Commercial property taxes should receive more attention than simply paying a bill and ignoring property taxes the rest of the year.
To manage your property taxes effectively, you need to invest resources into addressing your property taxes year-round. A large part of property tax management is proactively identifying areas of potential savings.
Follow these three steps to implementing a proactive tax management plan:
Step 1: Get Senior Executive Buy-in
Once an organization determines that their commercial property tax management strategy can benefit from an overhaul, the CFO or VP of Tax needs to make the case. While it typically isn't elevated beyond the finance team, it's not difficult to get upper management on board once they see the potential for savings.
Step 2: Centralize the Process
The corporate process to oversee the property taxes of a multi-state portfolio of corporate assets is generally not clearly delineated, much less centrally managed. The common perception that taxes should be managed locally results in decentralized — and inconsistent — processes without the benefit of creating additional value and cash flow management.
A centralized process ensures all property tax data is consolidated and visible in order to manage annual tax liability for all real estate, machinery, equipment and inventory. A centralized platform with a client access portal provides a timely and accurate view of the company’s tax liabilities across all properties.
This enables organizations to:
• Identify every potential opportunity for savings
• Have the necessary data when appeals are evaluated and pursued, and
• Avoid missing critical deadlines.
Step 3: Track and Document Everything
An effective commercial property tax management program should document all the data and analysis required for compliance returns and appeals. It should also tag all due dates in the process, including appeal deadlines, evidence due dates, and hearing dates. One misstep in filing an annual compliance return for machinery and equipment can result in an unexpectedly high tax bill. A real estate appeal that does not include the required data and evidence can negate an appeal completely. Every tax jurisdiction has its own set of rules - knowing them all is essential to a successful program.
In the end, organizations need to develop a commercial property tax management strategy for the long haul. It’s not easy. It’s not quick. The average appeal can take nine to 12 months, and a complex appeal can take years. That is why often companies will partner with a company that has deep experience managing multiple types of taxable assets and depth of knowledge in property tax as well as your industry.
In uncertain times, CFOs and VPs of Tax need to look anywhere they can to cut costs and manage risk. Commercial property tax is one area that should be incorporated into a comprehensive risk management strategy, but it is a complex issue that requires specialized expertise outside traditional corporate accounting and finance responsibilities.
For more tips and strategies to managing risk and finding opportunities within commercial property taxes, download our new e-Book at CFO.com.