Taxable Values Overview
Every year companies must file business personal property returns to the various local taxing authorities where they hold assets. These returns determine the taxable values that those authorities use to calculate your annual business property tax. Most jurisdictions, upon receipt of the return, calculate an assessment or taxable value and generate a notice that they mail to the various businesses. This amount is then applied to the authority’s tax rate to give you your tax amount for the year. It is vital for a business to know and understand how that amount is determined so they are not being over or under assessed on their property taxes. No one wants to overpay if they don’t have to, and I can’t imagine any business would like to be audited and get charged penalties and interest because they weren’t aware that their amounts were being calculated incorrectly.
Receiving Your Assessment Notice
The first thing you want to be aware of is how your local taxing authority informs you of your taxable value. Many jurisdictions will send out an assessment notice a few months before the bill. However, there are a few jurisdictions that only send out a notice if there was a change in your assessment while some skip this whole process and just send you a bill. A great step to take would be to have a calendar in place, whether on your own or via a tax software, that helps you keep track of when you should start receiving these notices. The last thing you want is to realize your value is incorrect and have already missed the appeal date.
Once you have your assessed/taxable value notice, make notes. Highlight the amount the jurisdiction determined and what their process is if you do not agree with the value. How much time do you have to appeal if necessary? Most authorities utilize 30 days from date of the notice while others could provide you months. Now comes the fun part. Compare your calculated amount to their taxable amount. If they match, then you don’t have to worry about what comes next. If they don’t, you take the next steps to figuring out why.
Research and calculate
I cannot stress enough how important it is to do your research and be prepared. If it comes down to an appeal, the more information you have to back up your calculation the more likely it is to go in your favor. The first thing I suggest doing is reverse calculating the value. The general equation used is original cost x depreciation factor x assessment rate = taxable value. This is why I say that research is invaluable. You need to know the assessment rate the jurisdiction uses. Do they assess at 100% or are they like West Virginia who assesses at 60%? The main number you are trying to determine is the depreciation factor they are using. This lets you know if you are using different tables to depreciate the asset. Spend as much time as you can on this step. Check the jurisdiction’s site for the tables & classifications they utilize for depreciating assets. If you are unable to determine why there is a difference on your own, then you will need to contact your tax assessor.
Contact Your Tax Assessor
Most assessors would rather work with you to determine why there is a difference than go through the appeal process. When you contact your local tax assessor, have your account number, parcel ID, and your calculated taxable value handy. Some of the offices are more than happy to send you their copies of how they calculated the taxable value to make it easier for everyone. Others will want to know what your value is and then will discuss with you how you reached your calculation to compare to theirs. At this point if you have still not reached a resolution and you are sure that your value is correct, then the appeal process is the next step.
- Review your bill or assessment notice. All of your taxing authorities will have a right to appeal section. This section will tell you how much time from the date of notice you must file the appeal and what steps to take to get started. Most jurisdictions will require your request to be in writing.
- Once you have filed your request, it will be determined how your request will be handled. Again, this varies from authority to authority. Some counties in Georgia give you a choice of three appeal methods: county board of equalization, arbitration (value), or county hearing officer. Others, like in Texas, will put your appeal in front of an Appraisal Review Board who will hear and decide your case.
- Present your case. Some authorities will allow you to request a copy of the evidence that will be presented against you in your case. If you can, do take this opportunity. The more information you have beforehand, the better it will be for presenting your case. Review the procedures required of the appeal process especially if you are going in front of a review board. They will treat it just like a court case so having that knowledge will make the process much smoother.
- Receive the formal decision. If the appeal was found in your favor, fantastic! All your information is already in place, and you can continue depreciating your property in the same manner as before. However, if it was not found in your favor, now you need to take the necessary steps to adjust your depreciation to match the county.
Appealing property values never sounds like a fun idea. Sometimes it just becomes a necessary step in the business property tax world. When setting up new sites or adding new property, research is key. Establish processes for classifying and depreciating your property. Be aware of the tax implications of your property in the taxing jurisdiction. Review which states do or don’t tax business personal property and/or inventory. Are there exemptions available to you? Reach out to a tax professional who is well versed in all property items and can offer you advice on how to move forward with your property. For instance, if you are considering opening a warehouse, a tax professional can look into potential locations for you and help you determine which state will work with you the most on property costs and exemptions.
Tips for the Taxpayer
The property tax process can seem overwhelming at times. There are many different variations from state and locality of how items are assessed. From the return process to the payment process, there are many steps to take and a lot of information to learn. The difficulties in this process will always fall on the taxpayer since property is self-assessed. Have your controls in place so you are always aware of due dates. Be aware of how your authority handles the whole process from assessment dates to payment dates. Compliance is vital in the tax world.
How Can We Help?
Allyn’s tax team is staffed with seasoned tax professionals experienced in all aspects of Federal, multi-state and local tax compliance and consulting for large US and global corporations. We use that experience to your advantage.
Allyn files state and local property tax returns in every US taxing jurisdiction. Allyn obtains property tax data, analyzes it for proper classification, cost basis, and exemptions, and ensures timely and accurate property tax return filing and property tax bill payment processing.
We routinely conduct opportunity reviews in all US states for companies and advise clients with proactive measures to improve their tax compliance. Allyn can review your asset listing and returns, provide onsite property tax reviews, prepare and file returns and manage the payment of property taxes throughout the US. We can manage your tax compliance, create a solid tax process, and provide audit defense for your company.
Contact us and we can provide a customized cost-effective solution to meet your company’s needs. For further information on Allyn Tax services, please contact: firstname.lastname@example.org.
For More Information
If you are interested in learning more about this topic or other tax topics, please visit our Tax Publications under News & Publications at www.allynintl.com.
Contributor: Racheal Wilkinson
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