How to Prevent Double Taxation on Your Next Commercial Property Tax Bill

Posted by Anne Sheehan on Aug 13, 2019

Avoiding Double Taxation on Commercial Property Taxes

Today, many businesses view property taxes as an unfortunate – and uncontrollable – cost of doing business. Because of this mindset caused by a lack of knowledge and transparency, property taxes are often treated as a fixed cost and are not investigated as closely as they should be for potential savings. As a result, there is a chance that your business is getting double-taxed due to a lack of understanding when it comes to commercial property tax assessments and your property tax bill.


A Tale of Two Tax Assessors

Two categories that make up your commercial property tax assessment are real property and business personal property. Real property is the land, land improvements, and buildings. Business personal property is machinery, equipment, furniture, fixtures, and inventory. These two assessments are separate by law but not necessarily separate in your property tax assessments, and unless you’re diligently scouring your assessments as they come in to check the assets, it could be costing your business serious money. 

How can this happen? The real estate assessor will not assess your business personal property.  They are managed on separate systems and valued differently – fair market value for the real estate and depreciated cost for business personal property. The taxing authority sends out your real estate assessment, and you have to appeal their value. You submit a compliance return for your business personal property every year, and the taxing authority sends you an assessment notice changing your return if they don’t agree. With two people assessing the different components of a business under the same roof, there are several possibilities for gray areas to get counted twice; thus, a chance for double taxation. 

For example, we had a client that noticed a spike in their property taxes and engaged us to examine their property assessment to figure what caused the increase and what we could do to lower the value and ultimately the bill. It turns out that due to the positioning of some equipment bolted to the wall, there was room for interpretation. This also varies from state to state. In one case, the assessor counted the attached equipment as part of the building assessment and the business personal property assessor included it as a personal property asset. It was very clear that the asset was there, everyone could see it, but no one was sure what to do.  In this case, under state law, if a piece of equipment is bolted to the wall or floor and is considered immovable due to the cost of dismounting it, it is considered real estate. If the equipment is readily movable to another location, this it is personal property. 

We appealed both the jurisdiction’s assessment of personal property and real property and swiftly lowered the assessment significantly with the correct classification, avoiding duplication and adding savings to their bottom line. If you believe that any part of your property is double taxed, you need to appeal both assessments. 

Keeping an Eye on Commercial Property Tax Laws

Not all states or counties have the same property tax laws, however, and we’re likely to see several changes in a direction to protect against double taxation in future years. For example, California has several laws which clearly identify the correct classification to prevent double taxation for commercial property taxes. Meanwhile, Texas has adjusted the state tax code multiple times in the last 10 years, striving for clarity.  The end goal is to clearly identify who has to file business personal property compliance returns, typically business owners, and who is exempt, typically investors.    

Regardless of better laws and more detailed guidelines, many taxpayers file their own returns without full knowledge of the law and the classification of their assets.

Want to ensure you aren’t paying too much in your commercial property taxes? RPTA’s assessment appeals for business owners routinely succeed. We know tax laws and property valuation schedules inside and out, and we manage every aspect of your appeal process and case management.

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Tags: commercial property tax management, Property Value

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