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Article From Our Team- Brent Moriarty

My name is Brent Moriarty and I am a new business account executive in the sales department. I have now been at PVS for more than 11 years and what really impresses me is how many employees have been with the company longer than that. I also get to participate in our mentoring program for new employees which allows me to meet new people in other departments and learn more about them personally as well as what work they perform within the company.

As an AE, I enjoy reaching out to new prospects and explaining how our services could not only help them reduce property taxes but also help manage their property tax needs for both real and business personal property. Another aspect that excites me about PVS is the number of companies that have been clients for 10-20 years. It really is a testament to the quality of work and communication given to everyone no matter how large or small.

 

I enjoy the relaxed atmosphere yet competitive nature of our department. The best part though is learning that we helped a new client with their property tax needs and save their organization money in taxes.

I have been married for 25 years and have three children, two at the University of Kansas and one sophomore in high school. In my spare time, I enjoy most outdoor activities like kayaking, cycling and golf, and watching my son participate in his school sports.

 

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.

Article From Our Team-Ciera Schweiss

Hello. My name is Ciera Schweiss. In 2017, I began working at PVS as a property tax consultant on the hospital team for our personal property department.

At PVS I enjoy not only working for a reputable and honest local business, but I also like the opportunity to work with the company’s amazing clients. During the last year, I have had the opportunity to work more closely with our clients through personal property audits, appeals, client meetings and answering any questions about personal property taxes.

My day-to-day tasks are different depending on the time of year. During tax season, I am engaged in filing the property tax returns and in the summer months, I am reviewing changes that taxing jurisdictions are making to property taxes for the following year and examining the county property assessments for errors against the returns we prepared during tax season. In the fall, I put together year end reports to help our clients better prepare for property tax accruals.

I value working for a company that places such a strong emphasis on our employees working together to ensure accuracy, reliability and results for our clients. Our teamwork allows us to better serve our clients and I believe this is what sets PVS apart from many other accounting firms.  

Outside of work, I enjoy spending time with family, friends and my cat, Atlas, hiking, vegetable gardening and perfecting my banana bread recipe. I look forward to hearing from any clients and prospective clients with questions that you may have.  

Business Personal Property and Real Estate Property Tax Appeals Process

Personal Property and Real Estate Property Tax Appeal Process

Throughout the United States, every taxing jurisdiction calls the process of disagreeing with the assessed value of property different as they will either refer to it as a property tax appeal or a property tax protest. These two processes are treated in the same manner but called different names. For example, in Kansas, it is referred to as a property tax appeal, but in Texas, they refer to the process as a property tax protest.

 

BUSINESS PERSONAL PROPERTY

Determination of Filing an Appeal or Protest

After receiving a notice of value, a taxpayer or their representation will decide if they want to file a property tax protest on their account. This process will be the same for both personal property tax and real estate tax.

For business personal property tax, renditions are required to be filed on an annual basis to the assessing jurisdictions. If these aren’t filed annually, assessors can place arbitrary assessments on the account. In most cases, the acquisition date and cost of the assets are used to place the assets on a set of depreciation tables to account for the loss in value as the assets get older. As assets depreciate differently, these typically include several tables that account for the loss of value at different rates. The calculation of this value plus inventory and/or supplies (if taxable in the particular jurisdiction) is how the appraised values are calculated for personal property taxes.

 

Property Tax Appeal or Protest Process with the Assessor

 

Once you or your designated agent have decided to appeal your value, each jurisdiction has a process to follow. Pay attention to deadlines and the procedures for your particular jurisdiction. With your Notice of Value, there is typically an appeal form that needs to be filled out. If there isn’t a form, you can send in a letter, or some will allow you to file the appeal on their website. Some jurisdictions ask that you provide your documentation to support the value you are requesting prior to the hearing. If they have requested the information, perhaps the assessor and/or board is willing to work with you informally to resolve the discrepancy prior to the hearing.  

 

Determination of Who is Correct

Because the State or County Assessor are government employees, it is often assumed that they are following state statutes or guidelines regarding general valuation, and they would like to believe they are correct in their methods. This is not necessarily the case, as PVS has developed multiple revaluation methodologies for assets to reduce our clients’ property taxes. That being said, solid backup data, research and sometimes legal arguments by experts are needed to support and defend value calculations or the board will ultimately side with the assessor.  

If the discrepancy is unable to be resolved informally, then you will want to attend the hearing to present your case. Once you have presented your case and the assessor has presented theirs, the board will either issue a ruling at that time or will wait until after everyone has left to determine the outcome. Once the outcome is determined, a notice will be issued to the taxpayer or tax agent regarding the case.

If the board does not side with the taxpayer, there is usually another step which can be taken. This step usually involves going to the State Board of Equalization. At this step, most of the time an attorney must be hired.  

 

REAL ESTATE

Almost all states across the country that impose real property taxes have a legal process in place for taxpayers to keep their real property assessments in line with the market. These assessment appeal processes are almost always annual and typically do not require use of an attorney. It is however recommended that taxpayers utilize industry experts such as property tax consulting firms since property tax consultants have a great deal of expertise and resources at their disposal to combat erroneous property tax assessments. 

 

Determination of Filing an Appeal or Protest

Property tax assessments are often viewed as set-in-stone or predetermined — out of the taxpayer’s control. Assessors in towns and counties across the country are widely presumed to be correct in their valuation of real property and property assessment laws are generally written with the assessor’s presumption of correctness as a starting point. Tax assessments are supposed to reflect the fair market value of one’s property. The market value of your real property is constantly in flux due to sales, changes in rental rates and changes in construction costs. For this reason, your real property assessed value should be monitored regularly. When was the last time you reviewed your property’s tax assessment?

Real Property Tax Appeal or Protest Stages

The real property appeal process varies from state to state, but in most cases, there are three main appeal stages: informal negotiations, board of review and litigation. Just as with business personal property appeals, there are deadlines to be mindful of when filing a protest of your real property assessment. 

Many taxpayers can find success at the informal level when being proactive and reaching out to their local assessors. If assessors begin to dig their heels in and decline to alter their assessment within the taxpayer’s requested valuation range, states typically have a process in place to have the appeal reviewed by a third party. This secondary appeal stage consists of either a hearing officer or a board of review composed of multiple members. 

Hearing officers and Boards of Review/Equalization do not always look at evidence as impartially as they should, so states have a third level of the appeal process established which generally requires engaging an attorney who specializes in property tax litigation. A cost-benefit analysis should be run when considering the litigation stage of a real property assessment appeal due to the costs involved with this extra stage. Not only are legal fees required but this stage will most likely require a full appraisal report to sway the opinion of the court. 

The litigation process for real property tax appeals can sometimes take years or even longer to resolve in certain instances. If the original assessment is far enough out of line however, most will find that seeing the assessment appeal all the way to the end is worth the additional legal fees and appraisal costs. 

 

Closing

Whether we are discussing real estate or business personal property, the bottom line is the same: do not assume that the values placed on your property and the corresponding property taxes are accurate. These values are computer calculated with minimal information involved. Reputable property tax firms, like PVS, have been cultivating and implementing valuation methodologies, developing relationships with assessors, and working to reduce our clients’ property tax liability for decades. There is something you can do about your high property taxes, and we can help.  

Take Advantage of All Our Property Tax Services

BY BRYAN HILEMAN

Property Valuation Services is recognized as the country’s preeminent property tax consulting firm. We are known for saving our clients money by reducing their property taxes, however even our clients may be surprised to learn that under one roof we provide an extensive amount of expert services. We felt it would be a good idea to dive into the myriad of services our experts can help with and how it all connects.

When Property Valuation Services started twenty-five years ago, we only worked within the business personal property realm filing returns for healthcare companies using our unique expertise in medical equipment to revalue these assets and lower property taxes. Twenty-five years later, that expertise has expanded to include saving the three largest theater companies in the country millions of dollars in property taxes on their projectors, manufacturing facilities on their equipment, leased equipment and, of course, we are still the only firm in the country with our multiple proven valuation methodologies to lower healthcare equipment property taxes. This is evident by the clients within our portfolio. 

What you may not know is that we also house a licensed ASA equipment appraiser to assist in our valuation methodologies, tax base arguments, filings, appeals and hearings. He can perform formal appraisals, but as our Technical Director/ Quality Control Director, he spends his time ensuring our work remains detailed and of the highest level. Assessors trust when PVS files a value, it is accurate and thorough.

We started our real estate department with similar expertise as we did in healthcare. Focusing on what makes a healthcare facility specialized, PVS has developed valuation techniques to take advantage of this expert knowledge. From hospitals to medical office buildings, surgery centers, dialysis clinics, imaging centers, nursing homes and senior living facilities, PVS works thousands of healthcare parcels every year and are known throughout the country as the go-to firm for medical real estate consulting.

Not to be outdone, the real estate department also houses licensed MAI Appraisers so that they can utilize the highest level of expertise in the industry. Similar to our equipment appraisers, these appraisers do not perform a high volume of formal appraisals, instead this provides us the opportunity to further demonstrate expertise when representing our clients’ filing appeals and attending hearings. No property tax firm has to employ an appraiser, but PVS chooses to because we know it is what best helps our clients’ interests.

These appraisers are simultaneously employed by a separate company called Appraisal Solutions Group, owned by the same owners as Property Valuation Services. Should a formal appraisal be necessary and not related to an appeal by PVS, our appraisers can perform such an appraisal.  

Filing business personal property tax returns and appeals, working real estate appeals and performing appraisals are not the only functions happening within our building. We offer all our clients what we refer to as our compliance services. For business personal property clients, these services are a part of the annual management fee collected that includes the filing of the return.  

What is lesser known is that our compliance services are an option for our real estate clients as well. This would include tracking our clients’ assessment notices, tracking tax bills, providing electronic tax bill approvals, sending multiple reports per year outlining account status and estimated property tax amounts for budget/accrual purposes, and managing all of this property tax information in an online user web access portal. With a secure username and password, our clients can view their property tax information and run customized reports. 

Another area of expertise some may not have experienced with PVS is our audit defense services. The word AUDIT can be scary, and for good reason. Audits can drag on for years, the statute period can be extended retroactively should the auditor find cause, and the potential back taxes, penalties and interest have literally bankrupted companies.  

First, know that PVS’ filings are respected as top in the industry. Any asset revaluation work that goes into filing a return will include all backup data, likely communicated preemptively with the assessor prior to the return being filed, and we promise our clients that we will defend any and all reductions we made if they were to be called into question during an audit.  

But going a step further, you never know when you will randomly be selected for a property tax audit. Most states have some sort of audit program, where certain states like California audit regularly every four years. Our experts have handled thousands of audits including everything from minimal concern random audits to multi-million-dollar assessments for major hospitals. We know how to mitigate liabilities and work with the Auditor to reduce findings so that you pay as little as possible.  

 

So why consolidate all of your property tax responsibilities into one trusted building? Let me explain. 

First, there was a prior article written pertaining to Lease Hold Improvements (LHI). In summary, these are the physical changes made inside a building so that the owner of the business can operate the business. At times, these improvements are considered real estate as they are a significant change to the inside of the building. Others consider these changes as business personal property as they are considered temporary additions to run the business. Without giving an opinion, the point is that often these are taxed by both the real estate assessor and the personal property assessor. If you do not have a firm handle on both, this could be easily missed.  

It is also a good idea to utilize our compliance services so that both your real estate and business personal property information can be managed for you, and the information be uploaded to our online client web-access site for your convenience. This will allow you to view both business personal property and real estate information in one location.

Bottom line is that PVS is known across the country as the preeminent representation for healthcare organizations. This expertise isn’t just lip service; understanding healthcare equipment, healthcare building specifications and healthcare services has meant hundreds of millions of dollars in savings. These companies are owned and operated by former healthcare executives, tax experts and healthcare professionals.  

If you work with PVS but feel there are other areas we could be further adding to the benefits being provided, please do not hesitate to reach out.  

 

Article from Our Team – Mark Kinch

My name is Mark Kinch and I am a senior consultant in the real estate department at Property Valuation Services. In December of 2021, I completed my 22nd year with the company. I began with PVS right out of college in the personal property department, and after about 15 years, I moved to the real estate department. I am licensed as a property tax consultant in multiple states.

When I first moved to the real estate department, I primarily worked with our health care properties, owned by many of the same clients I handled while in personal property. While I still work primarily with medical real estate valuations, I have also begun working with some retail and multi-family properties, helping to broaden my knowledge base.

Day-to-day tasks in the real estate department are transitioning back to a primary focus on reviewing property assessments and filing appeals. In the last few weeks, Kansas, Oklahoma and Arizona have issued their assessments, and we are currently reviewing them and filing appeals where appropriate. Before we know it, Texas values will be out and our department will shift into high gear. We are just a phone call or an email away to help with any valuation questions/issues you may have.

Outside of work, I enjoy spending part of my free time as a soccer referee. What started out as something my son and I did together became a bit of a passion for me. Also, it turns out my years of arguing with assessors over property valuations was good training for some of the commentary I hear during a match from the “experts” on the sidelines. When I’m not on the soccer fields, I also enjoy going to see live music, checking out new restaurants/breweries and traveling. In fact, when you read this, I plan to be laying on a beach, soaking up some sun with a beverage in hand.

Celebrating 25 Years of PVS

Written by: Kent Hileman, MAI, ASA, CMI

In 1997, Dave Dlugopolski was the Property Tax Manager at HCA, the largest hospital chain in the United States. Prior to this, he was the Assistant Vice President of a branch office of a national property tax consulting firm. Bob Hileman was a partner in a small property tax firm out of Overland Park, Kans. and was an entrepreneur that had come from the healthcare industry, having owned or managed imaging companies in his past. They both knew property tax, they both knew healthcare and they both saw the need for a more specialized consulting service for this industry. 

What better way to launch a company that specializes in both property tax and healthcare? That is where PVS began 25 years ago. We started with the two founders, a few healthcare clients — and we grew from there. Our main focus in the beginning, as it remains today, is the delivery of high-quality, ethical consultation services throughout the tax industry.  We were extremely blessed in the beginning of our formation to have a network of business associations that allowed our initial clients to trust in our consulting services. This trust continues to this day and has expanded exponentially. We are extremely appreciative of these first clients — and all our clients — for trusting in our services.  

For the first ten years, the main form of growth for PVS was from existing client growth.  Primarily as our clients experienced our services, we were allowed to grow with them. As many of our clients grew, we grew as well. We did not establish a formal sales group until many years later.

By 2000, we had around ten employees. By 2010 we had grown to roughly 50 employees. As we start our 25th anniversary year, we have approximately 70 employees. 

Along the way, many people have joined PVS who have made a large difference to our growth, and we appreciate all of them. Shortly after the launch of our company Pam Carley, our longest-tenured employee, joined PVS just after graduating from K-State. She has grown with our company and is now the Director of the Personal Property department. We are so appreciative of Pam’s leadership within this department and thank her for her continued commitment to our success.

In February 1999, Monte Welch was welcomed into our company. He and Bob Hileman had worked together in years past within the healthcare industry. His availability provided PVS the opportunity to add to our healthcare experience and knowledge as we value and file many healthcare-related equipment personal property tax returns. Monte’s prior career experience has provided PVS with the needed real-world knowledge to value medical equipment. He has worked closely with much of this equipment and can describe its function in detail. Monte is currently the VP of Operations at PVS.

In early 2000, Kent Hileman joined the team and was the first employee in the real estate department. Building upon Dave Dlugopolski’s prior knowledge and experience in the real estate tax industry, Kent and Dave teamed up to grow the Real Estate Department of PVS, while saving clients money through appeal work. Kent has gone on to get his MAI (Member of the Appraisal Institute – the gold standard in commercial real estate appraisal), two ASAs (one in real estate and one in appraisal management and review), and a CMI (property tax designation), and then became a partner with PVS in 2011 after receiving those designations.

To add to our depth and expertise, Chip Saam was invited in 2000 to join PVS. Chip’s experience in both property tax and healthcare added greatly to the company. While employed at PVS, Chip has achieved his ASA (in equipment valuation) and is also a CMI with roughly 30 years of experience.

Gerhart VanNote, who has also been in the industry for 30 years now, was recruited to join PVS in 2006. Gerhart and Dave both started their tax consulting careers together at a national property tax consulting firm. Gerhart started at PVS as a senior consultant but is now the Senior Director of Real Estate.

Jenna Reyes joined PVS in 2007 directly upon graduating from K-State and has risen through the ranks quickly. She has also been instrumental in the growth and maintenance of clientele and the management of staff. Jenna is now the Director of the Real Estate department with 15 years of experience.

There are many more who have been at PVS anywhere from 5 to 15+ years and range from senior consultant to the director level. The length of time our employee base has been at PVS is a testament to how much we care about our employees, but also the management team in place. To name a few that are at the manager or director level and who have been important to our growth (in no particular order): Catherine Murray, Tyler Rognlie, Bryan Hileman, Jennifer English, Tyler Tackett, James Lee, Daryl Smith, Vanessa White, Mark Kinch. We significantly appreciate all of them.

PVS has grown steadily and consistently over the years, as a result of the people all mentioned above, because of the quality of work those people put forward, and the relationships they build with our clientele. We are extremely proud of the people we have and the work we do. Our mission has been to provide quality consulting in an ethical and trustworthy manner. Property tax consultants can have a negative image by many in the assessing world, but PVS has separated itself by doing things the right way and being transparent in everything we do.

Another factor that separated PVS from its competition early on was the development of its own proprietary in-house property tax software system. The company has invested significantly in developing and growing this system through the years. It manages everything we do, from filing personal property tax returns, to tracking assessments, tracking tax bills, providing tax bill approvals, etc. Essentially it is our life from soup to nuts. We also invested early on in other technology, making sure we not only have quality servers, quality security protocols, but also backups so that we can be back up and running should any disaster happen. 

Not everything has been easy, PVS has faced adversity as well over the years, as all companies do that have been around for 25 years. It’s never a cakewalk getting to a quarter-century. In our industry, as our clients have faced cost reduction measures and we have faced increased competition, contingency fees have compressed. We have also had large clients that have had to reduce their sizes and readjust their business models, as the government is continuously changing reimbursement and other factors. These changes were inevitable, and luckily PVS predicted/saw them coming. To get through this, instead of pulling back on employee counts, PVS bulked up their sales department and started branching outside of healthcare. Ten to fifteen years ago, PVS was 95% healthcare, but had the consultants and experience to work outside of those constraints. As a result, we started selling heavily in other property types and industries, including hotels, industrial, retail, office, and more. Healthcare consists of the most complex property types out there (think hospitals, surgery centers, senior living, etc.), so valuing other property types was already in our wheelhouse. In the last ten years, we have doubled our number of clients, working over 900 clients around the country in our 25th anniversary year.

As we hit 25 years of business, our goals remain the same with those of the past. We strive to provide high-quality, ethical, transparent property tax consulting service to our clients, helping them to stay compliant and reduce costs, which in turn, helps their businesses to thrive.  

We thank everyone who has been a part of our company’s past and will be a part of our future as well, to include our staff, clients, and other partners we have across the country, such as attorneys and appraisers. Thank you! We look forward to the next 25 years.

 

Article from Our Team – Ryan Burnett

My name is Ryan Burnett and I am a manager in the business personal property department at Property Valuation Services. In November 2021, I completed my fourth year at the company. Facing new challenges involving property tax has been rewarding.

I am second in charge to Tyler Rognlie of a team of consultants that oversee approximately 6,000 accounts and more than 150 clients. Our team is referred to as the “multi-specialty” team, which spans across many different industries, including healthcare (surgical, oncology, diagnostic imaging, behavioral) and industrial. We also oversee the onboarding of first-time PVS clients and get them integrated into our systems and processes.  

Our team of consultants oversees all compliance aspects of our clients’ property tax portfolios, effectively being a turn-key solution for businesses’ property tax needs. We administer the preparation and filing of the annual business personal property tax returns, as well as the analysis and review of the valuation issued by the tax assessor. We oversee the appeals process on valuation disagreements with the tax assessor, including attending local board hearings, when merited. Our team also handles personal property tax audit work for our clients.  Our mission is to ensure compliance across our accounts, while also working to ensure that we are working to achieve the lowest possible taxes for our clients.

In the current phase of the tax cycle, the team is in the early phase of tax season, where we review the fixed asset listings and prepare the 2022 tax filings. We will be doing this for the next few months while also working with assessors to settle appeals filed in 2021.

While working at PVS, I’ve gained an understanding of many different aspects of tax compliance. Making improvements to our internal system and brainstorming the most efficient way to get the job done has been rewarding. Connecting with my co-workers and having a support system has made working at PVS a great work experience.

Outside of work, I am a father to a one-year-old daughter, Cecilia. My wife and I have loved watching her grow, explore and change! We are expecting another baby girl this May. Some hobbies I enjoy are spending time with my family, traveling, trying new restaurants and being a committed fan of KU football, basketball and the Kansas City Chiefs. Please feel free to contact me with any inquiries regarding personal property.

Effectively Assessing Your BPP Market Value

What type of property taxes are businesses responsible for?

For property taxes, most people automatically think of real estate property taxes. For businesses, there are also property taxes that may have to be paid on business personal property. It is usually easy for people to understand that real property includes buildings and land. This is due to most individuals having to pay yearly property taxes on their homes. Businesses, on the other hand, may have to pay property taxes on more than just their building and land. Business personal property (BPP) includes equipment, furniture and other moveable assets.  

Are business personal property taxes the same in every state?

Not all businesses have to pay every type of property tax. The state that a business is located in will determine if they need to pay business personal property taxes. Out of the 50 states, there are 12 states that do not assess business personal property, including Delaware, Hawaii, Iowa, Illinois, Minnesota, North Dakota, New Hampshire, New Jersey, New York, Ohio, Pennsylvania and South Dakota. The District of Columbia falls into the group that does tax business personal property. There are some states that allow the local jurisdictions to decide if they are going to tax business personal property. For example, Maryland allows towns or counties to determine on their own if they want to assess business personal property.

The states that do assess business personal property do not always use the same criteria to value the property. Some states will include inventory and supplies in the assessments while other states do not include them. Also, other states may include only inventory or only supplies.  Leased equipment is also treated differently. Some states will tax the lessor while others may tax the lessee. 

How does ownership of equipment get determined?

Business personal property assessments are based on the ownership of the equipment as of a certain date. This date is referred to as the lien date and it varies from state to state. Most states use January 1 as the lien date. However, some states assess equipment as late in the year as of October 1, including Alabama and Connecticut. Maine and Vermont both use an April 1 lien date while the District of Columbia, Nevada and West Virginia all have a July 1 lien date. 

Assessors require businesses to self-report their personal property. Most assessors will send out a return form requesting a listing of all assets owned by the business as of the lien date. This will include the description of the asset, acquisition date and acquisition cost. This list must include all owned assets regardless of the net book value. There are exceptions to this depending on the state you are reporting in. Adding to the complexity of the filing process, not only are there different lien dates, but states also may have different due dates for business personal property returns. Additionally, local assessors within a state may have different due dates. The due dates can range from January 31 through May 31 for the January 1 lien date while other lien dates are due much later in the year.

How does business personal property get assessed or valued?

Once the information is received by the assessor’s office, it is entered into their county or state-specific depreciation schedules. Each asset is categorized based on its description. The basic categories are typically computer equipment, furniture, office equipment and machinery & equipment. Some assessors use many more specific categories.  The assessor generally has different depreciation tables for each category which calculate a taxable value based on acquisition cost and age of the asset. Most states calculate the value using this process but not all of them. For example, instead of creating their own depreciation tables, South Carolina uses Federal Income Tax net book values for the assessment. Any assets that are claimed on the business’ income taxes should be reported on the business personal property tax return.

The number of depreciation schedules used by an assessor can vary greatly from state to state. The most common system consists of schedules based on useful life. This can be as simple as 3-year, 5-year, 8-year, 10-year and so on. Each asset category is assigned to a different depreciation schedule. Generally, computer equipment is put in the shortest life while furniture is placed in a longer life. There are some assessors that use only one depreciation schedule for all categories of assets regardless of the expected life of the asset. Whereas some assessors fall on the other end and use a large number of different schedules. These schedules can get very specific within one type of equipment. For example, instead of having one schedule for computer equipment, it could be split between personal computers, computer servers or computer peripherals.

Business personal property taxes can be challenging, who can be trusted to assist with it?

As you can see, business personal property is a complex process that can be overwhelming for companies. Property Valuation Services (PVS) has been handling business personal property nationwide for over 20 years. Over the years, PVS employees have acquired the knowledge and expertise needed to handle a variety of assessor requirements. All states have different statutes regarding the taxation of personal property, some even vary between the counties within a state. With the experience PVS has, we have worked with many assessors to negotiate new values on accounts.  

Can Property Valuation Services help reduce my business personal property taxes?

With over 20 years of experience, PVS has developed a myriad of methodologies to reduce business personal property assessments while still staying compliant with statutes. Different assessment reduction/tax savings strategies are employed for different circumstances:

  • Identification of High Technology Assets
  • Identification of Non-Taxable Cost Components
  • Equipment Specific Depreciation Schedule
  • Market Approach for Specific Equipment
  • Equipment Appraisals
  • Useful Life Analysis
  • Replacement Cost vs. Reproduction Cost
  • Ghost Asset “Clean-Up”
  • Identification of Non-Taxable Assets

PVS utilizes a pre-rendition approach – whereby the application of these value reduction methodologies are implemented as the returns are filed to include an open dialogue with the assessor for full disclosure to improve the likelihood that the methodologies will be accepted.

Reasons Your Business Personal Property Taxes Could Increase

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. There are a variety of reasons your personal property taxes may increase from the prior year. 

Capital Expenditures During the Prior Tax Period

 

The most common reason is related to capital expenditures. If there are a large number of capital expenditures in a prior year, it is likely that the personal property taxes will increase. New construction or renovations of your business may require permits being 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 is related to personal property and is not reflected on the annual business personal property tax return that was filed. Assessors’ offices may also conduct field checks of businesses in their jurisdictions annually to ensure that all businesses in their respective jurisdictions are accounted for and are reporting an annual return. They may also request to tour the businesses to look for things like renovations or expansions, and they could potentially adjust the value they have on their tax rolls. Construction in progress that is equipment-related may also be taxable as personal property in some jurisdictions. 

​​Audit Results

 

Another reason for your business property taxes to 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 as well — depending on the state statutes. Most taxing jurisdictions send out an annual business personal property return form notifying a taxpayer that they need to file. The forms often state the returns are subject to audit. Some states have very active audit programs (e.g. North Carolina, Tennessee, California to name a few). However, based on our experience, the majority of the states that tax business personal property do not have very active audit programs. Regardless, if your business is selected to be audited, there is the potential that the audit discovers equipment that has either been omitted or erroneously not reported on the annual business listing submitted by the business. Additionally, equipment picked up in an audit may be penalized depending on the property tax codes for the local taxing jurisdiction. One example of omitted property would be certain types of fixed equipment or leasehold improvements. If the improvements are not already being accounted for in the real estate assessment for the property, the business personal property assessor may add them to the business personal property assessment. 

 

Other types of omitted property may be expensed assets, inventory and/or supplies. Some taxing jurisdictions require businesses to report the amounts a business had on hand as of the lien date or possibly a one-month average of the balance and the balances are assessed at 100% of their cost. 

 

Another reason your taxes can increase in an audit would be if the auditor disagreed with the depreciation schedule the assessor used to value the equipment and moved it to a slower depreciation schedule resulting in a higher taxable value for the equipment. Any discovery or increase in value from an audit could be subject to penalty. In North Carolina, audit penalties are steep. It starts as a 10% penalty on the additional taxes from the increase in assessment per the audit the first year, and 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 for whatever reason and it affects 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.  

Leased Equipment

 

Leased equipment can also lead to an increase in business property taxes. Capital leases differ from operating leases in that operating leases are 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 the equipment is located in. It depends on the structure of the lease agreement. There are times when there is no clear language in the lease agreement to determine who’s responsible for reporting the equipment to the taxing authority and equipment can potentially be double reported by both the lessor and the lessee leading to duplicate taxation. At times, this can be 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 fixed assets of the lessee. Additionally, we’ve seen instances where operating leases end and the lessor files a final return for the equipment stating the lessee retained the equipment when the lease ended, and the assessor’s then added 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 to report leased equipment, regardless of the verbiage in the lease agreement. 

 

Depreciation Tables

 

Another reason your property taxes can increase is due to the depreciation tables used by the local taxing jurisdiction for business personal property purposes. 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 it eventually meets 100%. 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 as opposed to the original cost and date of the equipment, the equipment is not eligible for the additional depreciation in Arizona. Since the additional depreciation factor starts at 25% and increases over time, it results in an increase in the taxable value of the equipment until the additional depreciation factor goes to 100%. The number of years the additional depreciation factor is used depends on the year-life schedule the equipment is assessed on. 

 

Additionally, for most depreciation schedules used to value the business personal property in Indiana, the factor used 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. Your property taxes can also increase due to the local taxing jurisdiction increasing their residual depreciation factors for the various schedules used to value the equipment. For personal property tax purposes in most taxing jurisdictions and most depreciation schedules, the taxable value of the equipment does not depreciate all the way down to zero. As long as it’s still owned by the business, it will eventually hit a residual factor where it will be valued 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 tax increases if your business has a lot of older equipment.  

Abatement or Exemption Expiration

 

One reason you might see an increase in your property tax liability from the prior year is the expiration of an exemption or abatement from property taxes. Some local taxing jurisdictions will give businesses a partial abatement 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 certain state requirements, including investing a certain amount of capital assets in the county 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 tax treatment for a period, that typically is 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 taken into account for budgeting purposes.

​​Tax Rate Increase

 

One somewhat unforeseen reason your property taxes can increase is due to an increase in the tax rate adopted by the local taxing jurisdiction. Most of the property tax revenue collected by local taxing jurisdictions go towards various government departments and projects within their jurisdiction, (for example, upgrades to existing roads or schools within the jurisdiction). Therefore, local taxing jurisdictions may increase their property tax rates to fund these projects. Some jurisdictions will list on the notice the budgeted tax rate if certain propositions are approved locally. Sometimes, these tax rate increases can be substantial. In 2020, the property tax rate in Nashville, Tennessee increased 33% from the prior year.

Assessor Errors

 

Another unforeseen reason your property taxes could increase is due to an error in the calculation of the 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 there is nothing that 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. Additionally, there can be clerical errors. If the assessor were to accidentally key in another digit when entering in the costs reported by the taxpayer, it could significantly increase their property tax burden for the year. If these errors are found prior to the deadline to appeal the account, they typically can be corrected after discussions with the assessor and providing additional documentation if necessary. 

Conclusion

 

For these reasons stated above — as well as the ever-changing landscape of property taxes — it may prove helpful to engage a property tax professional to provide not only the preparation of the personal property tax renditions, but also aid in the budget of expected taxes to ensure that your business is planning accordingly.