Are You Overpaying Your Commercial Property Taxes?

Posted by Anne Sheehan on Apr 22, 2015

Are You Overpaying Your Commercial Property Taxes?Take a look at the people who help keep your business running. Ask yourself, “Who’s paying attention to commercial property taxes?”

Depending on the size of the organization and specializations of the people within, overseeing commercial property taxes could fall into just about anyone’s lap.

For instance, a small business owner may take direct responsibility for paying her real estate taxes, whereas in a larger organization the business owner(s) may not even know what the company pays annually for property taxes.

At the broadest level, the CFO or a corporate real estate executive is usually charged with overseeing a commercial property portfolio and the associated taxes. But some corporations assign asset managers, tax professionals and sometimes even facilities managers to oversee commercial property taxes. 

The Truth About Commercial Property Taxes

Regardless of who’s in charge, here’s how most companies deal with commercial property taxes: The bill arrives, it’s sent to accounts payable, a check is written, taxes get paid and everybody waits to repeat the process next year. Scrutinizing these tax payments just seems time-consuming and unnecessary, especially when the bottom line of the ledger is black.

But what’s wrong with this picture?

First, if CFOs and others in charge of commercial real estate (CRE) don’t know what their individual properties are worth from a tax standpoint, it should raise a red flag.

Second, consider that commercial property taxes are a major cost — up to 40 percent — of corporate occupancy.

The CRE market is never static; property values are always increasing or decreasing. Therefore, you should not view your property taxes as something set in stone. If you’re paying a static amount for taxes each year, you’re probably overpaying.

More Signs You Could Be Overpaying Commercial Property Taxes

A static property tax payment is a big red flag that you could be overpaying, but it’s not the only one.

What if your building’s neighborhood takes a turn for the worse? If a factory, power plant or other “disruptive” facility is built near your building, it could affect the tax value of your property enough to merit seeking a tax value reduction.

Obsolescence, both functional and economic, is also worth looking into from a tax valuation standpoint. If a poorly designed manufacturing plant causes workers to take longer to finish tasks when measured against industry standards, you might make a case for functional obsolescence that merits a reduction in tax valuation.

A tax value reduction based on economic obsolescence could come from market conditions causing a business to eliminate a third shift. The idle machinery sitting in a factory overnight contributes to obsolescence that should be considered in your property tax valuation.

Final Thoughts

The above points are just a few possible alerts that you’re overpaying your commercial property taxes. 

No matter who’s in charge of overseeing your organization’s property taxes, make sure they’re equipped with the resources and information necessary to ensure you’re only paying your fair share.

Discover how to stop overpaying commercial property taxes by downloading RPTA’s free e-book, The Corporate Taxpayer’s Guide To Reducing Commercial Property Taxes

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