During the first few months of the year, you’re likely not thinking about the upcoming property tax appeal season.
You’re more focused on compliance filings and deadlines approaching almost every 15 days.
However, just as the personal property filing deadlines start to subside, taxpayers will receive assessment notices for both personal property and real estate valuations. These notices require a review for accuracy and a decision to appeal, which must happen quickly (typically within 30 to 45 days of the assessment notice).
As the calendar pages turn and the business world hustles to meet compliance deadlines, savvy business owners know it's also time to prepare for the property tax appeal season.
A critical first step in this preparation is to mark the date each assessment was mailed on your calendar. If the date is not on the notice, refer to the postmarked date on the envelope. This is generally the date when your clock starts ticking.
Business owners must also be aware of the appeal deadlines – typically 30 to 45 days after the assessment notice, depending on the state.
Once you confirm the date the assessment was mailed and the appeal deadlines that apply to your business, the next step is understanding the appeal process. While the specifics will differ from state to state, the core action requires business owners or their appointed representatives to send a formal appeal request to the taxing jurisdiction.
This request typically includes the intention to appeal, the reason(s) for protesting the assessment, the specific account information (e.g., account/parcel number and address), and the taxpayer’s opinion of what that value should be.
Some states may require the request for appeal to be mailed to the specific taxing jurisdiction before the appeal deadline. Other states may have the option of completing an online form by the deadline.
Preparing for personal property tax starts with understanding the assessment cycles and knowing when your assets are revalued.
Typically, revaluation is an annual event set by the taxing jurisdiction – for many states, it occurs on January 1.
After receiving your assessment, review it for accuracy while also comparing the newly issued values with the expected values from your original tax return. If the values match your expectations, record the information in your assessment and tax log.
This would indicate the assessor agrees with your return as filed, and unless you have a value argument on top of what you submitted, an appeal is likely unnecessary.
However, if the values don’t match your expectations, you must research the differences and determine the tax impact. A difference larger than your business’ materiality threshold would likely require an appeal.
It’s acceptable for your business to request the assessor's workpapers. These documents can shed light on how your assets (equipment, inventory, etc.) were classified and valued, offering insight into the assessment's fairness.
There are many reasons a business should consider an appeal, typically related to arguments with the value of your assets.
If your assessment includes “ghost assets,” you may want to appeal. Ghost assets are those no longer physically present at your location because they were sold, discarded, or transferred but are still reported on the original return.
Another valid concern for appeal is when assets your business doesn't own are listed in the assessment, such as leased equipment or property. Businesses also see a reason for appeal when their assessment lists double assets, assets that appear on the real property assessment, or assets reported in two locations.
Sometimes, assessors misclassify assets, causing their values to be higher than they should be. This can happen when asset descriptions are vague, or assets are associated with an incorrect depreciation rate. Misclassification of assets is another reason your business may appeal its assessment.
Lastly, if one of your locations recently went through an audit and your results don’t seem reasonable or accurate, you likely have grounds for an appeal.
Preparing for real property tax appeals starts with knowing when your properties will be revalued based on your assessment cycle. These cycles vary by state but can be as frequent as every year.
Here are some examples of how often some states revalue properties:
Like personal property, you must review your real estate assessment for accuracy. And don’t hesitate to request the assessor’s workpapers. The workpapers will provide additional details about how the assessor came to the issued value and help determine if it’s fair.
If inconsistencies arise or the assessed value seems unfair, it's best to file an appeal. However, it is important to research the jurisdiction in which you plan to submit the appeal. The proactive step of appealing can lock you in; if later research shows the assessment was fair, withdrawing your appeal may not be an option.
Though the process of appealing your real property assessment is likely similar to appealing your personal property assessment, the reasons to appeal your real property assessment are usually different.
Your assessment may value a property twice. Like when you see this on your personal property assessment, this would warrant an appeal.
Sometimes, the details of a specific property may be listed incorrectly in the assessor’s records, causing an inaccurate value calculation. Such property details may include:
When these property details are incorrectly listed, you should consider an appeal.
Some businesses find their property is not valued similarly to other properties nearby – meaning the property is not assessed at the fair market value. This instance would warrant an appeal.
Lastly, some states have laws capping the increase in property values. For example, California has a 2% cap on yearly property value increases (assuming no change in ownership or new construction). If you own property in a state with one of these laws and your property value increases above the limit, you should file an appeal.
To ensure property tax appeal season – real and personal – runs smoothly, your business needs to adopt a strategic approach to its preparation.
How to prepare for property tax appeal season:
A good place to start is your assessment and tax log. Keeping this log updated with year-over-year assessments and tax amounts can identify trends that may influence whether an appeal is warranted.
These trends might include locations with steadily increasing taxes or those experiencing significant tax fluctuations. They’ll also help identify locations where the tax amount is larger than similar locations, which may justify an additional review.
You must understand the landscape of your jurisdiction's appeal process. Research how assessors have interacted with businesses in the past, the board's track record in siding with taxpayers, and any precedents set by cases like yours.
This information can inform your decision to appeal. It’s also important to know the appeal deadline in each jurisdiction. Missing the deadline to appeal will result in losing your right to argue the current assessed fair market value of your property.
It's wise for your business to determine an acceptable tax change threshold. This threshold could be a specific percentage or dollar amount above the expected value, tailored to each location based on the business's financial situation and budgetary constraints.
When determining this threshold, you should consider:
Before launching a formal appeal, consider contacting the assessor for an informal discussion. Often, assessors are open to resolving issues outside of the official appeal process, especially if it's a clear-cut error on the assessment.
This step can save time and resources by possibly avoiding a formal appeal.
Finally, before initiating the appeal process, confirm with tax experts that there are no strategic reasons to abstain.
Remember, filing an appeal can open your entire account to a comprehensive review or even an audit, so tread carefully and ensure your decision to appeal is as informed as possible.
The ultimate goal isn’t just to submit an appeal but rather to resolve any valuation issues well before tax bills are issued and payments are due. Ensuring your business is appropriately valued and your appeals are timely can prevent additional tax issues down the road.
If navigating the complexities of property tax appeal season feels daunting, remember you don't have to do it alone. Our state and local tax experts can provide the support and advice you need to ensure a fair assessment. Talk to our state and local tax experts.
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