Managing Your Company Property Tax Rates

Apr 24, 2020

How can you manage your company property tax rates? Josh Malancuk, President of JM Tax Advocates, was a recent guest on More than a Few Words, a podcast for business owners. In his interview, he gave some great tips on how to manage your property tax rates. The content below is pulled from the podcast episode and we have summarized those tips in this post.

How does your local government determine what tax rates are?

The government actually calculates tax rates through a reasonably complicated budgeting process that happens towards the end of the year or the beginning of the calendar year. What they do is determine what funding needs they have to fulfill at all of the various funding levels and components, you know, such as the schools, roads, police, fire, the whole nine yards, and then the general fund.

In some cases, there is a state funding component of that, as well as a state approval that happens with the overall rate – but by and large, it starts with “what’s my budget?” Then the second part is, “what is my assessment base in total, across all property types, and how does that end up supporting my budget as part of burden?” 

What happens next?

From a local government and state government perspective, there’s going to be a lot of cash outlays to cover all sorts of support programs that are kind of outside of the norm this year, whether it’s higher unemployment insurance at the state level and all sorts of higher support functions. Those bills are going to have to get paid. 

There’s no way to accurately predict what will happen next year because there are so many moving parts that need support from the government for individual citizens. However, Josh definitely subscribes to the concept of “there’s no free lunch.” In other words, someone has to pay for all of these extraordinary costs. If the government is having to fund some of these areas, they’re going to have to find some mechanism to return some of that funding, so that they maintain their fiscal integrity. Probably the easiest thing that Josh can think that could happen is through a tax rate increase and a broad brush application of spreading all of these extraordinary costs, much of which will fall on to the capital intensive business with their property tax bills.

Even if the value doesn’t increase this year from what historically has been the value, even for five years, there stands to reason that a business, if they don’t take action ahead of the protest period this year, they could be facing an issue – an unexpected surprise through much larger property tax amounts than they would have ever contemplated. This is just purely because of the tax rate increase process that is likely to happen when they pay their bills or ahead of paying their bills next year.

What are the kind of things they can be doing to get ahead of that protest period?

You can control what you can control and you can’t control certain aspects of that property tax bills. That’s what makes property tax management. You can’t actually challenge the property tax, you can’t challenge the rate. The only thing in many cases that you can control is your assessment level. In other words, what your assessed market value is determined by either the assessor or if you file your own personal property tax return, you as a self-reporting agent will determine many aspects of that personal property assessment as well. The prudent thing is always to scrutinize whether you’re paying an accurate, fair, and equitable level with your assessed value, whether it’s real or personal property tax-driven.

To do that, the starting point is typically looking at the assessment. Creating an analysis and filing an appeal ahead of the property tax protest deadline, which many are already expiring, and will continue on through the summer.

Josh knows this may sound a little self-serving, but it always helps to have an experienced navigator that knows how to advocate and address the appeal timetables appropriately. Also with that requisite valuation knowledge to recognize when a business is overpaying their property taxes because of a differential between the assessed value as deemed by the assessor or the business compared to someone who has many, many years of experience and their perspective at how they see a correct level of assessment.

About 80% of the time we do find differences that can make a material impact. So our suggestion would be to closely scrutinize the assessments with an experienced process to bring transparency to the assessed value and to act ahead of all of these key appeal protests and amendment deadlines. Acting on your key deadlines will help minimize your surprises next year and lighten the impact of any of those tax rate increases that Josh discussed.

What can I do?

You don’t want to be sorry next year when you see your tax bill, because, by the time that you receive your tax bill, it will likely be too late to change the property tax for that year. So, you’ll have to be okay in the overpayment position and possibly regretting not addressing this earlier on when you can actually influence and lower your assessment, which again, is the area that you can control now so that there are no surprises next year come tax bill payment time.

If you’re interested in learning more about how you can act now and manage your property taxes, be sure to register for our upcoming webinar on Friday, May 8th.

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