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Business Personal property Tax Appeal

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

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.

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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business personal property tax guide

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

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.

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