It can happen at any time, often without notice. And, the consequences can be costly – enough to flatline a business’s hopes for capital improvements or other spending plans.
We’re talking about a commercial property tax assessment increase.
If you’re blindsided by one of these, you could be on the line for way more than you have budgeted. It’s not uncommon for commercial property tax increases to reach 20%, and the impact to your business could amount to millions of dollars.
Fortunately, you have the opportunity to appeal increases to your property tax assessment. Use this step-by-step checklist as you consider a commercial property tax appeal.
Before You Begin A Commercial Property Tax Appeal
You have to pay your tax bill, and you have to pay it on time. Different jurisdictions have different requirements for what you must pay in order to be current (e.g., the old amount, the new amount, some third amount). Be sure to find out your jurisdiction’s specific rules.
Remember, the discounts available to you (which factor into your appeal), as well as any penalties you must pay, are affected by whether or not you’re current on your tax payments. If you’re not current, you forfeit your right to appeal a property tax increase.
Step 1: Determine Where You Stand
If you’ve received your assessment notice and it indicates an increase, the first step is determining whether that increase is unreasonable.
- How much did your assessment increase?
- Could this increase be considered “dramatic?”
- What market/submarket conditions could warrant or refute such an increase?
Step 2: Sort Out Your Appeal Deadlines
Every taxing authority in the U.S. has its own deadlines and processes for initiating a commercial property tax appeal. You’ll have to do some legwork to stay ahead of the curve here. Be proactive enough to know when everything is due before you embark on an appeal.
- When are assessment notices available for each property that you own?
- Is the listed appeal date a postmark deadline, or does it refer to when the appeal must reach the office?
- What must be included with the appeal for the jurisdiction to accept it?
Even if just one item is late, wrong or missing, the county will happily dismiss your case.
Step 3: Gather Evidence And Data
When it comes to commercial property tax appeals, every jurisdiction has a different set of requirements. Some taxing authorities require you to provide a target value. Some require that you show affidavits from a company officer. Some require financial details about your company in addition to all of the above.
Here are some deliverables you may need to prepare:
- Operating statements
- Sales comparables
- Construction documentation
- Deferred maintenance plans
- Rent rolls
This part of the appeal process is your opportunity to present your position in a light that’s most favorable to you. Don’t just make copies of everything and send it over. Be tactical about what information you present and how you present it. Also, be sure not to submit anything that’s not being asked for. For instance, the county taxing authority doesn’t need to see your full “below the line” financial records, as that data is irrelevant to a tax appeal.
Step 4: Confirm Receipt Of Your Appeal
Call the assessor’s office and make sure your appeal is in their hands. While you’re at it, see if you can have a conversation about your appeal with the assessor.
This one conversation could be all you need to short-circuit the whole appeal process. You don’t want to go through the effort of a formal hearing (much less go to court) if you don’t have to. Your assessor certainly doesn’t want that either.
If you can save the assessor the hassle of preparing their own research and reports by using your data and reports as the basis of the negotiation, they’ll see a lot of benefit – and often, you can come to a resolution more quickly.
Step 5: Get Ready To Make Your Case
In many situations, you’ll need to present your case for appealing commercial property taxes at a hearing before a board. These hearings are typically short sessions lasting 15-30 minutes or so. That’s not a lot of time, so you don’t want to waste any of it.
- Know your strongest points about why your appeal is legitimate.
- Be prepared to persuade; you’ll need to hammer home those points before the board.
- Determine whether you’ll have the opportunity to cross-examine the appraiser (and whether he’ll be questioning you).
- Find out the jurisdiction’s protocol prior to attending the hearing.
- Is the format simple, with each side presenting its data and conclusions?
- Is it a quasi-judicial format with strict rules for order of presentation, cross-examination, rebuttal and closing?
After You’ve Made Your Appeal
After the hearing, the best possible outcome is that you win your appeal and go home with a tax refund check. If you have a solid case for your appeal and you present your argument effectively, this is a likely result.
In the event that you lose your appeal, however, remember that all is not lost. If you’re not happy with the results of your hearing, you may need to hire a lawyer or commercial real estate appraiser to help you take it to the next level.
Keep in mind, though, that most cases of excessive property taxes are not the result of a county on a mission to take your money, but rather the outcome of the right people having bad information.
Often, local taxing authorities don’t have the resources on hand to accurately calculate the tax assessment value of a property. They simply use the resources at their disposal to make assessments, which can lead to unnecessarily high property tax bills in some cases.
If you think you’re being asked to pay more than your fair share of commercial property taxes, don’t just write a check. Start considering your options for an appeal.