Just because managing commercial property assessments and tax rates isn’t part of your job description doesn’t mean it’s not worth paying attention. After all, more than 90 percent of commercial property owners could unlock hidden tax savings within their property portfolios.
In pervious blogs we’ve covered how functional and economic obsolescence affects the value of commercial property , as well as why you should scrutinize your commercial property tax payments to make sure you’re only paying your fair share.
If you haven’t read those articles, now is a good time to do so, because they’re a good primer for understanding these two more technical tips for lowering your commercial property tax payments.
- Leverage all available abatement and exemption opportunities at all your properties: Abatements and exemptions are highly localized. To take full advantage of your property tax abatement and exemption opportunities, you must know which state and local jurisdictional opportunities to leverage.
Fully exploring tax abatement and exemption opportunities for commercial real estate portfolios requires granular attention to detail and deep market knowledge. Most accounting departments do not have the resources or expertise required to make an impact here, which is why it’s a good idea to partner with a commercial property tax management expert to leverage every local tax abatement possible.
Property tax exemptions, on the other hand, are a function of use. For example, churches or dedicated senior citizen housing facilities are exempt from paying property taxes. Commercial occupiers are able to take advantage of a variety of tax exemptions. In Illinois, for instance, certain dedicated green space within a plot of commercial property could be eligible for a tax exemption.
Commercial property tax abatements are typically created on a jurisdictional level and used to spur economic development by attracting new businesses and growing existing ones to expand a county’s tax base. Most people only think abatements are an option to leverage when new structures are being built, but abatements are sometimes available for existing properties as well.
For example, a four-decade-old manufacturing plant in Illinois is negotiating for up to $4 million in property tax abatements on a significant capital expenditure for the modernization of machinery and equipment. This abatement is being considered and will be awarded based on the overwhelming evidence of the benefits the plant modernization will bring to the taxing jurisdiction.
- Know your property in states with no mandatory reassessment cycle: There is no federal law mandating that commercial property values must periodically be reassessed.
The regulation and reassessment of property value is left up to the states and the individual taxing jurisdictions within them. Most states have some form of mandatory reassessment cycle for property taxes, but others, like New York, do not.
Consider the financial implications this could have for a business with multiple commercial assets in New York, where once a jurisdiction assesses property, they’re not required to perform a reassessment.
Think back to 2008 when the commercial real estate market crashed. If you bought a property in New York when the market was high, the property tax value of that real estate was likely assessed at a higher rate than it would be today.
Property values are always increasing or decreasing; they’re never flat. It makes no sense to pay a fixed rate for your commercial property taxes, especially in a state that does not require mandatory reassessment. Remember, while New York and other states may not have mandatory property tax reassessment laws, the states are still obligated to ensure that you’re paying no more than your fair share of property taxes.
If you can use market data to show that you’re overpaying, you’ll walk away with a reduced commercial property assessment.
If you see how leveraging tax laws in your favor could reduce your commercial property tax payments, but you don’t think you have the time, resources or expertise in-house to make it happen, considering partnering with a dedicated commercial property tax management service. Let the experts do what they’re best at so you’re free to focus on your strengths.
Download RPTA’s free whitepaper, “7 Signs You Might Be Overpaying Your Commercial Property Taxes" for more insights into the commercial property market and to learn how to uncover hidden property tax savings.