In the world of commercial real estate, taxes are an important consideration. Real estate taxes are based on the value of the property as estimated by the local tax assessor. In most cases, the assessor does a pretty good job. But in some cases, the estimate is far too high, resulting in excessive tax bills for some people and corporations. Are you paying too much in commercial real estate taxes? Ask yourself this question:
Are My Taxes Really Too High?
First, determine if your taxes really are too high. Let’s be honest, the value (and the resultant tax bill) just couldn’t be low enough for some folks. Like those who drive across town to save $.01 per gallon on gas, there are some who make an annual pilgrimage to the assessors office to protest, regardless of the value. Fair enough. Maybe they just like the challenge. However, some people and corporations have a legitimate case.
Here are three real-world situations that may result in an unfair tax bill.
- Changes in the condition of the property. Has the condition of your property changed? Has a sewage plant moved next door? Maybe a building on your site has been demolished or damaged since the last assessment and is still being taxed. If so, you might want to consider how those changes might impact your taxes.
- Changing Economic Conditions. The economic crises that began in 2008 resulted in a long steady decline in value for many commercial buildings, a change in value that still may not be reflected on the tax rolls for some counties and resulting in a tax bill that is entirely too high.
- Taxes that include intangible value. Perhaps this is the most egregious form of an unfair tax bill. Commercial buildings occupied by long-term national franchise tenants are often leased at above market rates and sold for prices that reflect the credit-worthiness of the tenant (an intangible asset) rather than the value of the real estate. One popular argument posed by assessors is that reducing the value on such property will decrease the tax base of the surrounding community, an argument that is totally void of merit. The truth is, if you’re being taxed on intangible value, then you’re paying too much.
What Can I Do About It?
Each county has a process to challenge the appraised value of the property. In the state of Kentucky, an attorney needs to represent you if you are a corporation. According to the Kentucky Department of Revenue, the first step you should take is to schedule a conference with the property valuation administrator or an authorized deputy. At the conference, you should come prepared with documentation that supports your value. If you and the property valuation administrator can reach an agreement on the property’s value during the conference, nothing further needs to be done. If no agreement is reached, then you have the option of filing an appeal with the local board of assessment appeals. This appeal is filed in the county clerk’s office and must be received by the county clerk by the close of business one workday following the close of the tax roll inspection period. It is highly recommended that you hire an attorney, who is aware of the appraised value, to represent you before a county board that evaluates merits of the argument.
The Impact On The Value Of My Property
Taxes can have a significant impact on value for owners and prospective purchasers. The motivation for purchasing many commercial buildings is the income generating capacity in the form of rental and lease income. An income stream reduced by $1,000 because of a bad assessment could reduce the value of the property by over $15,000. As the maxim goes, two things are certain in life. Death is one of them. We can’t help you with that. But taxes that are too high because the assessor got it wrong. Well, that’s something we can help you with. Give us a call.
If you have more questions about commercial real estate taxes, or if you could like a professional opinion, contact Russell Roberts Appraisals.