When relocating your operations, there are many factors that must be taken into consideration. Perhaps you’re seeking a location in closer proximity to your current clients or in a better market to draw in new ones. Maybe you’re looking for an option that enables you to cut the cost of rent. Regardless of your objectives, there is one major element you must not overlook: commercial property tax.
Selecting a location with higher property taxes could have a major effect on your bottom line if you’re not expecting the increase. Or, if you choose an option with a lower tax expense, it could save you hundreds or thousands of dollars in costs.
Whether you’re expanding to an additional space or moving your company altogether, understand the impact that property taxes have on your business’s location selection and how you could avoid paying more than you should.
What Do Property Taxes Have To Do With Location Selection?
A recent Bloomberg BNA study demonstrates the effect of corporate taxes on relocation and expansion. Of the 100 U.S. corporate tax professionals involved in the study (most of whom represent corporations with more than 10,000 employees or $1 billion in revenue), 42% say that a state’s corporate tax environment impacts their decision to relocate or develop a new facility.
States that provide corporate tax incentives have the potential to sway company decision-makers who are looking to relocate. The majority of large companies involved in the Bloomberg BNA study – 84%, in fact – have been offered incentives by a state or local economic official for a new development or corporate relocation.
It’s critical to make these tax factors a part of the overall relocation process. For instance, you’d benefit from knowing that states like Texas, Nevada and Florida have a reputation for providing the most favorable corporate tax environments, while California, New York and Illinois are notorious for their high commercial property taxes.
How To Combat High Commercial Property Taxes
A number of organizations are actually taking tax matters into their own hands. Fifty-nine percent of the companies that participated in the Bloomberg survey say they’re lobbying at the state level to impact corporate tax policy. For the largest companies – bringing in $10 billion in revenue or more – the lobbying rate soars to 81%.
But, lobbying for commercial property tax incentives and breaks isn’t the only option you have when it comes to moving or expanding your business. The commercial property tax appeal process is another viable way to cut down on high property taxes. Every year, in every U.S. jurisdiction, companies have the statutory right to file a commercial property tax appeal. If you’re noting increases in your property taxes, that’s a red flag to look into the appeal process.
Commercial property tax values are statistically over-assessed. Yet, despite the fact that overassessment is a common occurrence, many CFOs are unaware of their legal right to file a commercial property tax appeal.
Though the appeal process does take some legwork, it’s worth the effort – and it’s a far more efficient process than lobbying the state legislature for policy change. Fortunately, you don’t have to untangle the complex appeal process alone. In light of tight deadlines and various other demands, it’s often beneficial to bring in a third-party expert to help you streamline the appeal process.
Don’t overlook the potentially significant impact that corporate property taxes could have on your company’s profitability in the wake of a relocation or expansion effort. Take the proper measures to incorporate property tax considerations into your plans.
Are high property taxes hurting your bottom line? Download our free infographic to find out.