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healthcare real estate

Healthcare Real Estate Consulting for Property Tax Management

/ Blog, Case Study, Commercial Property Tax

healthcare real estate

Healthcare real estate consulting plays a crucial role in optimizing the financial performance and operational efficiency of healthcare facilities. With ever-increasing complexities in property tax regulations, strategic management of these assets is essential. 

 

This guide highlights how effective healthcare real estate consulting can enhance financial performance through proficient property tax strategies.

Understanding the Needs of Healthcare Real Estate in Property Tax Management

 

Healthcare real estate consulting is essential within commercial real estate, focusing on facilities like medical office buildings and specialized healthcare organizations. Managing property taxes in this sector affects both financial performance and healthcare operations, influencing the quality of patient care.

 

Challenges include complex valuations due to specialized equipment and designs, compliance with varying regulations, strategic financial planning to optimize property tax liabilities and effective lease management.

 

Importance of Healthcare Real Estate Consulting

 

Healthcare real estate consultants address these challenges by:

  • Simplifying Complex Assessments: Utilizing advanced appraisal techniques to navigate property valuations accurately
  • Ensuring Compliance and Accuracy: Staying updated with regulatory changes to manage compliance effectively
  • Strategic Property Tax Planning: Providing foresight in property tax decisions to manage cash flows and fund critical services
  • Tailored Real Estate Services: Offering customized advice for renegotiating leases and optimizing facility operations

 

Consulting services help healthcare facilities manage property taxes efficiently, ensuring compliance, minimizing costs and enhancing the ability to provide top-notch patient care.

 

senior living health care

The Expanding Scope of Healthcare Real Estate

 

The healthcare real estate market is experiencing unprecedented growth, projected to expand significantly from $1,336.94 billion in 2023 to an even more robust figure by 2030, with a compound annual growth rate (CAGR) of 7.9%. 

 

This surge, as identified by Grand View Research, is fueled by demographic shifts, such as an aging population requiring more intensive and specialized healthcare services. Technological advancements are also crucial, enabling more sophisticated healthcare facilities to integrate cutting-edge technologies for improved patient care. The evolution in healthcare delivery models toward more outpatient care and telemedicine is also reshaping the demand for healthcare spaces.

Growing Market Demands

 

This dynamic growth highlights the importance of specialized healthcare real estate consulting. As the market expands, so does the complexity of the real estate needs of healthcare providers. 

 

Consultants specialized in healthcare real estate, like medical buildings, are more crucial than ever to help navigate this evolving landscape effectively. 

hospital interior

Key Property Tax Management Strategies for Healthcare Real Estate

 

As the market grows, managing the property taxes of expanding healthcare facilities becomes increasingly complex. Effective management strategies are essential to ensure that healthcare organizations do not face unexpected financial burdens that could detract from their primary care missions. 

 

Regular and thorough property assessments are crucial. These assessments must accurately reflect the unique values of highly specialized medical facilities, which often differ significantly from typical commercial properties.

 

Engaging a team of healthcare real estate consulting experts is critical to navigating these challenges. These professionals can secure more favorable property tax treatments through their deep understanding of the nuances in healthcare property valuation and property tax laws. 

 

They also employ advanced real estate solutions to maintain essential documentation and manage property taxes more efficiently, thus ensuring compliance with the latest regulations and optimizing potential property tax savings.

 

Furthermore, healthcare real estate consultants are pivotal in strategically planning and managing healthcare properties. They help facilities prepare for expansions, renovations or disposals, considering the implications of each action on property taxes and operational efficiency. Their expertise ensures that healthcare providers can focus on delivering exceptional patient care without the added burden of navigating complex real estate and property tax issues.

What are the key factors when selecting a healthcare real estate consultant?

 

When selecting a healthcare real estate consultant, key factors include experience in healthcare real estate, knowledge of property tax laws, track record of successful projects, understanding of healthcare regulations and ability to provide tailored solutions for your needs.

 

Additionally, it’s essential to assess their communication skills and client service approach. Effective communication ensures that your needs are understood and met, while a client-centric service approach signifies a consultant’s commitment to fostering a productive and ongoing partnership. 

 

Look for consultants who offer clear, regular updates and are responsive to your inquiries and concerns, as this can significantly enhance the efficiency and effectiveness of the consulting service.

healthcare property consulting firm

Property Valuations Services’ (PVS) Healthcare Real Estate Portfolio

Expertise and Background of Our Consulting Team

 

Property Valuation Services (PVS) has a team of experts reviewing valuation methodologies and their correlation to a property’s actual fair market value. We are led by a Member of the Appraisal Institute (MAI) and the American Society of Appraisers (ASA).

 

As property tax professionals, we have diverse backgrounds in appraisal, property tax management, real estate, accounting, economics and finance, providing comprehensive and insightful solutions. 

 

We consistently discover property tax savings, even when working after other consulting and property tax firms. This diverse blend of expertise allows us to approach complex property taxation from multiple angles.

Case Studies

 

Our case studies showcase how PVS has refined property tax strategies for healthcare real estate throughout the past 27 years. We have served more than 800 clients and managed nearly 40,000 property tax parcels across all 50 states, establishing ourselves as a national leader in healthcare property tax valuation.

Hospital Operator Savings

 

Our healthcare real estate consulting was pivotal in securing significant financial benefits for a national hospital operator. We achieved $690,000 in property tax savings through meticulous assessment and strategic negotiations. 

 

This substantial reduction in property tax liabilities enhances the hospital’s financial health and frees up capital that can potentially be redirected toward improving patient care services and facility upgrades.

Assisted Living Facility Relief

 

During the COVID-19 pandemic, our consulting services proved especially beneficial for an assisted living facility struggling with low fill rates. By providing expert guidance and robust property tax management strategies, we facilitated $1.6 million in property tax savings. 

 

These savings were crucial in alleviating financial pressures during reduced revenue, allowing the facility to maintain its operations and continue providing essential services to its residents.

Senior Living Facility Appeal

 

For a senior living facility in Kansas, our team demonstrated its expertise by successfully filing an appeal that resulted in $40,000 in savings. This achievement highlights our proficiency in navigating complex property tax regulations and reflects our commitment to ensuring our clients benefit from accurate property valuations.

 

The savings enabled the facility to reinvest in enhancing the quality of life for its residents, including better amenities and services.

Decision-Making Process for Healthcare Real Estate Property Tax Services

 

In choosing healthcare real estate property tax consulting, consider consultants who demonstrate a profound understanding of the healthcare industry and have a track record of reducing property taxes through effective property tax protests. 

 

Evaluate potential service providers, focusing on their success rates and strategic approaches.

 

By employing strategic property tax planning and partnering with experienced advisors, healthcare facilities can ensure financial stability and compliance while focusing on providing excellent patient care. 

 

PVS: Your Expert Healthcare Real Estate Consultants

 

Services Offered by PVS:

 

  • Healthcare Real Estate Property Tax Appeals: Challenge and negotiate property tax assessments to ensure fair valuations
  • Appraisal: Conduct accurate and comprehensive building valuation services
  • Compliance: Ensure adherence to property tax laws and regulations
  • Assessment-Reduction: Work on property tax reduction
  • Professional Representation: Represent clients in all property tax-related proceedings
  • Assessment Uniformity Study: Analyze assessment uniformity to ensure equitable property tax treatment
  • Abatement and Exemption Research: Investigate potential abatements and exemptions to minimize property tax liabilities
  • Identification of all Reasonable Reliefs: Explore all available property tax reliefs to maximize property tax savings
  • Preparation and Analysis of Taxable Value: Prepare and analyze reports to optimize property tax strategies

 

Let PVS help you optimize your healthcare real estate investments and navigate the complexities of property taxation. Contact us today to enjoy hassle-free property tax management and maximize your property tax savings.

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commercial property tax firm

Choosing the Right Commercial Real Property Tax Firm

/ Blog

Commercial Real Estate

Choosing the Right Commercial Real Property Tax Firm

Minimizing property tax expenses is crucial to enhancing your bottom line as a business owner. Choosing the right commercial property tax firm that offers specialized commercial property tax services can reduce your property tax liabilities, provide peace of mind and strengthen your financial strategy.

This comprehensive guide will delve into the various types of commercial real estate property tax consulting firms, outline their benefits and drawbacks and offer valuable insights to help you make the best decision for your commercial real estate portfolio. 

accounting firm

Types of Property Tax Firms and Considerations

Big4 Accounting Firms

Big4 firms offer comprehensive financial services, including property tax assistance, but property tax may not be their primary focus. For broader financial needs, a Big4 partnership is beneficial; however, specialized property tax services might lack the same depth of attention and support.

Local Firms

Local property tax firms operate within specific cities or counties. They often emphasize their close relationships with assessors as a selling point. While this can lead to high percentages of property reductions, there may be a potential conflict of interest due to their strong ties with assessors.

Additionally, if you own properties in multiple jurisdictions, managing separate local representation can be burdensome.

Law Firms

In some states, legal representation is required for property tax appeals. Hiring a law firm specializing in property taxes becomes crucial in such cases. However, it’s important to note that not all states mandate legal representation.

Texas, for example, has a significant number of property tax representatives who are not attorneys. It’s advisable to evaluate if legal representation is necessary based on your specific state requirements.

National Property Tax Consulting Firms

National property tax consulting firms specialize in property tax matters and often have a wider presence across multiple jurisdictions. These firms offer expertise in property tax reduction strategies and have experience handling diverse portfolios.

They can also provide personalized attention and have appraisers on staff to enhance their capabilities. Choosing a reputable national property tax consulting firm ensures comprehensive coverage and expertise tailored to your needs.

Property Valuation Services (PVS) is a national consulting firm in the United States specializing in the specific property tax services required for commercial real estate (CRE).

We offer targeted solutions that streamline property tax processes and optimize property owners’ financial outcomes. Additionally, our local expertise ensures that we provide nuanced insights and strategies tailored to each jurisdiction’s unique property tax landscape.

Our team includes commercial property valuers and commercial property tax specialists equipped to handle everything from commercial real estate appraisals to building valuation services.

Case Studies of Successful Commercial Property Tax Appeal

Corporate Office Campus in Fulton County, Georgia: PVS challenged an overvalued corporate office campus assessment. The assessment was reduced by $25 million through detailed market analysis and comparisons, saving $204,918 in property taxes.

Big Box Store in Missouri: PVS represented an overvalued closed and vacant big box store, securing a 50% reduction in assessed value and saving the owner $89,665 in property taxes.

National Hospital Operator: PVS achieved $690,000 in property tax savings for a national hospital operator by addressing the overvaluation of an obsolete hospital facility, successfully revaluing it despite initial assessor resistance.

office building interior

Considerations for Choosing the Right Firm

Value over contingency fees

Base your decision on the value provided rather than solely focusing on the lowest contingency fee. Quality and effectiveness should be prioritized over cost.

With PVS, you benefit from a comprehensive approach where each property tax bill is carefully reviewed for accuracy before any payments are made, ensuring you never overpay. Our standardized approval process provides clear, timely information on payment amounts and deadlines, optimizing your financial planning and cash flow management.

Team Qualifications

Evaluate the qualifications, experience, and expertise of the professionals who will handle your property tax appeals. Look for a firm that emphasizes communication and transparency.

PVS is led by a team of nearly 100 dedicated commercial property tax professionals, including a property tax expert with the esteemed Member of the Appraisal Institute (MAI) designation, ensuring that highly qualified experts manage your appeals.  

We have 26 years of experience and a solid track record in property valuation. PVS not only holds necessary certifications and accreditations but also provides compelling case studies demonstrating expertise in commercial real estate assessments.

Specialized expertise

Consider if the firm has appraisers on staff to provide a higher level of expertise for property valuations and appeals.

PVS offers expert valuation analysis to ensure fair market value, thorough market comparisons and continuous market monitoring to ensure your property’s assessed value remains aligned with the market. This specialized expertise allows for proactive management of your property taxes.

Jurisdiction coverage

Consider if the firm has appraisers on staff to provide a higher level of expertise for property valuations and appeals.

PVS offers comprehensive coverage, handling nearly 40,000 property tax parcels annually across all 50 states. Our proactive approach ensures that your property taxes are continuously monitored and adjusted in response to market changes, safeguarding your investments from over-taxation.

advantages of outsourcing commercial property tax needs

What are the advantages of outsourcing commercial property tax needs to a specialized firm?

Outsourcing your commercial real property tax needs to a specialized firm brings expertise in complex property tax laws, saves time and ensures accurate valuations. This approach frees up resources and helps minimize property tax liabilities by leveraging in-depth knowledge of local market conditions.

A commercial property tax firm efficiently manages every aspect of the entire property tax assessment process, including real estate valuation, freeing up your resources for other strategic activities.

Additionally, their detailed knowledge of local markets guarantees that your property valuations are precise, helping to minimize commercial property tax liabilities for your commercial properties.

In today’s rapidly changing CRE market, selecting the right commercial property tax firm is more critical than ever. 

According to the Tax Policy Center, “Changes in workers’ expectations about the location of work and declines in urban population suggest these recent trends could be here to stay. A recent academic study estimated that New York City could see a long-run decline of 44 percent in the value of office buildings, which equates to about $50 billion. This has prompted worries beyond the office real estate market. Overall, the authors approximate a destruction of over $500 billion in office value in the US.”

With such significant fluctuations, partnering with Property Valuation Services (PVS) ensures you’re well-prepared to navigate these uncertain times.

Let PVS Help Navigate The Complexities Of Property Taxes

Selecting the right property tax team requires careful consideration beyond contingency fees. You can find a firm that will deliver significant savings and safeguard your business interests by evaluating expertise, team qualifications, and jurisdiction coverage.

Partner with PVS to optimize your commercial property tax strategy and ensure robust financial health for your commercial real estate property investments.

Picture of Gerhart Van Note

Gerhart Van Note

Gerhart Van Note, Senior Director of Real Estate at Property Valuation Services, has led the department since 2006. He has expanded the client base to over 1,000+ and the parcel count to 20,000+. A Georgia Southern graduate, Gerhart is committed to providing expert property tax services nationwide.
commercial property tax firm

Considerations for choosing the right firm include value over contingency fees; team qualifications; specialized expertise; and jurisdiction coverage.

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Property Valuation Services

What Is Property Tax Valuation?

/ Blog, Business Personal Property

Business Personal Property Tax

What Is Property Tax Valuation?

Property valuation refers to the professional services used to assess and determine the accurate value of business personal property and commercial real estate. These services are essential for businesses and investors seeking to understand the true worth of their assets. By providing expert insights and comprehensive analysis, property valuation services enable businesses to make informed decisions, optimize profits and effectively manage potential risks associated with their properties.

If you’re not familiar with all the ins and outs of property valuation, don’t worry. This guide simplifies the process for commercial real estate, defines key terms, outlines the steps and explains the benefits of commercial real estate valuation service.

How to Determine the Value of a Property

Several approaches can be utilized to determine a commercial real estate property’s value, including comparable market analysis, income approach to value and the cost approach.

To better understand property valuation, here are some commonly used terms:

Market Value is the estimated worth of a property in the current market. It’s determined by location, property size, condition, amenities, income potential and recent comparable sales.

An appraisal is an expert’s assessment of a property’s value based on location, size, condition and recent comparable sales. Licensed professionals conduct appraisals, which are often required by taxing authorities and the judicial system when appealing a property tax assessment.

Comparative Market Analysis (CMA) is a method for determining a property’s worth by comparing its value with similar properties in the market. It involves analyzing recent sales data, today’s market trends and property characteristics to assess a property’s value.

Assessed Value is the local government entity’s assigned value to a property. Assessed values are used to determine property taxes and may not always reflect the market value of a property.

Fair Market Value (FMV) is the price a property would sell between a willing buyer and seller in an open and fair market. Supply, demand, property, location and current market conditions influence FMV.

Depreciation is the decrease in a property’s value over time due to wear and tear, age or outdated features. It’s an important consideration for property owners, as it can affect their overall value.

For instance, a property built 20 years ago may have experienced some depreciation due to aging infrastructure, which could lower its value compared to a newer property.

Capitalization Rate estimates a property’s potential income and value based on its expected return. It is commonly used in commercial property valuation to assess investment opportunities.

For example, a commercial property with an expected annual net income of $50,000 and a capitalization rate of 7% would have an estimated value of approximately $714,285 ($50,000 divided by 0.07).

Highest and Best Use means determining the most profitable use of a property based on market conditions and local zoning regulations. It involves evaluating alternative uses to determine the most financially advantageous option.

A vacant lot in a commercial zone might be more valuable if developed into a retail shopping center than a residential property.

Zoning is the set of local regulations that dictate the approved uses and development guidelines for commercial properties within a designated area. It determines whether a property can be used for residential, commercial, industrial or other purposes.

 

computing tax

The Property Tax Valuation Process

Step 1: Collection of Data for Initial Assessment 

The first step in property tax valuation involves professional consultants/appraisers gathering relevant information to understand the property’s characteristics, location and prevailing market conditions.

During this phase, they assess the property’s size and condition, considering the number of rooms, amenities and overall appeal. Additionally, they analyze the property’s location, including its proximity to schools, amenities, transportation and the neighborhood’s desirability, all impacting its commercial value.

Step 2: Application of Valuation Models/Methods

Property valuers employ various methods to determine the value of a property. The most commonly used approaches include:

Sales Comparison Approach

The sales comparison approach involves comparing the subject property with recently sold properties with similar characteristics in the same area, considering local market conditions, as part of the appraisal process. 

It’s particularly useful for residential properties with many comparable sales available. However, finding genuinely comparable properties can be challenging for unique or specialized properties and may not account for unique features or improvements.

Income Capitalization Approach

The income capitalization approach — often called the income approach — is primarily used for commercial real estate valuation of investment properties. It values the property’s income potential by analyzing its rental income and operating expenses. This method focuses on the property’s income potential, which is critical for investors to evaluate the rate of return on their investments. 

However, accurate and reliable rental income data is necessary for an accurate valuation, and it may not be suitable for properties that do not generate rental income or where accurate income data is unavailable.

Cost Approach

The cost approach evaluates the value of properties by considering the cost to rebuild or replace them. It is useful for unique or specialized properties where comparable sales or rental income data may be limited or not applicable. This approach provides an estimate of the property’s value based on the cost of reproducing or replacing it, considering current construction costs and depreciation.

property valuation consultatnts

Step 3: Consideration of Influential Factors

Several factors are taken into consideration when valuing a property:

Location and Accessibility

The property’s location is a key determinant of its value. Proximity to amenities, schools, transportation and the neighborhood’s desirability significantly influence its market value.

Size, Layout and Condition

The property’s physical attributes, including square footage, layout, number of rooms and overall condition, play a crucial role in determining its value. Well-maintained properties generally have higher values.

Market Dynamics and Comparable Sales

The overall real estate market trends, including supply and demand dynamics, along with the recent sales prices of similar properties in the area, are crucial in determining the property’s market value. This comparison helps assess how the property stands in its current market environment.

Rental Income Potential

Investment properties have significant potential rental income and cash flow. The property’s ability to generate income is a key factor in its valuation, reflecting its profitability and attractiveness to investors.

Benefits of Property Valuation Services

Property valuation services, led by expert consultants and appraisers, offer numerous advantages regarding commercial real estate property tax assessment. These services are specifically tailored to the unique requirements of commercial properties, ensuring fair and accurate property taxation. 

Here are the key benefits:

  1. Objective and Unbiased Assessment: These services objectively evaluate the value of a commercial property, ensuring fair property tax assessments that reflect its actual market value.
  2. Compliance with Property Tax Regulations and Support for Property Tax Appeals: Experts in property valuation are well-versed in property tax laws, helping to ensure adherence to all relevant guidelines and minimizing the risk of non-compliance and penalties. Additionally, in the event of a property tax appeal, a professionally conducted valuation report can serve as crucial evidence to support the owner’s case with solid arguments.
  3. Identifying Property Tax Savings Opportunities and Mitigating Overpayment: Professionals can pinpoint potential property tax savings specific to commercial real estate, such as eligible deductions and exemptions that can lower the property taxable value, thus reducing property tax liabilities. Accurate valuations prevent overpaying property taxes, avoid unnecessary financial burdens and enhance operational efficiency.
  4. Strategic Financial Planning and Minimizing Assessment Errors: Understanding a property’s value enables owners to make informed financial decisions and optimize property tax-related expenses. Moreover, expertise in evaluating commercial properties minimizes the risk of assessment errors, providing a reliable valuation that reflects the true market value.

Property Valuation Services experts

Factors to Consider in Choosing the Right Property Tax Service Provider

Experience and Expertise: Property Valuation Services (PVS) boasts 26 years of experience and a solid track record in property valuation. PVS not only holds necessary certifications and accreditations but also provides compelling case studies demonstrating expertise in commercial real estate assessments.

Reputation and Client Feedback: Client testimonials reflect high satisfaction levels and quality service. These references from previous clients and case studies offer insights into our reliability and effectiveness in handling complex property tax issues.

Service Offerings, Specialization and Jurisdiction Coverage: PVS is a national consulting firm specializing in the specific property tax services required for commercial real estate and business personal properties. Our comprehensive property tax and building valuation services are tailored to meet the unique demands of commercial properties across jurisdictions.

Efficiency and Cost: We are proud to meet crucial deadlines and offer competitive pricing structures to ensure you receive timely and cost-effective services. Our ability to efficiently handle your property tax needs helps maintain operational continuity and financial stability.

Property Valuation Services

Property Valuation Services (PVS) specializes in assisting commercial real estate owners achieve their property tax-related goals. We focus on providing comprehensive property tax and building valuation services conducted by commercial property tax professionals who consider all relevant factors specific to commercial properties.

With a deep market knowledge, we offer valuable insights and customized solutions to effectively address your property tax needs. Our property tax reports adhere to industry standards and guidelines, enhancing your credibility with property taxing authorities and regulatory bodies.

PVS values long-term partnerships and prioritizes professionalism. We ensure privacy and data security. You can trust us to uphold confidentiality and integrity throughout the property tax assessment process.

Contact us to benefit from expert property tax advice that optimizes your commercial property value and minimizes your property tax liabilities.

Picture of Chip Saam

Chip Saam

Chip Saam, ASA, CMI, spearheads Property Valuation Services (PVS) as Senior Technical Director. With over 25 years of hands-on expertise, Chip specializes in pioneering valuation approaches aimed at maximizing property tax efficiencies and savings for businesses navigating complex property tax landscapes.
Property Valuation Services

Property valuation services, led by expert consultants and appraisers, offer numerous advantages regarding commercial real estate property tax assessment. These services are specifically tailored to the unique requirements of commercial properties, ensuring fair and accurate property taxation.

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Business Personal property Tax Appeal

Understanding Business Personal Property Tax Protests: When and How to Challenge Your Assessment

/ Blog, Business Personal Property

Business Personal Property Tax Protests

Understanding Business Personal Property Tax Protests: When and How to Challenge Your Assessment

A business personal property tax appeal (BPPTA) is a formal process by which business owners challenge business personal property’s assessed value for tax purposes. Local government entities determine the value of business personal property within their jurisdiction and calculate taxes accordingly. However, there may be instances where business personal property owners believe that the assessed value is inaccurate or unfairly high, leading them to file a formal appeal. If you have questions about what a BPPTA entails, when it is appropriate to file, the steps for filing a protest and how to navigate this process to secure property tax relief, this blog has the answers you need.

What is a business personal property tax appeal?

BPPTA is a formal procedure through which business owners can dispute the assessed value of their tangible assets for taxation purposes. Business personal property refers to the movable assets used in conducting business, such as furniture, equipment, machinery and inventory — distinct from real property or real estate. Challenging the assessed value of these assets is crucial to ensure a fair and accurate tax assessment.

Suppose you own a small manufacturing business, and your county assessor determines that the value of your machinery and equipment for tax purposes equals $1,000,000. However, after researching and consulting with industry experts, you believe your assets’ fair market value is closer to $500,000. This discrepancy could significantly impact your tax bill. By initiating a BPPTA, you can seek a reassessment that more accurately reflects the true value of your assets, potentially lowering your overall property tax payments.

While many states assess business personal property tax, New York and Ohio are some of the exceptions, so a protest would not occur in these states. You can check this list from Legal Zoom for the states that exempt businesses from this property tax.

By presenting evidence such as recent appraisals, sales data for comparable machinery and equipment with any relevant documentation highlighting the condition or depreciation of your assets, you can build a strong case to support your protest. The goal is to demonstrate that the assessed value is inaccurately high and does not align with the fair market value of your business personal property.

For real-life inspiration, watch this video to learn how a hospital in Texas saved $34K in business personal property tax dollars after filing an appeal.

When should you consider a property tax protest?

Timing is crucial. You typically have 10 to 30 days from the date of the valuation notice to challenge the assessment through a personal property petition. This process is not applicable in states like New York and Ohio, where local business taxes on personal property are not assessed. You should check local regulations and possibly consult the county board of equalization for specific guidelines applicable to your locale.

Determining whether a BPPTP is appropriate for your situation requires careful evaluation, and several scenarios indicate when it might be time to consider filing a protest:

Overvaluation

If you believe the assessor has overvalued your business personal property, resulting in an inflated assessment and higher property taxes than warranted, a BPPTP may be necessary. Like the example above, if the assessor values your machinery and equipment at $200,000, but recent sales data or industry standards suggest a value closer to $150,000, you can file a protest to seek a more accurate assessment.

Market Value Changes

Business personal property, such as equipment and machinery, can experience depreciation over time due to technological advancements, wear and tear or changes in market demand. If your assessment does not consider these factors and reflects an outdated or inflated value, a protest can help adjust it accordingly.

Suppose technological advancements have rendered your equipment less valuable compared to newer models. In that case, you can present evidence of market conditions, expert opinions or depreciation schedules to support your protest. Demonstrating the depreciation of your business personal property can be a compelling argument for a reassessment that accurately reflects its current market value.

Read this case study to learn how a leasing company saved $220K in property tax dollars.

Incorrect Property Information

Errors in the assessor’s records, such as inaccurate descriptions or missing assets, can lead to an incorrect assessment of your business’s personal property. A BPPTP can rectify such errors and ensure a fair evaluation. For example, if the assessor mistakenly includes assets you no longer possess, this can lead to an artificially higher value. In that case, you can provide documentation and accurate asset listings to support your protest.

property tax protest - Property Valuation ServicesWhat are the steps in filing a business personal property tax protest?

While some states like Texas publish a business protest guide for small businesses detailing the steps needed to file an appeal, procedures may vary in other states. By following the specific guidelines of your local government, you can ensure that you’re challenging your assessment correctly and effectively.

Filing a protest generally involves several crucial steps to challenge your assessment effectively. By following these steps carefully and correctly, you can increase your chances of success:

1. Review Assessment Notice

Carefully review the assessment notice sent by the county assessor. Note the assessed value, the deadline for filing a petition and any other pertinent details such as the tax rate and any exemption determinations.

2. Gather Supporting Evidence

When preparing for a business personal property tax protest, gathering specific supporting evidence for both intangible and tangible personal property is crucial. Here are examples of the types of evidence you should consider collecting:

Tangible Business Personal Property

Tangible business personal property is the physical property that can be seen and touched. It includes items such as machinery, equipment, furniture and vehicles.

  • Recent Appraisals: Hire a licensed professional to independently appraise your tangible business personal properties. The appraiser will assess factors like their condition, age and market value. Seek the expertise of professionals who have successfully handled cases and can provide their opinions or written statements regarding the accuracy of your property assessment. They can analyze the specifics of your property, review the assessment and provide their expert opinion on whether it is accurate or unjustifiably high. Their opinions can carry weight during the protest process, so choosing those with a proven track record is critical.
  • Comparable Sales Data: Research recent sales of similar tangible assets in your industry or region. For example, if you own a restaurant and are protesting the assessed value of your commercial kitchen equipment, find comparable sales of similar equipment in your area. This evidence will demonstrate if your assets have been assessed higher than comparable assets, strengthening your case during the protest.
  • Photographs: To support your protest, take clear and detailed photographs of your tangible assets. For instance, if you have outdated machinery that needs repairs, capture those aspects in photographs. These visual representations can reinforce your argument and provide tangible evidence during the protest process.

Intangible Assets

Intangible Assets

Intangible assets are non-physical assets that hold value but do not have a physical form. They include intellectual property, software, brand recognition and customer lists.

  • Expert Opinions: Seek the expertise of professionals specializing in evaluating intangible assets. For example, consult an intellectual property attorney or an experienced appraiser if you have intellectual property. Their opinions can carry significant weight during the protest process.
  • Financial Documentation: Gather relevant financial documents that demonstrate the value of your intangible assets. For instance, if you are protesting the assessed value of your brand or customer list, provide financial statements highlighting the income generated by these assets or any licensing or royalty agreements showcasing their value.
  • Market Research: Conduct market research to gather data on similar intangible assets in your industry. For example, if you own a software company and are disputing the assessed value of your software code, collect information on comparable software products, their sales and any relevant market trends. This market research can provide valuable evidence to support your case during the protest.

Consider your local property tax authority’s guidelines, as evidence requirements may vary depending on your jurisdiction. Gathering the appropriate evidence and following the correct procedures will help you build a strong case for your business personal property tax appeal.

3. Complete Protest Forms

Obtain the necessary protest forms from your local property tax assessor’s office or website. Complete the forms accurately, providing all required information and supporting documentation.

4. Submit Protest

Submit your completed protest forms and supporting documentation to the appropriate authority, often the county board of equalization, within the specified deadline. Adhere to the submission guidelines provided by your local property tax assessor’s office to ensure your protest is appropriately filed.

5. Attend a Hearing (if applicable)

A formal hearing may be scheduled to review your business personal property tax appeal. If you receive a hearing notice, prepare your arguments, organize your evidence and articulate why you believe your property tax should be adjusted.

How can Property Valuation Services help with your business personal property tax appeal?

At Property Valuation Services, we understand the complexities involved in the business personal property tax appeal process, and we’re here to assist you every step of the way. Our expertise in property valuation can strengthen your case and increase the likelihood of a successful business personal property tax appeal. Here’s how we can help you:

Independent Property Valuation

Our team of experts will conduct an independent evaluation of your business’s personal property value. Using our in-depth knowledge of local markets and industry-standard valuation techniques, we’ll provide you with an unbiased assessment that serves as evidence to support your claim.

Detailed Property Reports

We will provide comprehensive reports that delve into the factors influencing your property’s value. Our detailed analysis includes information on comparable sales, market trends, property conditions and other relevant factors. These reports will significantly strengthen your case during the property tax protest, providing a clear and thorough understanding of your property’s value.

Expert Testimony

If needed, our team can provide expert testimony during the protest hearings. Drawing on our extensive experience and expertise in property valuation, we will confidently present your arguments, explain complex valuation concepts and highlight discrepancies in the assessment. Our expert testimony will provide an independent and authoritative perspective that supports your claim for a lower assessed value.

Guidance and Representation

We understand the legal complexities and will ensure you are well-informed. Our team at PVS can handle all aspects of the appeal process, from gathering necessary evidence and preparing documentation to navigating any challenges. With our strong representation, you can be confident that we’ll advocate in your best interest.

Market Knowledge and Insights

Our team stays up-to-date with local market trends and changes in regulations. We have a deep understanding of how these factors can impact property values and can provide you with valuable advice and strategies to pursue during the business personal property tax protest process.

Contact Property Valuation Services (PVS) for a fair and accurate assessment of your business’s and personal property’s value. Our expertise will strengthen the case and alleviate the burden of excessive property taxes. With our guidance, we can confidently navigate the tax protest process for a successful outcome.

Picture of Chip Saam

Chip Saam

Chip Saam, ASA, CMI, spearheads Property Valuation Services (PVS) as Senior Technical Director. With over 25 years of hands-on expertise, Chip specializes in pioneering valuation approaches aimed at maximizing property tax efficiencies and savings for businesses navigating complex property tax landscapes.
Business Personal property Tax Appeal

BPPTA is a formal procedure through which business owners can dispute the assessed value of their tangible assets for taxation purposes. Business personal property refers to the movable assets used in conducting business, such as furniture, equipment, machinery and inventory — distinct from real property or real estate. Challenging the assessed value of these assets is crucial to ensure a fair and accurate tax assessment.

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Reasons Your Business Personal Property Taxes Could Increase

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Business Personal Property Tax

Reasons Your Business Personal Property Taxes Could Increase

States that assess property tax on equipment require an annual business personal property return to be filed by a specific date each year. In most cases, the local assessor’s office reviews the returns filed and performs an analysis to calculate a taxable value for the equipment, including all taxable business personal property — this could include items from aircraft to furniture to machinery and computers. Some jurisdictions assess the equipment based on how it was filed by the taxpayer without performing any analysis. 

This value is most often determined by depreciating the cost of the equipment using either local or state depreciation schedules. As a result, in most cases, newer equipment will yield a higher taxable value initially but will decrease over time as it receives another year’s worth of depreciation until it reaches the residual depreciation factor for the schedule it is being assessed on. As the assessed value of equipment increases, so does the amount of annual personal property tax.  Businesses need to keep good books and records to track all of their equipment, as there can be significant factors in determining business personal property taxes. 

Let’s examine the reasons why your business personal property taxes might climb. Understanding these elements can safeguard your business against unforeseen financial strains.

business personal property

Capital Expenditures During the Prior Tax Period

The most common reason for increased business personal property taxes is related to capital expenditures. Personal property taxes would likely increase if there were a large amount of capital expenditures in the prior year. 

Common sense tells us that if a company buys a lot of equipment in a prior year, the cost of equipment on the subsequent year’s business personal property tax return will go up and, therefore, so will the value of equipment.  

Also, new construction or renovations of your business may require permits to be filed with local authorities. Based on these permits, an assessor may add value to a personal property account if they believe all or a portion of the cost of the project is related to personal property and is not reflected on the annual business personal property tax return filed.

Assessors’ offices may also conduct field checks of your business annually to ensure that all companies in their respective jurisdictions are accounted for and are reporting an annual return. 

In some cases, they may request to tour the site to review the assets being reported on the return compared to what is physically located on site, and they could potentially adjust the valuation they have on the property tax rolls. Lastly, equipment-related construction in progress may also be taxable as business personal property in some jurisdictions.

audit checklist

 

​​Audit Results

The second reason your business property taxes may increase is if your business is selected for an audit. Audits are significant as they can impact not just the current year but preceding years — depending on the state statutes. 

Most jurisdictions send out an annual business personal property return form notifying taxpayers they must file. The forms often state the returns are subject to audit, making filing accurately and on time crucial for business personal property tax management.

Some states have very active audit programs (e.g., California, Georgia, Indiana, North Carolina, and Tennessee, to name a few). Many other states are required by statute to perform “desk audits” annually on a certain percentage of accounts from their tax roll.

Consequences of Audit Findings

If your business is selected to be audited, the audit may discover equipment that has either been omitted or erroneously not reported on your submitted annual business listing. 

Additionally, equipment picked up in an audit may be penalized depending on the property tax codes for the local taxing jurisdiction. Certain types of fixed equipment or leasehold improvements are examples of omitted property that may be added to your assessment. If the improvements are not accounted for in the real estate assessment for the property, the business personal property assessor may add them to the business personal property assessment. 

Commonly Overlooked Items

Other types of omitted property may be expensed assets and items the taxpayer felt were nontaxable. Assets that are expensed and not capitalized on your books and depreciated may be assessable as taxable personal property.  Some states require this figure to be filed and assessed annually, while others may assess multiple years of expensed assets before allowing them to be removed from the return.  Some taxpayers may feel that certain assets are intangible and, therefore not taxable as personal property.  Things like software, freight and installation charges, etc.  There are several states that assess and tax these types of assets as personal property.

Inventory and/or Supplies Calculations

Some states assess inventory and/or supplies as business personal property.  Inventory is typically assessed based on the balance on hand as of the lien date while supplies are often valued as a one-month average.  In both cases, the balances are assessed at 100% of their cost.  The calculation used to report a supplies balance is a common issue in an audit. In some states that tax supplies, there is not a consistent formula used across jurisdictions within the state which can lead to confusion for a taxpayer.

Impact of Depreciation Discrepancies

Another reason your taxes can increase in an audit is the reclassification of assets by the auditor. This occurs when the auditor moves assets to a longer-lived, slower depreciating table.  For example, a taxpayer may file certain equipment on a 5-year depreciation table that is moved to a 12-year depreciation table by an auditor.  The slower depreciation rate will cause the value to remain higher over a longer period of time. 

Penalties and Interest

Any discovery or increase in value from an audit could be subject to penalty and/or interest. In some cases, these charges can be extremely punitive.

For example, in North Carolina, audits typically cover the current year plus the prior three years. In this case, penalties can be steep. In the first year, there is a 10% penalty on the additional taxes from the increase in assessment per the audit. The penalty increases an additional 10% each subsequent year included in the audit, assuming the equipment was owned as of the lien date for that tax year. 

That means if the audit covers four years and there is a discovery or increase in the assessment affecting all four years being audited, you would be paying a 40% penalty on the increase in taxes from the audit for the oldest tax year being audited.

Given the complexities of property tax audits, it’s prudent to seek professional assistance from Property Valuation Services (PVS) to ensure accuracy and compliance. A tax professional can help navigate the audit process, avoid penalties and safeguard your financial interests. Be audit-ready and avoid the consequences.

Examples of leased equipment

Leased Equipment

Another reason for an increase in business property tax is leased equipment. Capital leases differ from operating leases in that operating leases are typically the responsibility of the lessor to report for business property tax purposes and seek reimbursement for the taxes from the lessee. However, capital leases can be either the lessor’s or the lessee’s responsibility to report to the local taxing jurisdiction where the equipment is located, depending on the structure of the lease agreement. 

Challenges with Lease Agreements

Sometimes, the lease agreement does not clearly state who is responsible for reporting the equipment. Equipment can potentially be double-reported by both the lessor and the lessee. In these cases, businesses need to understand the implications and properly report, or not report the leased equipment to avoid potential issues with duplicate taxation.

At times, this can be extremely challenging to correct as the cost and description of the equipment can differ between the lease contract and how the equipment is ultimately booked to the lessee’s fixed assets. 

Additionally, we’ve seen instances where operating leases end and the lessor files a final return for the equipment stating that the lessee retained the equipment when the lease ended. The assessor then adds value for the leased equipment to the lessee’s personal property assessment. However, it was later discovered that the equipment was returned to the lessor when the lease ended. 

Lastly, state statutes differ as to who is responsible for reporting leased equipment, regardless of the verbiage in the lease agreement.

depreciation table

Depreciation Tables

The depreciation tables used by your local jurisdiction for business personal property purposes could also increase your property taxes.

What is Depreciation?

Depreciation can be simply defined as an asset’s loss in value caused by physical deterioration, functional obsolescence, or external obsolescence.  It’s important to note that accounting depreciation, income tax depreciation, and property tax depreciation are most often different from each other.

Local Taxing Jurisdictions and Depreciation Adjustments

The depreciation tables used by assessing jurisdictions across the country vary widely in length and speed of depreciation.  For example, most assessors will value technology-heavy equipment and computer equipment on a 3-year or 5-year table while valuing furniture and fixtures on a 10-year or 12-year table.  Some assessors within a state may all use the same set of depreciation tables while in other states, each local jurisdiction may have its own unique set of tables. 

In Indiana, the percent good factor for the most commonly used table increases from the first year to the second year on new equipment purchases, so the taxable value of the equipment increases in the second year it’s owned before beginning to decline. It’s interesting to note that the third-year factor is also still higher than the first-year factor.

For personal property tax purposes in most taxing jurisdictions and most depreciation schedules, the taxable value of the equipment does not depreciate down to zero. The remaining depreciation percentage at the bottom of each depreciation table is called a residual factor. As long as the business owns an asset, it will be valued at the residual factor until the equipment is no longer at the facility. 

How low the factor goes depends on the useful life of the asset, but an increase in any of these factors can lead to significant business personal property tax increases if your business has a lot of older equipment.  

We have seen some local taxing jurisdictions increase the residual depreciation factors for the schedules they use to value the equipment and thereby materially increase the assessed value of the equipment. 

Abatement or Exemption Expiration

You might see an increase in your property tax liability from the prior year if an exemption or abatement agreement related to property taxes expires. Some jurisdictions will grant businesses a full or partial abatement of property taxes for a certain number of years to promote the development of an area.

For example, in Nevada, there is a 10-year and a 20-year partial property tax abatement for data centers if they meet specific state requirements, including investing a certain amount of capital assets in the county where the data center resides and requiring a certain percentage of employees engaged in the construction of the data center be residents of Nevada. 

In some instances, a business may be able to negotiate favorable property tax treatment for a period, which is typically also tied to an agreed-to capital investment during the period of the preferential tax treatment. When these exemptions end or begin to be phased out, it can lead to a substantial increase in property tax liability that must be considered for budgeting purposes.

Tax rate increase

​​Tax Rate Increase

One unforeseen reason property taxes can increase is due to property tax rate increases adopted by local jurisdictions. Most of the property tax revenue collected by local jurisdictions goes towards various government departments and projects within their jurisdiction (like upgrades to existing roads or schools within the jurisdiction). Therefore, local taxing jurisdictions may increase property tax rates to fund these projects. 

Some jurisdictions list the budgeted property tax rate on the assessment notice if certain propositions are approved locally. Sometimes, these property tax rate increases can be substantial. In 2020, the property tax rate in Nashville, Tennessee increased 33% from the prior year.

Assessor Errors

Lastly, property taxes could increase due to an error in calculating the business personal property tax return. Assessors in bigger taxing jurisdictions process a large number of personal property tax returns, sometimes in a short period of time, and mistakes can be made. 

We’ve seen instances where an assessor’s office does not remove a deletion if it’s a larger piece of equipment that seems integral to business operations and nothing appears to have replaced the equipment. Or they may ask for a disposal date before removing the equipment. Other times, the deletions can just get overlooked by the assessor, and in these cases, taxpayers have the right to file an amended return and request a refund for any overpaid property taxes.

Additionally, there can be clerical errors. If the assessor accidentally enters another digit when entering the costs reported by the taxpayer, it could significantly increase the property tax burden for that year. 

If these types of errors are found before the deadline to appeal the account, they typically can be corrected informally after discussions with the assessor if any additional documentation requested is provided. However, if you miss the appeal deadline date, you may be unable to appeal and correct these errors, resulting in a higher property tax bill.

Let PVS Assist With Personal Property Tax Renditions

Personal property taxes can be daunting. According to the Tax Foundation, “Complying with personal property taxes is onerous, as it requires documenting all assets—all the way down to cleaning supplies for the office kitchen—along with their acquisition price, acquisition date and depreciation.”

Given these challenges — not to mention the ever-changing landscape of property taxes — it’s wise to consider professional help. PVS’ business property tax professionals can simplify the process of preparing personal property tax renditions and aid in budgeting expected taxes. Contact us today to ensure that your business plans effectively and meets tax obligations without delays.

Picture of Chip Saam

Chip Saam

Chip Saam, ASA, CMI, spearheads Property Valuation Services (PVS) as Senior Technical Director. With over 25 years of hands-on expertise, Chip specializes in pioneering valuation approaches aimed at maximizing property tax efficiencies and savings for businesses navigating complex property tax landscapes.
Business personal property tax

As the assessed value of equipment increases, so does the amount of annual personal property tax. Businesses need to keep good books and records to track all of their equipment, as there can be significant factors in determining business personal property taxes.

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Reasons Your Business Personal Property Taxes Could Increase Read More »

duplicate taxation

Real vs. Personal Property: The Fight Against Duplicate Taxation

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Business Personal Property Tax

Real vs. Personal Property: The Fight Against Duplicate Taxation

When companies consider property taxes, the focus is often on real estate property tax. However, it’s equally crucial to understand the distinction between real property, which includes the land and any permanent structures, and business personal property, which are movable items like equipment and furniture. This differentiation influences financial reporting, property tax liability and compliance with varying state laws.

Accurate property evaluation and building valuation services ensure that both real and personal property are assessed fairly. Misunderstanding these nuances can lead to misclassifying assets, which might result in overpaying property taxes or penalties for non-compliance. Accurate classification aids in strategic financial planning and efficient asset management, helping companies avoid legal issues and optimize their property tax strategies, ultimately safeguarding their profitability and reputation. 

How is business personal property different from real property?

Business personal property (BPP) includes items not permanently attached to the land, such as equipment and furniture. Real property refers to land and structures on it. The critical difference lies in mobility; personal property can be moved, while real property is fixed and immovable.

Real property is land and anything built on it. This includes houses, buildings and improvements like paving and lights. Payment for commercial real estate property tax can vary. These property taxes are sometimes paid through an escrow account, similar to a residential mortgage. In other instances, tenants pay the property tax to landlords as part of their rent. Property owners might also pay the local property tax collector directly.

Real property tax may be more familiar because it’s a significant expense; depending on the building type, size and location, it might be the most substantial cost for tenants or building owners. But it isn’t the only type of property tax in most states. 

While not as familiar to most business operators,  BPP tax is assessed and collected on the equipment, furniture and fixtures inside a building or other movable items such as RVs, boats, vehicles and machinery.

Real estate is typically considered fixed or permanent; BPP is considered “moveable” and tangible — items that would be taken if a business vacates its building. 

Examples include computer and IT equipment, manufacturing equipment, interior signage, cabinetry and more. Depending on the state, it may also include interior building changes made by the tenant, referred to as leasehold or tenant improvements, which are the most common assets facing duplicate property taxation. 

Business owners must report their BPP on their tax return, including the total cost of the assets, income tax depreciation and net depreciated value.

business personal property

Overview of Business Personal Property Valuation

Personal property assessments for businesses are primarily derived from the company’s fixed asset listing, which may also encompass inventory, supplies and leased equipment, contingent on the state’s regulations. 

Companies must submit a BPP rendition annually to the relevant property taxing authority detailing all business-owned assets as of the lien date. This submission should include acquisition dates and costs of all taxable personal property.

State-Specific Property Taxation and Deadlines

Thirty-eight states in the United States impose taxes on business personal property, with most adopting Jan. 1 as the lien or valuation date. Each state stipulates its deadlines for filing personal property returns, typically from Jan. 31 to May 15, although some states set later deadlines. Businesses must be aware of their specific state deadlines to ensure timely compliance.

Asset Types and Property Tax Application

Depending on the state, personal property taxes may apply selectively to certain asset types, such as aircraft, business machinery and computers or more broadly to all personal property categories. Businesses must familiarize themselves with the local laws and regulations to file their returns correctly and avoid potential issues with duplicate taxation.

Calculation of Property Taxable Value

Property tax assessors determine the value of each asset by subtracting depreciation from the acquisition cost. Depreciation rates vary significantly and are influenced by the asset’s type and age. Typically, assets are grouped into categories such as office furniture, manufacturing equipment, medical devices and communication technology. Most property tax assessors apply a specific depreciation schedule for each category, which differs from book or federal depreciation methods. However, some states use federal property tax classifications to determine appropriate asset depreciation.

Navigating the complexities of BPP taxation requires deep expertise, particularly in understanding varied state laws and accurately calculating asset depreciation. Property Valuation Services (PVS) offers specialized valuation services that help businesses meet their property tax obligations and avoid overpayments and penalties by ensuring accurate asset assessments and timely compliance.

Overview of Commercial Real Property Valuation

Like the valuation of business personal property, commercial real estate (CRE) is determined as of a lien date, typically set on Jan. 1. Unlike personal property, the valuation process for real estate usually doesn’t start with submitting an annual return.

State Requirements and Assessment Initiation

In several states, commercial property owners must report any changes in building structure, new constructions and occasionally income and expense details to their local assessors annually. However, most states do not mandate filings related to the building or land itself. Instead, local property tax assessors independently initiate accurate property valuation and notify owners of the assessed values.

Assessment Procedures and Frequency

The valuation process may include a physical inspection of the property or a desk review by the assessor. The frequency of reassessments varies by state; for example, Texas, Kansas and Georgia conduct annual real property reviews. In contrast, Iowa and Missouri reassess real estate every odd-numbered year, while Tennessee and North Carolina follow a statutory schedule, reassessing property every four to eight years.

Appeals and Review Process

Upon receiving a valuation notice, property owners have a designated period to contest the assessor’s market value estimation. To argue for a lower assessment, taxpayers must provide supporting data such as income statements, leases or market comparisons. 

The appeal process typically involves formal procedures, including discussions with appraisal staff or hearings before a board composed of local citizens, commissioners or appraisers. 

Here is a comprehensive guide to commercial real estate property tax appeals.

commercial real estate property

Duplicate Taxation: When Real Property Becomes Business Personal Property

According to most state statutes and laws, the real estate assessment is an estimate of the fair market value of the building and improvements as of the lien date, meaning the anticipated price at which it would sell in an arms-length transaction between a willing buyer and seller.

Logic asserts that the sale of a building would include the exterior walls and everything inside, in addition to the land and land improvements. This seems like a simple concept, but many states across the country complicate the matter, arguing that various real estate components are business personal property, such as leasehold improvements or tenant buildout. If the property tax assessor is taxing real property at its reasonable selling price and taxing building components on the personal property account, that’s double taxation — and illegal.

Terminology and Building Components

Knowing the components of a building and industry terminology is important when discussing the double taxation of property on the real and personal sides. 

The term “shell” is a building composed of four walls, a floor and a roof. It has exterior walls and windows installed, as well as concrete or other base floors, but does not contain interior dividing walls, like exam rooms in a medical office building (MOB) or cubicles in an office. 

It does not include other finishes like tile, carpet, acoustic drop ceilings, interior lighting, paint, wallpaper or common area décor. Those are often called “tenant improvements” or “leasehold improvements” — interior buildouts inside the four walls of a building.

It’s common for the developer or owner of the real property to construct or build both simultaneously – a fully functioning building from the start. But it’s also common for a real property owner to construct and own only the shell building and for tenants to build or install their interior buildout, specific to their liking, use or industry. This happens frequently in special-use properties, like those in the medical community or buildings with a high turnover rate and generic use space, like retail or office buildings.

Challenges of Duplicate Taxation

Regardless of ownership, most buildings are fully complete — meaning they contain shell and tenant improvements — and are fully functioning real estate. However, those who own or install each component can lead property tax assessors in various jurisdictions nationwide to tax them separately and often twice.

Duplicate taxation also commonly occurs when business owners list real-estate-related assets from a fixed-equipment or leasehold improvement account on their property tax return. In-house accounting staff and CPA firms make this common mistake, listing items from fixed-equipment or leasehold accounts as tangible or movable assets. 

Property tax assessors are most likely to accept a return as it is filed rather than question the taxpayer on these assets when reviewing such renditions. After all, it’s additional revenue for their county and city.

Connecticut’s Approach to Duplicate Taxation

Connecticut is a great example of the struggle with duplicate taxation on tenant improvements. Many state property tax assessment offices use a third-party appraisal firm to analyze and set the town’s real estate values.

In PVS’s experience, these real estate assessments are typically at market value for a fully built-out building. That means the valuation estimates what that building would sell for with shell and tenant improvements exactly as it stands as of the lien date.

The assessment office or their third-party firm reviewed local market sales of similar properties, current lease rates and listed market rents to estimate what the building would generate in revenue for a potential buyer. This real estate assessment, therefore, includes the entire building as it stands, including tenant improvements.

At the same time, Connecticut assessors, who typically handle the valuation of business personal property in-house, will value interior buildout completed by tenants in a building on their business personal property account. This is largely because the tenant paid for and installed those walls, flooring, etc., so they appear on the tenant’s fixed asset listing or general ledger. They will assert that any physical additions or changes inside the building, not installed or owned by the actual property owner but rather the tenant, are taxable as tenant improvements.

Avoid or Resolve Duplicate Taxation with PVS

The fight to eliminate this double property taxation can be challenging, which is why owners/landlords and tenants approach commercial property tax firms like Property Valuation Services (PVS). The process involves proving that the real estate assessment reflects the total market value, requiring building valuation services that offer expert appraisals, industry knowledge, access to market data and comprehensive valuation experience.

The process requires proving that the real estate assessment is at total market value, which involves valuation services that offer appraisal and industry knowledge, access to market data and extensive valuation experience.

Knowing also which personal property assets, like specific fixed equipment, should be taxed as personal property is critical to determining their assessed value. The resolution typically requires a formal appeal on the business personal property account, so the taxpayer must possess knowledge of both forms of property tax.

Leverage PVS’s Expertise for Effective Business Personal Property Tax Solutions

PVS knows how to accurately prepare and file the annual business personal property rendition, which can provide a large head start on duplicate taxation issues. Having a business personal property tax professional prepare the personal property return on time can also avoid costly and time-consuming audits, which can often review up to four prior years of personal property data. 

Hiring a firm with expertise and experience in real and personal property is invaluable when duplicate taxation issues plague your property tax expense.

Attention to detail, industry knowledge and experience and knowledge of legislative changes are essential in the skill set of the company filing your business personal property returns. PVS specializes in business personal property taxes and has prepared returns and challenging property tax assessments since 1997. 

Contact us to see how we can help you and your company file your renditions and avoid or resolve duplicate taxation from local governments.

Picture of Chip Saam

Chip Saam

Chip Saam, ASA, CMI, spearheads Property Valuation Services (PVS) as Senior Technical Director. With over 25 years of hands-on expertise, Chip specializes in pioneering valuation approaches aimed at maximizing property tax efficiencies and savings for businesses navigating complex property tax landscapes.
duplicate taxation

Accurate property evaluation and building valuation services ensure that both real and personal property are assessed fairly. Misunderstanding these nuances can lead to misclassifying assets, which might result in overpaying property taxes or penalties for non-compliance. Accurate classification aids in strategic financial planning and efficient asset management, helping companies avoid legal issues and optimize their property tax strategies, ultimately safeguarding their profitability and reputation.

Recent Posts

Real vs. Personal Property: The Fight Against Duplicate Taxation Read More »

commercial property tax appeal

Comprehensive Guide To Commercial Real Estate Property Tax Appeal

/ Blog, Commercial Property Tax

Commercial real estate property taxes typically represent a business’ most significant operating expense aside from debt. Proactively managing property taxes through review and appeal is a vital strategy that can dramatically enhance your profitability and reduce operational costs. By partnering with experts in strategic commercial real estate property tax appeals and valuation services, you can safeguard your financial health, free up capital for reinvestment and secure a competitive edge in your market.

 

Discover the transformative impact effective property tax management can have on your business operations and bottom line.

 

What are the current challenges in commercial real estate?

According to reporting by CoStar News, “Office owners across the country, coping with more vacancies and lower demand that reduce building values, now face another issue: higher property tax bills.”

 

Amid fluctuating market conditions, property taxes remain a significant burden. As market demand shifts and vacancies increase, property valuations and property tax liability changes are expected. However, the timing of property reassessments, which often lag behind current market conditions, or the application of fixed property tax rate increases, can result in property owners facing tax bills that don’t accurately reflect their property’s diminished market value. This discrepancy can create a financial strain for property owners, who must manage taxes that are misaligned with the real economic value of their properties.

 

Given these challenges, it’s imperative to understand how properties are assessed. A deep dive into the assessment process not only clarifies why you might be facing high property taxes but also equips you with the crucial knowledge needed to contest them effectively.

 

Understanding the Assessment Process for Commercial Real Estate Property

Assessing commercial real estate property is crucial in determining your property tax liabilities. Here are the factors used by local authorities to establish the taxable value of a property:

 

  1. Location: The geographical area where the property is situated influences its value. Properties in high-demand or economically thriving locations are generally assessed at higher values.
  2. Size: The property’s overall square footage directly affects its valuation. Larger properties typically incur higher property tax assessments due to their potential for generating more revenue.
  3. Age: Age can affect the assessed value of your property, with newer properties often valued higher due to greater demand by tenants fewer anticipated maintenance issues than older properties.
  4. Condition: The current state of the property is crucial; well-maintained or recently renovated properties are likely to be assessed at a higher value.
  5. Income Potential: The property’s ability to generate income through renting or leasing spaces is a critical determinant of its assessed value. Higher income-generating properties are usually subject to higher property taxes.

These factors play a pivotal role in determining a property’s market value. This value is determined based on current market conditions and the prices of similar properties in the area, reflecting what the property would likely sell for under normal circumstances.

 

How does Property Valuation Services (PVS) help in accurate assessment? Holding the esteemed MAI designation from the Appraisal Institute

Our team of nearly 100 dedicated professionals, led by an experienced property tax professional holding the esteemed Member of the Appraisal Institute (MAI) designation, assists in:

 

  • Expert Valuation Analysis: PVS experts specialize in commercial real estate valuation services and understand the intricacies of commercial property valuations. We use advanced tools and methodologies to analyze the factors affecting the value of your property.
  • Market Comparisons: To ensure fairness, we conduct thorough market studies comparing properties in the same region. This helps in arguing for a more equitable assessment by showing real-world examples.

 

  • Appeal Support: This involves preparing detailed reports and presentations highlighting discrepancies in the assessment process. We have a proven track record of successfully producing reductions, serving more than 800  clients annually with nearly 40,000 property tax parcels across all 50 states.

 

  • Continuous Monitoring: PVS monitors market changes and appeals assessments accordingly. This proactive approach ensures that your property’s assessed value remains aligned with its actual market value, preventing over-taxation.

By partnering with PVS, commercial property owners can have confidence that their property taxes are fair and optimized to reflect the actual value of their investment, potentially saving significant property tax dollars annually. 

 

Commercial Real Estate Property Tax Appeal

Successfully challenging an overassessment can dramatically reduce one of your most significant operating expenses. Overassessments occur when an assessor’s appraised value exceeds its actual market value, often leading to unnecessarily high property tax bills. Proactively addressing these discrepancies is where PVS excels.

 

According to Atlanta Civic Circle, “A research team at Georgia Tech’s School of Public Policy, led by assistant professor Brian An, studied Fulton County tax records from 2011 to 2022 and found that commercial property owners appealed their properties’ assessed fair market value 31,587 times over that period and were successful 62% of the time. Consequently, they were able to lower their tax bill.”

 

This significant success rate underscores the effectiveness of well-prepared appeals and highlights the potential for substantial property tax savings.

commercial property tax firm

How does PVS identify and challenge overassessments?

PVS’s role as a commercial property tax specialist involves several key actions that help challenge and correct overassessed property values:

 

Detailed Property Analysis

We begin by conducting a comprehensive analysis of your property, considering all factors that impact its market value, such as location, condition, size, age and income potential. This thorough understanding helps identify discrepancies between the property’s assessed value and the current market conditions.

 

Gathering Robust Evidence

Solid evidence is crucial for a successful commercial real estate property tax appeal. We gather data, including recent sales of comparable properties, current market reports and other relevant financial information, to build a compelling case that the assessed value exceeds the fair market value.

 

Expert Testimony and Reports

PVS provides expert testimonies and detailed valuation reports during the appeal process. These reports are crucial in negotiations and hearings, offering clear, data-backed insights into why the assessment should be reduced.

 

Strategic Negotiations

With a deep understanding of property tax laws and local regulations, our team engages in strategic negotiations with property tax assessors and other relevant authorities. Our expertise and professional approach often facilitate favorable outcomes in reducing assessed values.

commercial real estate property tax

Case Studies of Successful Commercial Real Estate Property Tax Appeal

Partnering with PVS meant significant property tax savings for these clients:

  • Corporate Office Campus in Fulton County, GA: PVS challenged the assessment of an expansive corporate office campus that had been significantly overvalued. By providing a detailed market analysis and comparing it with similar properties, PVS reduced the assessment by $25 million, resulting in property tax savings of approximately $204,918.

 

  • Big Box Store in Missouri: In another instance, PVS represented a property owner who faced an excessive valuation increase on a closed and vacant big box store. PVS’s appeal process resulted in a 50% reduction in the assessed value, saving the property owner $89,665 in property tax dollars.

 

  • National Hospital Operator: PVS successfully secured a $690,000 commercial real estate property tax savings for a national hospital operator by addressing the overvaluation of a vacated, functionally obsolete hospital facility. Despite local assessors initially maintaining the total value of the old facility, even after its cessation as an acute care center, PVS managed to revalue the property by quantifying its functional obsolescence. 

Compliance and Deadlines in Commercial Property Tax Management

Knowing property tax regulations is critical for commercial real estate owners to avoid penalties and potential legal consequences. Understanding and adhering to property tax deadlines is crucial in this process. We ensure our clients comply with all property tax obligations.

 

Importance of Compliance

Failure to comply with property tax deadlines and regulations can lead to severe repercussions for property owners, including hefty penalties, interest on overdue amounts and even legal actions. In some cases, non-compliance can also jeopardize the possibility of successfully appealing unfair property tax assessments. Thus, maintaining compliance is not merely about following rules — it is about protecting your investment and ensuring its profitability.

 

How PVS Provides Hassle-free Compliance

PVS offers several vital services to ensure that clients can meet their property tax obligations effectively and without hassle:

 

 

  1. Deadline Tracking: Our team keeps a detailed calendar of all relevant property tax deadlines across different jurisdictions. This proactive approach ensures that no deadline is missed.
  2. Documentation and Filing Assistance: We assist in preparing and filing all necessary documentation required for property tax payments and appeals. This service is crucial, as proper documentation is often extensive and must be meticulously prepared to ensure compliance.
  3. Property Tax Planning and Forecasting: Beyond mere compliance, PVS helps plan for future property tax liabilities. This includes providing property tax accrual forecasting, which allows you to budget for property tax expenses effectively and avoid financial surprises at the end of the property tax period.
  4. Regular Updates and Consultations: We regularly review and keep up-to-date with legislative changes and are available to discuss the changes, when necessary, with our clients. 
  5. Representation in Disputes: If there are discrepancies or disputes with local property tax authorities, PVS represents and supports our clients throughout the resolution process. This representation can be critical in ensuring that rights are protected and our clients comply with legal requirements.

commercial real estate property tax appeal

Ensuring Long-Term Compliance

PVS’s role extends beyond just meeting immediate deadlines. Our comprehensive approach to commercial property tax management ensures that clients are well-prepared for long-term compliance, safeguarding against risks and optimizing the financial health of their real estate investments.

 

By partnering with us, you can rest assured that your property tax compliance is in capable hands, allowing you to focus more on properties’ strategic management and growth.

Let PVS handle your commercial real estate property tax appeal.

Challenging overassessments is a strategic move that all commercial property owners should consider, especially when discrepancies in valuation are evident. With PVS’s expertise in commercial property tax appeals, property owners can ensure they are not overpaying property taxes and can optimize the financial performance of real estate investments. This proactive approach not only guards against financial inefficiencies but also enhances your property portfolio’s overall value and profitability.

 

Don’t let overvaluations of your commercial properties burden your business with excessive taxes. Contact PVS today to discover how we can help you achieve significant savings and ensure fair assessments. Maximize the potential of your commercial real estate investments with PVS as your trusted property tax specialist.

Comprehensive Guide To Commercial Real Estate Property Tax Appeal Read More »

depreciation schedule

Depreciation Schedule Guide: How to Save on Property Taxes and Streamline Your BPP Process

/ Blog, Business Personal Property, Case Study

Once you know how a depreciation schedule can potentially save you property tax dollars, you’ll appreciate their value beyond mere compliance. An optimized depreciation schedule is a strategic tool that can lead to significant savings. In this guide, we’ll discuss managing business personal property (BPP) taxes through accurate and strategic depreciation schedule management, tackle common management challenges and provide actionable strategies to enhance compliance and maximize property tax efficiency.

Depreciation Schedule in Business Personal Property Tax

When businesses open, they acquire assets, such as computers, copiers, desks, phones and machinery, etc. Each type of asset has a schedule of depreciation based on its expected life, usage and role within business operations.

According to the Internal Revenue Service (IRS), “You can depreciate most tangible property (except land), such as machinery, vehicles, furniture and equipment. You can also depreciate certain intangible property, such as patents, copyrights and computer software.” Property qualifies for depreciation if it is owned by you, used in your business or for income generation, has a measurable useful life and is expected to last more than one year.

For federal purposes, the following items are categorized as follows:

  • Three-year properties: tractors, tools and some livestock.
  • Five-year properties: computers, office equipment, cars, light trucks and construction assets.
  • Seven-year properties: office furniture, appliances and most other property, not otherwise categorized.

Over time, you are allowed to depreciate the cost of these assets.

What is Federal Depreciation?

Federal depreciation is the method businesses use to calculate the decrease in value of their assets, as defined by U.S. property tax laws. It involves applying IRS-approved methods and guidelines to determine the amount of depreciation that can be deducted from a business’s taxable income each year.

What is a Depreciation Schedule?

A depreciation schedule, on the other hand, is a detailed document that systematically outlines how assets lose value over time. This schedule is crucial for property tax purposes because it provides a structured way to account for the depreciation of tangible assets, thereby reducing the amount of taxable income.

The IRS defines depreciation as, “an annual income tax deduction that allows you to recover the cost or other basis of certain property over the time you use the property.”

Depreciation schedules determine the value of assets based on their cost and age, taking into account factors such as usage, current condition, wear and tear, technological advancements and market trends.

Federal Depreciation vs. Depreciation Schedule

Many businesses don’t realize that federal depreciation isn’t what most assessors use to assess their personal property taxes. A few states use federal depreciation for personal property taxes, including Missouri, Nebraska and South Carolina. Other states and/or counties develop depreciation schedules based on their research as to how long the useful life of certain equipment is. 

Arizona

For example, in Arizona, for equipment reported at its original cost and date, the assessor applies an additional depreciation factor that increases every year until total depreciation eventually meets 97.5%. If you’re reporting equipment that has been re-booked — meaning it’s being reported at the cost and date your business acquired an existing asset instead of the original cost and date of the equipment — the equipment is not eligible for the additional depreciation.  Arizona has recently modified the application of additional depreciation factors, so it is important to fully understand their depreciation schedules and how this applies to your personal property. 

Indiana

In Indiana, the factor used on new equipment purchases increases from the first year to the second year, so the taxable value of the equipment increases in the second year before beginning to decline again in the third year.

In some cases, when using a depreciation schedule, assessors will assign index factors to an asset’s original cost to determine the replacement cost new of an asset before applying the depreciation factors based on the equipment’s useful life and age. 

The overall factor is then used to calculate the equipment’s market value. If assets remain on your depreciation schedule, they are taxable for business personal property taxes — even if the netbook value is zero.  In the majority of cases, the most an asset will be depreciated is 80-90% of its cost — thereby leaving a remaining taxable value, otherwise known as its residual value — which will be taxable until the asset is disposed from a taxpayer’s books and records.     

Common Challenges in Managing Depreciation Schedules

In an attempt to manage depreciation schedules effectively, businesses may face several common challenges to maintain accuracy and compliance. 

Incorrect Classification of Assets

Different types of property may be taxed at different rates. Correctly categorizing assets means they are taxed appropriately. 

Incorrect classification of assets can skew the depreciation calculations, leading to potential overstatements or understatements of asset values on financial statements and property tax returns. 

Market Dynamics

Another challenge is maintaining up-to-date asset valuations that reflect current market conditions. As market dynamics shift — due to factors such as technological advances, economic downturns or changes in consumer demand — the value of assets can fluctuate significantly. 

Property Tax Laws Dynamics

Moreover, property tax laws concerning depreciation are not static and can vary widely across jurisdictions. This complexity is magnified for businesses operating across multiple regions since they must stay informed about and comply with diverse regulatory requirements.

Managing depreciation schedules requires a proactive approach, including regular schedule reviews and updates, a thorough understanding of applicable tax laws and the application of appropriate asset classification and valuation methodologies. Property tax professionals from Property Valuation Services (PVS) can help businesses optimize their property tax benefits and maintain compliance by addressing these issues.

schedule of depreciation

Strategies for Optimizing Depreciation Schedules

Optimizing depreciation schedules is crucial for maximizing property tax benefits and enhancing financial accuracy. Here are some strategic approaches we employ to make depreciation schedules precise and efficient:

  1. Review Regularly:

    Conduct systematic and regular reviews of depreciation schedules to account for all assets correctly and align their depreciation with current regulations and business operations. Identify errors or changes in asset conditions or valuations that might affect depreciation calculations.

  2. Employ Suitable Depreciation Schedules:

     Simply put, you need to choose the right depreciation schedule for each type of asset. Businesses must evaluate the estimated decline in value for each asset type and ensure that the depreciation schedule used is appropriate for the decline in value. This choice impacts how quickly an asset is depreciated and can affect a company’s property tax obligations and overall financial outlook.

  3. Manage Asset Strategically: Acquiring assets at a time that maximizes property tax benefits or disposing of them when they no longer contribute value can significantly impact a company’s financial health and property tax liabilities.
  4. Document All Assets:

     Record all assets, including the purchase dates, cost and depreciation schedules. 

By implementing these strategies, businesses can feel confident that their depreciation schedules are compliant and strategically aligned with their broader property tax planning and financial management goals. But, ensuring everything is correct can get complicated quickly. That’s why the experts at PVS work to minimize the burden of figuring out depreciation schedules by doing the legwork for businesses.

Case Studies: Property Valuation Services’ Success Stories of Depreciation Optimization

These real-world examples illustrate how PVS employs a comprehensive approach that includes utilizing depreciation schedules tailored to specific modalities or industries.

Case Study 1

PVS filed the business personal property tax renditions using their in-house property tax savings methodologies for a health care system in South Texas. The proposed values from the Appraisal District were appealed and resolved through mediation. 

Challenges: To identify assets with intangible components, PVS had to review and classify asset listings for five hospitals and several ancillary items and compare them to our in-house database of high-technology medical equipment for the appropriate adjustments. PVS also had to determine the appropriate depreciation schedule for each asset. 

How PVS Helped: PVS prepared personal property renditions that identified components of certain pieces of equipment as either intangible or non-taxable and thereby reduced the taxable base and moved a large portion of assets to a faster depreciation schedule, both of which resulted in lower taxes assessed. 

Results: PVS secured more than $1,000,000 in savings for the client.

Case Study 2

PVS filed the business personal property tax return for a newly constructed replacement hospital using their in-house property tax savings methodologies. The assessor’s office accepted the return with minor discrepancies. 

Challenges: To identify assets with intangible components PVS had to review and classify an asset listing with over one thousand items and compare it to our in-house database of high-technology medical equipment for the appropriate adjustments. PVS also had to determine the appropriate depreciation schedule for each asset. Additionally, there was a bulk entry costing over $6,000,000. 

 

How PVS Helped: PVS prepared a personal property return that identified components of certain pieces of equipment as either intangible or non-taxable. This reduced the taxable base of the assets and moved a large portion of assets to a faster depreciation schedule, both of which resulted in lower taxes assessed. PVS was also able to obtain details behind the bulk entry and incorporate those assets in the property tax savings methodologies. 

Results: PVS secured more than $60,000 in savings for the client. 

Case Study 3

PVS started working with a leasing company to reduce the property tax liability on leased equipment of a current client. PVS identified intangible and non-taxable components of the equipment that could be removed from the taxable basis of the assets, along with identifying jurisdictions that would allow the movement of the equipment to a faster life.

Challenges: PVS reviewed and analyzed the leased equipment to determine the appropriate cost adjustments and depreciation schedules. As the equipment was located throughout the country, the exact location of each asset had to be considered when applying property tax reduction methodologies, as they can vary not only by the state the equipment is located in but also the individual jurisdictions.

How PVS Helped: By reviewing the leased equipment before the lessor’s filing, PVS was able to reduce the property tax liability of the leased equipment.

Results: This resulted in savings of more than $220,000 in the first two years.

what is depreciation schedule

The Impact of Legislative Changes on Depreciation Schedules

Legislative changes can alter how depreciation schedules are managed in BPP taxation, often with the goal of stimulating economic growth or adapting to new economic conditions. These changes can include modifications to depreciation methods and rates, potentially increasing depreciation rates for certain assets to encourage investment by allowing businesses to recover costs more rapidly through property tax deductions. Additionally, the introduction of temporary property tax incentives, such as bonus depreciation or higher expensing limits, can enable companies to deduct a greater portion of an asset’s cost in the year of purchase, thus affecting their short-term financial and property tax planning.

 

To stay compliant and strategically aligned with new property tax laws, businesses need to adapt by updating internal processes and systems. Understanding these legislative impacts is crucial for businesses to maximize property tax efficiencies and make informed decisions about capital investments and asset management.

Property tax laws are complex and constantly changing, but experienced property tax professionals have the expertise to apply property tax-saving strategies effectively and keep your business compliant. Hiring a property tax expert is a smart investment that pays off by protecting your bottom line and freeing up capital to drive business growth. 

Property Valuation Services Can Help You Manage Depreciation Schedules

At Property Valuation Services, we understand that managing depreciation schedules is crucial for minimizing property tax liabilities and maximizing savings.

By customizing depreciation schedules to fit the unique characteristics of each asset type and industry, our clients receive fair and accurate property tax valuation.

Contact us and don’t let the complexity of depreciation schedules intimidate you from optimizing your property tax strategy. 

Let us help you transform your property tax management challenges into opportunities for growth and savings.

 

Depreciation Schedule Guide: How to Save on Property Taxes and Streamline Your BPP Process Read More »

business personal property tax guide

Simplifying Business Personal Property Tax: A Guide for Every Business Owner

/ Blog

Business personal property (BPP) tax can be taxing! Ignoring or misunderstanding property tax doesn’t just risk compliance issues; it could mean missing out on substantial property tax savings. Also, overpaying on property taxes drains essential resources and funds that could support growth, innovation or bolster your business’s financial health. 

 

Understanding business personal property tax is a financial strategy that can significantly impact your bottom line. Learn how to navigate BPP effectively so you’re not leaving money on the table and enable smarter investments for your business. 

What is Business Personal Property Tax?

Business personal property tax is a self-reporting tax where taxpayers file returns listing tangible assets they possess as of a specific date. Assets commonly include furniture, machinery, computer and office equipment, vehicles and inventory. Essentially, if it’s not real estate, it’s likely business personal property.

 

It’s different from the property tax on your building or land, which is called real property tax. The key is to report exactly what you have, so you don’t pay more property tax than you should.

 

In most states, assessing jurisdictions require annual filings of business personal property tax renditions. Failure to file can result in arbitrary assessments by assessors. Depreciation tables are commonly used to consider the acquisition date and cost of assets and account for their declining value over time. These tables often include various rates of depreciation to accommodate different asset types.

Why Getting It Right Matters

Filing your business personal property tax return is a critical step in managing your property tax liability. Incorrect filings — overvaluation, undervaluation or omission of assets — can lead to unnecessary property tax overpayments or potential penalties. Such financial missteps draw essential resources away from crucial business growth areas, impacting your ability to innovate, expand and maintain operational stability. Moreover, every dollar inaccurately allocated to property tax overpayments is not invested in your business’s future.

 

Consequently, Property Valuation Services’ (PVS) comprehensive approach to personal property valuation includes the following techniques:

 

Identification of High-Technology Assets: We have expertise in identifying and valuing high-tech assets accurately.

 

Cost Adjustments: We have developed proprietary cost adjustment methodologies to revalue assets so that the valuation reflects the current market value.

 

Industry Specific Depreciation Schedule: We utilize depreciation schedules tailored to specific modalities or industries.

 

Market Approach for High-Tech Equipment: We employ market-based approaches for valuing high-tech equipment.

 

Equipment Appraisals: Our team houses American Society of Appraisers (ASA) equipment appraisers who can conduct thorough equipment appraisals to determine accurate, credible values.

 

AHA Useful Life Analysis: For healthcare, we perform useful life analyses following the American Hospital Association guidelines.

 

Replacement Cost vs. Reproduction Cost: We assess the replacement cost versus reproduction cost for accurate valuation.

 

Ghost Asset “Clean-Up”: We identify and rectify ghost assets for accurate assessment.

 

Identification of Non-Taxable Assets: We identify assets that may be exempt from taxation.

What’s the Process of Filing a Business Personal Property Tax Return?

Each year, businesses are required to file a business personal property rendition detailing their assets. This includes information like acquisition dates, costs and other relevant documentation. Accurate filing is crucial because it directly impacts your property tax assessment. Inaccurate filings or underreporting can lead to crippling audit liabilities, including penalties and interest.

 

The filing date can vary by jurisdiction. Typically, these returns are due annually, with deadlines ranging as early as January or late as November in a few places. The specific date can differ from one state, county or city to another. It’s important to check with your local tax authority for the exact filing deadline applicable to your business.

Assessors Figure Out Your Business Personal Property Tax

How Do Assessors Figure Out Your Business Personal Property Tax?

The Tax Foundation explains that “Taxes on [Tangible Personal Property] are levied mostly by local governments, but they are regulated at the state level. There is much variation in how TPP is taxed. Property classifications, assessment ratios and exemptions are often established by the state, with localities opting to tax TPP within the boundaries set by the state government.

 

Seven states (Delaware, Hawaii, Illinois, Iowa, New York, Ohio and Pennsylvania) exempt all TPP from taxation, while another five states (Minnesota, New Hampshire, New Jersey, North Dakota and South Dakota) exempt most TPP from taxation except for select industries that are centrally assessed, such as public utilities or oil and natural gas refineries.”

Factors To Consider When Calculating Your BPP Tax

Moreover, when calculating your BPP Tax, here’s what to keep in mind:

 

Current Value of Assets: Consider both the original purchase price and their current market value. Factor in how much they have depreciated over time.

 

Age of Assets:  Note that the date you acquired each asset and their expected useful life span are necessary to accurately calculate depreciation.

 

Depreciation: Know the depreciation rate applicable to each category of your assets and how much their value has diminished over the years.

 

The Internal Revenue Service stated, “You can depreciate most tangible property (except land), such as machinery, vehicles, furniture and equipment. You can also depreciate certain intangible property, such as patents, copyrights and computer software.”  Property qualifies for depreciation if it is owned by you, used in your business or for income generation, has a measurable useful life and is expected to last more than one year.

 

Local PropertyTax Rules: Be aware of the specific property tax rates in your jurisdiction, available exemptions or deductions and the filing deadlines and documentation requirements.

 

Type of Assets: Movable items like equipment, machinery, computers and furniture are subject to business personal property tax, along with considerations for the property tax implications of leased equipment.

 

Professional Valuation: Consulting with property tax experts can lead to an accurate valuation of your assets and strategies to minimize your taxable liability through legal avenues.

Paying Less Business Property Tax Legally

Avenues to potentially reduce your business personal property tax involve several strategies and considerations that align with property tax laws and regulations:

 

Exemptions and Exclusions: Identify assets that may be completely exempt from property tax or qualify for partial exclusions based on their use, nature or value. Some assets can be partially taxed based on exempt components of the asset, so the original cost and taxable original cost could differ. 

 

Based on information from the Tax Foundation, “De minimis exemptions provide relief for small firms by eliminating their tax liability if they remain below a valuation threshold for their tangible personal property (TPP). These exemptions lower compliance costs for firms with a small amount of otherwise taxable TPP.”

 

The Tax Foundation also reported, “Arizona, Colorado, Idaho, Indiana, Michigan, Montana and Rhode Island have TPP tax de minimis exemptions of $50,000 or more, while Florida, Georgia, Kentucky and Utah have lower exemptions.” 

 

Depreciation: Understanding how to apply depreciation rules effectively can result in substantial property tax savings.

 

Property Tax Credits: Certain jurisdictions offer property tax credits for businesses that qualify under specific criteria. These criteria include using renewable energy sources or investing in community development projects.

 

Accurate Asset Valuation: Ensuring your assets are valued correctly can prevent overpaying property taxes. This includes disputing overvaluations and updating asset values to reflect current market conditions.

 

Asset Classification: Different types of property may be taxed at different rates. Correctly categorizing assets means they are taxed appropriately.

 

Negotiated Property Tax Agreements: In some cases, businesses can negotiate payment agreements or incentives with local property tax authorities, especially if they contribute significantly to the local economy.

 

Timely Reporting and Filing: Adhering to deadlines and filing requirements can avoid penalties and interest, which add to the property tax burden. Some jurisdictions also offer discounts for early filing or payment.

 

Property tax laws are complex and constantly changing. Property tax professionals have the expertise to apply property tax-saving strategies effectively and keep your business compliant. Hiring a property tax expert is a smart investment that pays off by protecting your bottom line and freeing up capital for your business growth. 

Business Property Tax Efficiency Strategies for Entrepreneurs at All Stages

Whether you’re a seasoned business owner or just starting out, PVS offers tailored solutions to enhance property tax efficiency. For veterans in the business world, we delve deep into your asset portfolio, ensuring everything is meticulously accounted for and compliant with the latest property tax regulations.

 

Also, if your assessments seem higher than necessary, we’re here to support you in challenging them. For new entrepreneurs, we provide comprehensive guidance on setting up your property tax reporting correctly from the start. By educating you on the essentials of business personal property tax, we prevent common mistakes. This also equips you with strategies for sustainable financial health. 

Partnering with Property Valuation Services (PVS) Means Less Stress

Since property tax laws and regulations change from time to time, it is hard to keep up. At PVS, we stay on top of all the updates for you. We possess a unique advantage. Our team combines technology and product specialists with seasoned business personal property tax professionals. This powerful blend enables us to develop exclusive, cost-cutting methodologies that result in substantial client savings. Our comprehensive business personal property tax representation services include:

Real Stories from Real Businesses

At PVS, we’ve had the privilege of supporting a diverse range of businesses in mastering their property tax challenges. Our clients have found the freedom to concentrate on their passions since their property tax affairs are in expert hands.

businessmen discussing

 

Case Study 1: Aircraft Parts Company

Executive Summary 

PVS took over the personal property tax compliance responsibilities for an aircraft parts company with a warehouse in Texas. In reviewing the prior year’s filings for their centers, PVS identified that this company was not taking advantage of the Freeport Exemption, which PVS believed they would qualify for. 

Challenges 

Initially, PVS reviewed this client’s financial information, sales and shipping data, and analyzed how quickly their inventory moved through their warehouse in Texas. By doing so, PVS found that this client did, in fact, qualify for the Freeport Exemption.

How PVS Helped 

PVS analyzed the data from this client, prepared and filed the Freeport Exemption for this client so they could claim this benefit. PVS was able to save this client more than  $42k in personal property taxes by filing the Freeport Exemption.

 

Case Study 2: Movie Theaters

Executive Summary

During the first two years of the mandatory digital projection transition for movie theaters, PVS signed/engaged in a joint venture with the top movie companies in the U.S. We used their methodologies for revaluing high-tech equipment to save them $4.4M in property taxes.

Challenges

During the transition, these new assets were leased from their joint venture company formed to install and maintain these projectors. So, PVS’ ASA Equipment Appraisers contacted and worked with the projector manufacturers to analyze one of the actual assets. This is done to identify how they could revalue the equipment and lower the leasing company’s property tax liability, which would be passed through to these movie theater companies.

How PVS Helped

PVS filed returns for thousands of movie theaters specific to each leasing company. PVS appraisers collaborated with manufacturers and analyzed assets on-site. 

 

Case Study 3: Health Care System

Executive Summary 

PVS filed business personal property tax renditions using their in-house property tax savings methodologies for a health care system in South Texas. The proposed values from the Appraisal District were appealed and resolved through mediation. 

Challenges 

To identify assets with intangible components, PVS had to review and classify asset listings for five hospitals and several ancillary items and compare them to our in-house database of high-technology medical equipment for the appropriate adjustments.  PVS also had to determine the appropriate depreciation schedule for each asset. 

How PVS Helped 

PVS prepared personal property renditions that identified components of certain pieces of equipment as either intangible or non-taxable. This reduced the taxable base and moved a large portion of assets to a faster depreciation schedule. Both of these resulted in lower property taxes assessed. PVS secured more than $1,000,000 in savings for the client. 

Let Property Valuation Services Reduce Your Taxable Liability

Business personal property tax is complicated, but it doesn’t have to be a headache. 

 

Our diverse team of accounting-based staff and finance specialists from Overland Park, Kansas are committed to understanding your properties from both an analytical and accounting perspective. PVS consistently finds property tax savings following behind other property tax firms. Most of our services are conducted on a pre-assessment basis to represent your interests and maintain positive relationships with assessors in the community. 

 

It is rare for a consulting firm to house MAI Appraisers, let alone have two on staff.  Property Valuation Services strives to provide the highest level of expertise to our clients. This also includes presenting the highest level of credibility to an assessor when debating values.

 

We’re not just maximizing your tax savings; we’re your partner in taking the entire tax management process off your plate. By entrusting your property tax responsibilities to PVS, you free up valuable time, allowing you to focus on driving your business forward. Let us handle the intricacies of tax filing, so you can dedicate your energy to your business’s growth and innovation. 

 

Contact us today and let’s make property tax time a little less taxing, together.

Simplifying Business Personal Property Tax: A Guide for Every Business Owner Read More »

tax planning

Essential Tax Planning Strategies for Franchise Owners

/ Blog

Let’s face it: a franchise‘s property tax can take a big bite out of your profits. By dialing in on how you manage these taxes, you can turn what seems like another bill into a chance to save some cash. Staying on top of your property taxes means you won’t waste money on mistakes or pay more than you should. If you let this slide, you could spend more than necessary, cutting into your hard-earned profits. Be proactive with your property tax planning strategies now, and you’ll set your franchise up for a healthier financial future while avoiding overpayment and penalties.

Understanding the Impact of Business Property Taxes on Your Franchise

Understanding and keeping track of property taxes can be like finding hidden money. You can potentially turn a routine bill into actual property tax savings by getting smart about managing your real estate and business personal property taxes. 

 

Staying sharp on managing property taxes means you’re not just throwing money away through mistakes or ignorance. But if you’re not paying attention, you might pay more than you should, which directly cuts your profits. 

What is Business Property Tax?

When discussing business property taxes, we cover two major areas: property taxes on the real estate you own for your business and property taxes on the tangible business personal property part of your daily operations. 

Real Property vs Personal Property

Real property refers to the land and any structures firmly attached to it. This category captures your franchise’s physical location and any permanent installations or modifications therein. It’s the aspect of your business that doesn’t move, including buildings and any fixed enhancements. 

 

Additionally, leasehold improvements — alterations made to rental property by a tenant — also fall under this category. Despite being initiated by the tenant, these modifications are considered permanent contributions to the property’s value and are thus treated as real property for property tax purposes.

 

On the other hand, tangible personal property encompasses all the movable items within your business. This property includes office essentials like computers and furniture, operational gear such as kitchen equipment and the various tools essential for your trade. The defining characteristic of personal property is its mobility; these items aren’t fixed to one location and can be transported as needed.

 

Understanding the distinction between real and personal property is crucial because they’re taxed differently and can have various exemptions and rules depending on location. By getting a handle on both, you ensure you’re not overpaying in either category, optimizing your business’s financial health and efficiency.

Business Property Tax Planning for Franchise Owners

The secret sauce to handling your property taxes well is to stay ahead with smart planning. This plan means knowing exactly what property taxes you’re dealing with right now, looking for any changes on the horizon and finding ways to keep those tax bills as low as possible without stepping over any lines. 

 

Here’s how you can get started:

 

  1. Know Your Current Situation: Start by getting a clear picture of what you’re paying in terms of both real estate taxes and business personal property taxes. It’s like knowing the layout of the land before you start navigating.

 

  1. Watch for Changes: Property tax rates and regulations can change, and new equipment or property upgrades can affect your property tax bills. Keeping a lookout means you won’t be caught off guard.

 

  1. Find Ways to Reduce Your Property Tax: Once you know where the land lies and what changes might come, it’s time to look for legal ways to reduce your property tax. This reduction could mean challenging assessments you think are too high or taking advantage of property tax incentives and exemptions you’re entitled to.

 

By taking these steps, you’re not just ticking boxes to stay compliant; you’re actively looking for ways to improve your property tax situation for your business’s bottom line.

 

tax planning for franchise owners

Essential Steps for Smart Business Property Tax Planning for Franchise Owners

Keeping Up with Property Tax Rate Changes

Consider the impact of a new infrastructure project funded by increased local property taxes in your area. This scenario could significantly affect your budget. You can stay ahead of these developments by subscribing to local government newsletters and attending city council meetings. 

 

Suppose you know an upcoming vote on a tax increase to fund a new public park. In that case, you can budget accordingly or even engage in advocacy efforts to mitigate the impact on local businesses. This level of engagement helps you anticipate financial shifts and adapt your budget to maintain profitability.

 

According to the Tax Policy Center, “Cities also use different assessment methods that can limit the decline in tax collections from declining property values. New York, for example, uses net operating income submitted by owners of commercial buildings, rather than recent sales, to determine assessed value, and phases in those changes over five years. The city comptroller estimated that a “doomsday” scenario where office values decline by 40 percent between 2023 and 2029 would lead to a decline in property tax levies of 3 percent in 2027.”

Getting Ready for Property Revaluations

Think about the effects of a new commercial development nearby, which could increase property values in your vicinity. If your property’s assessed value spikes, so does your property tax bill. You can prepare a robust challenge by familiarizing yourself with the revaluation process, including the appeal procedure. This procedure might involve commissioning an independent appraisal or compiling evidence of any factors that could detract from your property’s market value, such as needed repairs. Appealing an unfair assessment can lead to substantial property tax savings, benefiting your bottom line.

Planning for Property Improvements

Adding a high-tech drive-thru to improve customer service could significantly boost sales, but it might also increase property taxes. By consulting with a property tax professional before undertaking the project, you can explore ways to minimize its impact on your property tax liability, such as taking advantage of specific property tax breaks for technology investments. Strategic timing of the project’s start and completion dates also plays a role in mitigating property tax consequences, allowing you to reap the benefits of your investment without a hefty increase in your property tax burden.

Managing Your Equipment Taxes

The Tax Foundation cautions business owners that “Complying with personal property taxes is onerous, as it requires documenting all assets—all the way down to cleaning supplies for the office kitchen—along with their acquisition price, acquisition date, and depreciation.”

Suppose you’re overhauling your POS systems across multiple locations. The investment, while substantial, is necessary for improving efficiency. By carefully planning the purchase and installation timeline, you can maximize property tax benefits related to business equipment investments. 

In addition, understanding business personal property assessment is essential, as many states tax business personal property in addition to real property. Those that do tax equipment, require that an annual business personal property return be filed each year by a certain date. The local assessor’s office reviews the returns filed and calculates a taxable value for the equipment, most often by depreciating the cost of the taxable equipment reported on either their own local depreciation schedules or the state depreciation schedules. As a result, in most cases, newer equipment will yield a higher taxable value initially but will decrease over time in most places as the equipment receives another year’s worth of depreciation until it hits the residual depreciation factor for the schedule it’s being assessed on.  

 

However, your business personal property taxes may increase from the prior year for various reasons like capital expenditures, ​​audit results, leased equipment, depreciation tables, abatement or exemption expiration, ​​tax rate increase and assessor errors.

By tackling these areas proactively and informedly, you’re not just dealing with property taxes as they come. Instead, you’re setting your franchise up for a better financial future. It’s about finding the right balance between doing what’s best for your business now and planning for property tax savings.

 

tax planning for franchise owners

Teaming Up with Tax Pros for Winning at Business Property Taxes

FranNet franchise experts explained that “While it’s a common misconception that franchises are owned by large corporations with deep pockets, franchise operations are small businesses too with much in common with their independent counterparts. Both have similar staffing and revenue models, depend on local employees, community involvement and attracting a consumer base with an organic, grassroots appeal.” 

The Vital Role of Property Tax Management

These similarities underscore the critical importance of effective property tax management. Just as these operations strive to connect with their communities and manage their resources wisely, navigating business property taxes with precision and insight becomes vital to sustaining growth and success.

Business property taxes can feel like venturing into a labyrinth without a map. That’s precisely why enlisting the expertise of a seasoned tax planning advisor is not just helpful — it’s a game-changer. These aren’t just any advisors; they’re specialists who live and breathe property tax codes, dedicating their careers to understanding every twist and turn of tax legislation.

Elevating Your Strategy with Expert Advisors

By partnering with these experts, you’re not merely outsourcing a task; you’re incorporating a wealth of knowledge and experience into your team. They offer property tax planning services with a toolkit of strategies, each tailored to fit the unique contours of your franchise. They do more than ensure compliance with the complex web of legal requirements; they actively seek out opportunities for property tax savings that might otherwise fly under the radar.

Widely acclaimed across the country, Property Valuation Services (PVS) exceeds what local certified public accountants or general tax consulting firms offer. We provide specialized attention to understanding your properties from an analytical and accounting perspective.

Proactive Property Tax Savings with PVS

With our diverse team of accounting-based staff and finance specialists, we consistently discover property tax savings, even when working with other consulting and tax firms. Most of our services are conducted proactively, on a pre-assessment basis, to represent your interests while maintaining positive relationships with assessors and the community.

Making the Most of Tech Tools for Tax Management

There’s a ton of tech out there designed to take the headache out of handling your business property taxes. Think about software that keeps track of your assets and figures out their value for you or apps that ping you with updates whenever a tax law change could affect your business. These tools make property tax planning for franchise owners more accurate and much less time-consuming, so you can focus more on running your business and less on crunching numbers.

Building a Stable Financial Future with Property Valuation Services

Staying on top of your business property tax planning is the secret to keeping your franchise financially healthy. It’s about understanding what you’re dealing with, making smart plans and using all the help you can get from pros and tech tools. This approach doesn’t just help you manage property taxes today; it sets you up for long-term success, ensuring your franchise keeps growing and thriving.

 

If navigating the maze of business property taxes seems daunting, you’re not alone. Now is the perfect time to reassess how you manage property taxes and pinpoint areas for enhancement. From seeking specialized advice to leveraging cutting-edge tax technology, numerous strategies can fine-tune your tax approach for optimal outcomes. Engaging with professionals like Property Valuation Services in Overland Park, Kansas, can be a game-changer. Their expertise in accurately assessing your property’s value and navigating property tax regulations ensures you’re not paying more than necessary. 

 

Why not take a proactive step towards financial clarity and efficiency for your franchise? Schedule a consultation with Property Valuation Services and start your journey to financial optimization and confidently secure your franchise’s future.

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