While you may not be able to control the tax assessments made by your jurisdiction, you do have the power to prepare for them. Explore these three actions you should take to prepare for unexpected increases and lower your risk of paying more than your fair share in property taxes.
1. Take A Proactive Approach To Property Tax ManagementOne of the biggest mistakes companies make in relation to property tax management is failing to take a proactive approach. The majority of businesses that receive an increase in their taxes are forced to address it reactively.
To mitigate the risk of unexpected increases, you must have a plan in place. In building a proactive plan to manage your property taxes, take the following actions:
- Research your jurisdictions. Every jurisdiction has its own way of operating and its own processes. To be prepared for an increase in taxable value, you should know how your jurisdiction functions.
- Understand the appeal process. The appeal process, which is different in every jurisdiction, is a complex one. Find out your deadlines and assessment dates so you’re ready to appeal if necessary. Also, ask your jurisdiction what information you should be gathering for potential appeals.
- Regularly assess your properties. Annually monitor any changes in your holdings that could alter their value, and conduct your own assessments on a regular basis. That way, you’ll be prepared with data if the county’s assessment doesn’t align with your own.
- Always follow protocol. Confirm exactly what it takes to file an appeal in your jurisdictions. If you don’t follow the protocol and processes to the letter, you could forfeit your right to a commercial property tax appeal.
2. Focus On Year-Over-Year Savings
Real estate values are constantly fluctuating. The definition of market value is the price agreed upon by the buyer and seller, and the value of the transaction to each party. Sales prices are never static, so you must be aware of what is happening in your submarkets. In managing your property taxes, take a strategic approach to deliver year-over-year savings for your company.
Understand that real estate values are not flat. What you paid for your commercial property holding may not be its current value today - the value could be more or even less. As you build your property tax management plan, remain flexible, knowing that your property values are constantly changing, and focus your efforts on increasing your savings over last year.
As you consider year-over-year savings, a prudent way of communicating the necessity of property tax management to your stakeholders and board members is to create a business case. A property tax advisor can review your assessment from last year, reevaluate it, show how much you could have saved and provide you with a case to report to your company leaders. Once you have buy-in, begin drafting a strategic plan to help save on property taxes next year.
3. Partner With A Commercial Property Tax ExpertYour accounting department has the expertise to manage certain taxes for your organization. However, commercial property tax is the one tax that companies don’t usually have the resources or knowledge to manage.
So, what should you look for in a property tax expert? Be sure to ask the following questions when considering a firm to partner with.
- What market do they work in? Are they familiar with your jurisdictions?
- Do they have experience managing properties like yours? Remember, all commercial property holdings come with their own set of tax assessment complexities.
- How do they measure and quantify obsolescence, or any other form of depreciation in value that your property experiences due to internal or external factors?
- Do they manage your properties’ taxes themselves, or do they farm the work out to other companies? How do they maintain quality control for subcontractors?
- How much reporting do you receive as the management and appeal process progresses? Will you be able to brief your boss on the status of your property tax appeals whenever he asks - without calling your provider to see where they are? Will they evaluate every property, every year to find appeal opportunities? Many companies select only a handful of a client’s properties with the highest potential value to be considered for the appeal process.
- Who is your point of contact, and how often should you expect to hear from them? Find out whom you should call if you have questions.
Taking control of your commercial property tax management could mean the difference between suffering from a huge increase and saving thousands of dollars. Start preparing for the future by building a strategic plan, focusing on your year-over-year savings and finding the right tax expert to walk you through the management process.
Find out more about paying less on your commercial property taxes by downloading our free whitepaper.