessment may mean the taxpayer is leaving money on the table.

For example, the owner of a free-standing restaurant assessed at $1 million files a protest and convinces tax authorities to lower the assessment to $800,000.  Using a local tax rate of 2.5%, the lower assessed value would equal $5,000 per year in savings.  In some areas the tax rate may be significantly higher, meaning greater savings.  Depending on the jurisdiction, that savings could continue for years.

HOW TO REVIEW ASSESSMENTS
What is an assessor attempting to measure in an assessment, and what constitutes a bad assessment?  Procedures vary from state to state, but in most places property taxes are based on the fair market value of the property as determined by the local assessor.  The market value is typically considered to be the price that the property would sell for in an open-market, arm's length sale as of the assessment date.

There are a number of reasons why some assessments miss the mark in attempting to establish a fair taxable value.  Many initial assessments are done by mass appraisal firms on a city- or county-wide scale, without much consideration for the individual situation of a particular property.  Assessors also may have inaccurate data on a given restaurant building, such as incorrect square footage or age, or amenities that do not actually exist.

An assessment may be unfairly high because it is based on a sale that occurred in a better market, or because it reflects costs to construct the building but lacks appropriate deductions for depreciation.  An assessment may also reflect a lease with an above-market rental rate negotiated in different market conditions, or negotiated many years prior to the assessment date.

Given so many opportunities for error, it's a good idea to review each assessment.  The first thing to check is the factual data the assessor used in the determination of value, including building area, acreage, year built, type of building and finish and amenities.  Experienced legal counsel can help with these points and proceed with a more technical review of the assessment to determine whether or not to protest the assessed value.

HOW TO PROTEST
Appeal deadlines vary from state to state.  Some states have an annual filing deadline, such as Ohio, where the deadline is March 31.  Other states allow a certain amount of time – for example, 30 days –from the mailing of the assessment notice or tax bill.

Some jurisdictions have informal procedures prior to filing the formal appeal, where it is possible to meet with the assessor and share information.  In some cases, providing the assessor or reviewing body with income and expense information or comparable sales data will be enough to get the assessment corrected.  Other cases will require a formal appraisal prepared by an independent appraiser.  Appraisals done for tax purposes are unique and in most instances will require testimony from the appraiser.

In many jurisdictions, there is no filing fee for the initial appeal, while others may charge a modest filing fee in the neighborhood of $100.  If the state requires a formal appraisal, that can cost $2,500 or more, de-pending on the property type and complexities of the case.  Legal fees also vary, but property tax attorneys often work on a contingency basis where there is no charge for the initial review of the assessment.

Because valuation methods and appeal procedures differ greatly, not just from state to state but even within states, it is helpful to have an experienced tax professional assist in reviewing the assessment and in taking any necessary steps to correct it.  Knowledge of the local law, appeal procedures, personalities, and appraisers are invaluable in successfully lowering tax liability.

Real estate taxes needn't be a fixed expense that is entirely out of the taxpayer's control.  Review property tax assessments carefully for possible tax savings that could even increase the bottom line.

Cecilia Hyun 2015

Cecilia Hyun is an associate attorney at 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. She can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

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Jan
21

APTC Website Redesign Announcement

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APTC is proud to announce the release of our new website. Our new site has been redesigned with a fresh look and new features intended to enhance user experience and make information more accessible across a broad range of viewing devices.

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