At the end of December, I made my annual trip to the treasurer’s office to pay my property taxes. Over the past few weeks, I have had contacts from a handful of clients about their property taxes increasing over last year. Unfortunately, by the time you receive the tax bill, there generally are limited or no opportunities to contest the assessed values and corresponding tax amount due.
As you set up your property tax accruals for 2016 and compare them to your prior-year accrual, you may want to consider taking the time to review the value assigned to the real estate you own (whether that is the property on which your facility is located or property you own through foreclosure or as an investment). Generally, most states value the property as of January 1 of each year. The governmental agency usually sets the value in the spring and provides opportunities for both informal and formal challenges at that time. Now is the time to evaluate the value, either internally or by using a property tax consultant.
In some states, financial organizations also are required to pay personal property taxes. These taxes tend to be based on reports filed by you directly. Since the information is self-reported, the burden is on you to properly report your assets. The classification of property for income tax purposes may be different from the reporting classification for property tax purposes. An example would be carpeting. Carpeting is generally seven-year property for income tax purposes but is assessed as part of the real estate for property tax reporting purposes. Therefore, if you have done buildouts or remodeling of existing facilities, you may want to validate that you self-report only assets that are properly classified as personal property.
So…don’t wait until you get the tax bill to determine that you have been over-assessed!