How to Choose a Property Tax Firm

How To Choose A Property Tax Firm

BY BRYAN HILEMAN

 

There are two certainties in life: death and taxes. We have heard this anecdote many times. In nearly every state, as a business owner, you have the responsibility to pay multiple types of property taxes. 

 

Real Estate Property Tax, meaning property tax levied on land and buildings that you own or passed through property tax on buildings you lease, is the most commonly understood. The other type being Business Personal Property Tax, which essentially means property tax paid on assets your business owns like equipment, computers, etc.

 

Many people we talk to feel there is nothing they can do about reducing their property taxes — the unfortunate theme being “I have to pay them” so there must be nothing that can be done. For informed business owners who do know this isn’t the case and that help is out there, the next problem becomes determining how to choose the best property tax firm for their needs.

 

Here are some of the drawbacks and advantages to different types of firms.

 

Big4 Accounting Firms

 

First, let’s look at the Big4 Accounting Firms or similar large accounting companies. We know who they are. You see their commercials on television, you see their logo on golfers’ apparel, you see their offices in your cities across the country. These firms offer a multitude of financial, accounting and tax services. These tax services include property tax, but property tax is not nearly as significant as others like corporate tax, income tax, sales and use tax, etc. 

 

If you are a C-Level Executive at a major national company who needs financial help and accounting services outside the realm of just property tax, partnering with a Big4 firm may be enticing. The idea of handing over anything to do with numbers definitely makes sense. Here is what we have heard from some of our clients as to why they did not feel the partnership with a Big4 was successful. 

 

First, if you do not need all different types of services, then just using one aspect of those companies can lead to feeling invisible. Specifically, if you were looking for someone to just help with real estate property tax appeals, then a Big4 accounting firm may not value your business. The odds of you receiving a call back from your point of contact or being effectively communicated with may not be what you were hoping for. Also, we have seen these larger representations ignore smaller valued properties, only working their top percentage in value or increases within a portfolio that quite frankly includes more properties than they can handle otherwise. In short, you may feel seen as just a number.

 

Local Firms

 

Another type of firm we compete with is what we refer to as a “local” firm. These companies are likely only working in one city/county. Their reps are likely former assessors — or they claim to work closely with local assessors. This seems like a great sales pitch. They’ll say they are close with the assessor, they drink or play golf with the assessor, they used to work with the assessor, they will have some impressive numbers regarding both percentage of properties reduced and total number of properties worked because all they do is work in that one area. Again, all of this sounds wonderful and they likely have a high percentage of properties reduced.

 

The problem is that this local representative’s entire livelihood demands that they maintain a close relationship with the assessor. Yes, they will obtain a high percentage of cuts, but those reductions will likely be minimal in actual value because fighting for significant reductions would potentially rock the boat that they otherwise need to remain calm in order to continue to be successful. In short, the person representing your businesses’ financial success may have a closer alliance with the person you’re going head-to-head with — the assessor.  

 

Furthermore, if you have properties in more than one county, it would be an exhausting task to find and maintain local representation in each taxing jurisdiction. It seems to make more sense to find a nationally respected property tax consulting firm that has extensive experience in the taxing jurisdictions where all your properties are located.

 

Law Firm

 

The third potential candidate for property tax help is hiring a law firm that specializes in property taxes. Now, there are some states where this makes a lot of sense as some areas of the country require an attorney to file a protest — like Illinois or Ohio for example. There are also some states that require an attorney if you reach a certain level of appeal past informals — such as Kansas or Texas — while others do not require one at all. We often partner with law firms in states where it is required or beneficial — so I still believe we are a great option — but to be honest, it’s understandable for a company to hire a law firm if their properties were solely in a state where legal representation is required.

 

The one nuance would be in Texas. Some attorneys who work on property tax appeals will tell you that litigating is the best way to achieve the largest reduction. This is a sales pitch, not a fact. We settle 90% of our appeals informally without the need to litigate. Our reductions are significant and arguably comparable to any attorney, without the need for an additional step in the appeal process or legal fees. Do not be fooled into hiring a lawyer when you do not have to. There are well over 2,000 property tax representatives in Texas alone and most are not attorneys.

 

National Property Tax Consulting Firm

 

The last type of representation is a national property tax consulting firm, someone who specializes in property tax but has a national presence and possibly even regional offices. There are some out there who do a great job, but the prior few years have seen an unprecedented shift in this unique subset of companies we need to analyze.

 

A few years ago, we would say we had five or six main competitors. Three specifically come to mind who either no longer exist or no longer exist in the same capacity they used to. Without naming names obviously, one sold to a foreign entity that wanted more of a presence in the United States. Another just recently sold out to a large national accounting firm that basically just bought their clientele. The third has since latched itself onto a law firm specializing in property tax and now essentially acts as their sales department.

 

Why are so many of our competitors falling off? Each has its own story I am sure, but one trend we are seeing across the country — especially in Texas — is that contingency fees are plummeting at an alarming rate. At first, it was due to competitors trying to undercut and steal business. Unfortunately, what we have heard from some of our clients who left and came back is that they only worked the top portion of their portfolio and didn’t do a great job saving money. 

 

Now, because of the pandemic and companies struggling, it seems to be simply a competitive market idea. Prospective clients are looking for the best deal, (meaning the best contingency rate regardless of other factors), so revenue is down for most firms. So some have sold out, others have closed their doors, and then there are a few of us who have continued to thrive under the same flag of integrity, hard work and a consistent belief that doing what is best for our clients is always the right thing to do.

 

So, how do you choose the best firm?

 

First, do not do so simply based on the lowest contingency fee. Someone willing to take 15-20% contingency is undercutting to win business. That is a risky hire. How hard are they willing to work for a 15-20% cut of the savings? Not a lot. They will tell you otherwise, but we have seen it become an issue. Most will only look at the largest properties or largest value increases and the rest will be ignored. It’s the old adage that you get what you pay for.

 

Instead, try looking at the people within the firm who will be working your appeals. Who are the owners, directors, managers and consultants who will actually have their hands on your values or on your returns? Are they willing to get on the phone to talk with you, even before you sign a contract? How effective are they at communicating? How many years’ experience do they have? Is there an online management tool for your property tax portfolio? Do they have appraisers on staff to lend a higher level of expertise to your returns or real estate valuation appeals? How much do they work in your taxing jurisdictions, but they hopefully do not only work in that one jurisdiction?

 

All of these questions regarding expertise, communication and service are incredibly important, but somewhat forgotten at times. It’s not about the contingency fee, it’s about how much money they can save your company in property taxes and how well they can protect you.

 

The information and views expressed in this article are of the opinion of the writer based on his experience and expertise working in property tax for over 13 years.