3 Ways To Streamline Commercial Property Tax Risk Management

Posted by Anne Sheehan on Jun 28, 2016
Explore three important aspects of an effective property tax risk management plan.The real estate industry is fickle. Given its subjective nature, it could be a source of risk for your company in terms of property tax assessments.

If you receive an assessment notice increasing the value of your commercial property, this will result in a higher tax bill unless you take action. You may or may not have the funds to cover the higher cost. Even if you do have the cash to reconcile this expense, you’re likely missing out on opportunities to spend your money in other, more valuable areas of the business.

There are three key steps you should take to mitigate the risks associated with property taxes. Learn how to build a proactive commercial property tax risk management plan and protect your company.

1. Build A Strategy

Most businesses are unsure of who should be responsible for received assessments and the options for addressing them, let alone how to deal with one that doesn’t reflect fair market value. But, every successful property tax appeal begins with a strategic plan. To build your property tax risk management strategy, start by answering a few basic questions:

  • What is your property worth? Before you ever receive an assessment, you should know the value of your property. It’s prudent to independently evaluate this annually. That way, you’re prepared to judge the merit of your jurisdiction’s assessment when it arrives.

  • Who takes ownership over property tax management? Your company needs a point person (or team) tasked with managing your property taxes. When an assessment arrives, this individual must be ready to respond. Often, the CFO is the default person responsible for managing property taxes – the only taxes that cannot be managed by referring to the company’s financials.

  • Do you have a plan? Prior to getting hit with an assessment and deciding you need to appeal an increase, you need to have a plan in place. Decide who is responsible for monitoring and conducting the appeal, and what resources they need to build a successful case. 

2. Research Your Jurisdiction

When seeking a reduction for what you owe in commercial property taxes,  you’re really requesting an adjustment on the fair market value of your property. But, understand that property taxes are the largest source of revenue for many jurisdictions, especially smaller ones. Therefore, changes to fair market value could pose a threat to the survival of the entire community.

Jurisdictions will fight hard to maintain that income, so it’s essential to base discussions on fair market value and to provide data and analysis that supports it. Even with the pressures of balancing the need for income with taxpayer appeals for lower assessments, assessors appreciate taxpayers who are professional and help them through the process by being prepared and willing to share data. By getting to know your jurisdiction and its interests, you’ll be in a better position to get the reduction you are looking for.

Another factor that makes it imperative to research your jurisdiction is knowledge of strict protocols surrounding commercial property tax appeals. No two jurisdictions are alike, and if you miss your appeal deadline or fail to provide everything required to file, you won’t get a second chance. Thoroughly research your jurisdiction’s deadlines, evidence requirements and appeal procedures.

3. Invest In Resources

If you want to mitigate the risks associated with higher property taxes, it’s wise to invest in resources that strengthen your fair market valuations. Jurisdictions have access to in-depth, expensive databases with information to help them build their case in an appeal. While your company may not have the benefit of using databases like these, there are some cost-effective options to help you develop your case.

If you’ve ever worked in the real estate industry, you’ve probably heard of CoStar, LoopNet and other similar companies that provide information on commercial real estate properties, including pictures, census data and benchmarking against other properties. The information found in these databases is the foundation on which you build your property tax appeal.

Regardless of what data resource you’re using, find as much information as possible to support your case. Your jurisdiction is going to come to the appeal well prepared – and so must you.

Property tax risk management is a complex activity. That’s why so many companies outsource this aspect of their business to property tax experts. With knowledgeable, experienced professionals handling this effort and ensuring the best chances for success, you’re able to get back to focusing on your job. Whether you choose self-management or outsourcing, making property tax risk management a priority is critical to protecting your company from huge losses.

Learn how to identify the signs that you may be overpaying on property taxes.

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