Most people would not consider this a fair deal and either reject the offer or request a lower price. This should be the same thought process when the appraisal district overassesses your business personal property (BPP). Texas law requires business owners to report BPP, personal property used for the production of income, to the appraisal district for assessment and taxation. Although there are no criminal penalties for not complying with the law, there is a penalty of 10% of the taxes. For example, if you have a BPP account assessed for $100,000, your annual BPP taxes are $3,000, based on a 3% tax rate. The 10% penalty for this BPP account would be $300 ($3,000 times 10% equals $300).

The huge range of assessed value for business personal property (BPP) makes obtaining substantial property tax reductions highly probable. It is not unusual for the range of assessed value for BPP accounts for similar properties to vary by 5,000%! For example, furniture and computers for companies within the same office building sometimes vary from $1 to $50 per square foot. Market value and unequal appraisal are two options for appealing BPP assessments. Given the inequity in BPP assessments and the subjectivity of valuing BPP, property owners have a high probability of success when properly prepared for a BPP assessment appeal. Protest both market value and unequal appraisal.

How to appeal?

To appeal your BPP, you can either use the Comptroller’s form, or send a letter to the appraisal review board (ARB) on or before May 31st of each year. The protest letter to the ARB should identify the property and the reason for your protest (section 41.44d of the Texas Property Tax Code).

Tips:

· Since the appraisal district’s staff tends to become more motivated to resolve appeals later in the season versus earlier in the season, it is better to appeal or protest on May 31st or shortly before the deadline date.
· Even if you do not receive a notice of assessed value for your BPP account, it is still important to send a written notice of appeal or protest. The appraisal district does not have to send a notice of your assessed value if the value does not change by more than $1,000. If the notice of assessed value gets lost in the mail, and you do not send a protest notice, you lose your right to appeal for the current year.
When sending a notice of appeal to the ARB, also send the appraisal district a House Bill 201 request. House Bill 201 refers to section 41.461 of the Texas Property Tax Code that allows property owners to obtain a copy of any evidence the appraisal district plans to use at the ARB hearing 14 days before the hearing. This request prohibits the appraisal district from using any information that was not provided to the property owner 14 days before the ARB hearing.

Market Value, Book Value & Comptroller Schedule

Three popular options for describing value for BPP are: market value, book value, and the Comptroller’s schedule. Market value is defined in section 1.04(7) of the Texas Property Tax Code that reads as follows:

“Market value” means the price at which a property would transfer for cash or its equivalent under prevailing market conditions if:

(a) exposed for sale in the open market with a reasonable time for the seller to find a purchaser,
(b) Both the seller and the purchaser know of all the uses and purposes to which the property is adapted and for which it is capable of being used and of the enforceable restrictions on its use, and
(c) Both the seller and the purchaser seek to maximize their gains and neither is in a position to take advantage of the exigencies of the other.

Let’s compare the differences in value resulting from using market value, book value and the Comptroller’s schedule. The BPP for a typical motel room includes items such as bedding, linens, window air-conditioning unit, towels and a television. Based on market value, after one year, these types of items could probably only be sold for 10% to 30% of the original cost. Book value, based on federal depreciation schedules, indicates a value of 80% of the purchase price after one year. The Texas Comptroller’s schedule for BPP for motels has an eight-year life with 10% depreciation for the first seven years. Hence, the Comptroller schedule indicates one-year old hotel furnishings are worth 90% of their original purchase price. This is clearly inconsistent with market value for these items.

Inventory

There are a number of controversial issues related to how inventory is assessed. These include shrinkage, damage, functional obsolescence and economic obsolescence. For example, what is the market value of merchandise returned during the week after Christmas on January 1st (the effective date for valuation)? Since returned merchandise has usually been opened, damaged, missing parts or may be an unpopular item, it is worth less than cost in many cases. Market value is relevant in determining the assessed value for inventory for Texas BPP taxes.

Preparing A Summary For Your Hearing

The appraisal district would prefer to see a fixed asset listing, which includes the original cost and date of acquisition for every asset purchased. However, a fixed asset listing is not required. This is good news for small businesses that do not maintain a fixed asset listing.

Unequal appraisal

Assessed values for BPP accounts often range from ten-times to fifty-times on a per square foot basis for companies in the same industry. For example, real estate brokerage offices, which have 10,000 square feet of office space, may have assessments ranging from $10,000-$500,000. It seems unlikely that the computers and furniture in one brokerage office are 50 times as valuable as those in a competitor’s firm on a per square foot basis.

Appraisal districts tend to accept the assessed value rendered by property owners. Many large companies render using fixed asset listings. Appraisal districts use the cost basis information and the Comptroller’s schedule to calculate the “market value” for property. The valuations for these rendered accounts tend to grossly distort the actual value of these properties. Property owners who do not render have values on the lower end of the range of value. While it seems intuitive that appraisal districts would penalize owners who do not render by sharply increasing their assessed values, the practice is the opposite. Appraisal districts tend to reward property owners who do not render by leaving their assessed values at modest levels. This creates a disincentive to render. It also unequally taxes property owners who render with a fixed asset listing. These factors have caused a high degree of dispersion in BPP assessed values.

How To Appeal On Unequal Appraisal

Contrary to popular belief, it is possible to appeal BPP utilizing unequal appraisal, a concept that is fairly new. Most property tax consultants and large property owners have not considered or utilized unequal appraisal regarding BPP. Appraisal districts are resistant to the concept of appealing BPP based on unequal appraisal. (It is inappropriate to tax property owners who render using a fixed asset listing at the highest level, based on utilizing the Comptroller schedule, when allowing property owners who do not render very lean levels of assessment.)

Preparing an appeal based on unequal appraisal for BPP is simple and straightforward. Start by obtaining information on the assessed value, and amount of office space/manufacturing or warehouse space for property owners similar to the subject property owner. This is typically done by using companies with the same Standard Industrial Code (SIC) as the subject property owner. You can obtain this information by sending an open records request to the appraisal district. When appealing, research the assessed value for your competitors. Compile data regarding the assessed value and building area for the subject and comparable accounts into a summary:
When should you appeal?

Appeal annually on market value and unequal appraisal. To effectively appeal on these two options, research unequal appraisal based on assessment comparables on the appraisal district’s web site and evaluate the market value of your BPP. After reviewing both the unequal appraisal and market value options, determine your primary focus for appealing your BPP account. If neither market value nor unequal appraisal provides a basis for appealing your property taxes, you can withdraw the notice of protest or just skip the hearing.

Tips for your hearing (Informal & ARB)

Informal hearing

· First meet with the appraiser and politely explain the basis for your adjustment. Give the appraiser a copy of your evidence and explain it in a methodical way.
· The appraiser will review your information and the information he/she has available, and will then likely make an offer to settle. Consider the appraiser’s offer and explain why your evidence is better than his/her evidence, and again request your value or a value between your value and his/her value.
· You will quickly learn the lowest value the appraiser is willing to accept. At this point, you need to either agree to that value or proceed to the Appraisal Review Board (ARB) hearing.
· If you settle the appeal at the informal level, you will not be able to pursue an ARB hearing or a judicial appeal. However, it does resolve the issue in a timely manner.

ARB hearing

· Introduction of the two parties at the hearing
· Explanation of the hearing process
· Property description (address any errors in the description of your property after the appraiser’s description of your property)
· Property owner presentation
· Questions from the ARB panel members
· Appraisal district presentation
· Rebuttal and closing evidence from the property owner
· ARB announces its decision

Summary Points

· Annual appeals will minimize your BPP property taxes.
· There are huge differences between the market value estimated by the Comptroller’s schedule and actual market value.
· Based on excessive assessments for BPP for companies who render using a fixed asset listing, a low percentage of property owners who render and the low assessed values for property owners who do not render, there are rich opportunities for appealing BPP by using unequal appraisal.

It has been estimated that over 60% of all homes and commercial properties are overvalued. This means that billions, perhaps trillions of unnecessary tax dollars are over-funding our city, county and state governments.

The tax assessment system is bias for funding itself, and while it officially promotes that a property owner should take advantage of the property tax deductions; they know that most people will only get minimal relief.

The real tax reductions are a function of getting beyond the first “in-office” appeal and going straight to the Value Adjustment Board (”VAB”) and on to a judicial appeal if necessary.

For 99% of all property owners, this process is nearly impossible because of the strict requirements of the appeals system. Working within the system’s guidelines and knowing what to submit for the appeals is why professional appealers are so successful in getting the appeals system to work for them.

If your county makes adjustments it is usually for the purpose of adding TAV to your property. Adjustments that add value have “enhanced” the Fair Market Value (”FMV”) of your home or commercial property that were not on the tax rolls previously such as extra rooms, driveway, pool (in ground or not), landscaping, new roof, and many other physical improvements that the tax assessor can see from the street or has access to the permits pulled by you or your contractor for improvements.

Adjustments (exemptions) that reduce your TAV include the following exemptions: homestead. Widow/widower, disabled veteran, veteran service-connected disability, senior combat-wounded veteran, blindness, total or permanent disability (not requiring a wheelchair), total or permanent disability (paraplegics/wheelchair bound), total or permanent disability (quadriplegic), to mention a few.

These exemptions are the first line of appeal for professional tax appealers but are just the beginning of an intensive effort to get the property owner’s taxes reduced.

Adjustments that also reduce your property’s TAV could be any of the following if properly documented: comparable sales in your area, condition of the property, square footage versus other properties with similar square footage, closed sales or in certain circumstances: listed but not sold properties, actual square footage versus what is in the tax rolls, flood and drainage impact on property value, actual number of bedrooms and baths, quality of construction, age of the property, land restriction or deed restriction usage, zoning issues not taken into account.

Value of land assessment versus assessment of the physical structure, environmental impact and issues, sound or noise abatement issues, building code requirements that cause a loss of value, future land or building approvals in proximity to the property, easement and boundary issues, building to land evaluation ratio that is incorrect, highest and best usage of the property, nearby railways or expressways.

Unlawful assessments such as double assessment of common areas for condos, number of garages, code violations that required removal of illegal additions, traffic and planned future roadway or right-of-way changes, an accurate drawing (not by an architect) that details your property and what is different compared to the tax assessor’s information, and too many more to be explained here.

For the average property owner, all of the above adjustments to his property’s value can be bewildering. Not choosing the proper ones, or poor documentation, could actually result in a higher property tax assessment than he already has. Professional appealers know what works and what doesn’t and more importantly, they know how to prepare and present the documented adjustments to the VAB or the circuit court for the best possible results.

It is imperative to understand that if a property owner goes to the tax assessor’s office and meets with a clerk, and a tax assessment is granted at this level, there are likely much greater reductions available by appealing. Unfortunately, this appeal level does not favor the individual property owner and is totally in the realm of the professional appealers.

In summary, arm yourself with all the possible property value reductions that you can determine from a logical standpoint. Next make an appointment with your local tax assessor’s office and make your case to the clerk. Whether you get a tax reduction or not, next seek a professional tax appealer to resubmit your case for an even greater tax break.

Many California homeowners have already benefited from a reassessment of their declined property values. Strict deadlines held by the counties of California may be prevent you from seeking a property tax reassessment if you wait too long before you file. The best thing you can do for yourself is to act now before another deadline passes and the potential savings of another tax year is gone.

A property tax rebate is not a gift or a benefit handed out to lucky homeowners by the state – it is your right as a California property owner to receive fair taxation. As home property values have plummeted in California and across the country, a reassessment resulting in a property tax reduction is almost a inevitable if you took ownership of your property between 2004 and 2007. The general rule for property tax rates is that the state will increase your property tax every year at a capped rate of 2 %. In some areas, the county assessor will take the initiative to reassess homes, and it does not benefit homeowners to wait until this happens. Be proactive and start the appeal process now.

Property owners in California and across the country have been bombarded by annoying advertisements sent out by greedy property tax appeal consultants asking for up-front fees to provide a simple but carefully guarded service. Forget it! Now is the perfect time for homeowners to take matters into their own hands and find new ways to save money on their properties. The time for spending and excess is over, the time fr saving and self motivation is in. Now is the time for homeowners to be proactive about their home finances and weather the storm. Saving thousands on property taxes is a relatively easy process but it requires a self-starter mentality – at least for a few hours – to file a compelling case for property tax reassessment and win.

Do it yourself! There’s a growing group of California homeowners who are about to save thousands of dollars! You too can save thousands on your property taxes by filing an appeal yourself, but you have to take action and demand a property tax reassessment before it’s too late. If you need help, there are great programs out there that will show you what to do step-by-step and provide all forms necessary for your property tax appeal letter. Do it yourself and save $1000’s. Yes, it is possible to take the rollercoaster ride down and still survive the plunge.