Real property taxes are the largest variable cost of owning or leasing real estate and the cost fluctuates. High property taxes can impede your company’s growth by increasing the cost of occupancy and depleting your cash flow or savings. We recommend reviewing your property tax assessment when it arrives to determine if it is correct and reflective of the fair market value. Given the impact, these taxes should be treated like other big business decisions instead of simply accepting them as an accounting line item.
Reasons to Appeal:
- The fair market value estimated by the county assessor is higher than the actual fair market value. Fair market value is commonly estimated by using the generally accepted valuation methods of real estate appraisal and includes consideration of the three approaches to value: the cost approach, the comparable sales approach, and the income approach.
- The assessor made a clerical error in the valuation that led to an inflated value. Clerical errors can include:
- Land acreage
- Gross Building Area or Net Leasable Area
- Construction year
- Construction type
- The assessor valued the same property twice which created double taxation of the same asset. This can occur in states that tax real estate in addition to business personal property.
- Your assessment is not in line with similar properties in the local area. For example, Texas law mandates that no property should be assessed at a value higher than “the median appraised value of a reasonable number of comparable properties appropriately adjusted.”
- The assessment value of real property exceeded the allowable increase in value compared to the previous year. For example, California law mandates that real property value not increase more than 2%, unless there is new construction or a change in ownership.
- Your property may have deferred maintenance items that are not factored into the value since the assessor can’t look at every asset individually. Deferred maintenance items are usually components essential to the economic life and physical useful life of the property and, if not addressed, will lead to a drop in the integrity of the building and affect the value over time.
Fortunately, you don't have to accept a high property tax assessment. Seeking an assessment reduction can lead to tax savings and the opportunity to invest elsewhere in the business. MarksNelson can help you with property tax compliance, assessment value review, and tax appeal functions. For an example, read how we helped another organization achieve a significant property tax savings.
