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Challenging Your Commercial Property Tax Assessment

By Raj Shah Email By Raj Shah
February 2014
Challenging Your Commercial Property Tax Assessment

Many commercial property owners and business owners are noticing a sizable increase in their property tax statements. Although commercial property owners may be diligent in researching and finding any and all tax deductions, credits, exemptions, and write-offs that they can use, they often operate under the assumption that property taxes are a set value with no room for negotiation. The fact is that property taxes can often be negotiated based on economic and market conditions. This is done by challenging a property tax assessment before the tax bill is generated. The tax assessment states that it is not a tax bill. Due to that language, many owners don’t pay attention to the value that has been assessed and miss the opportunity to challenge the valuation.

Why Lower Your Property Tax?
The obvious reason is to keep more money in your pocket. Lowering property taxes may cause an increase in the Net Operating Income (NOI) of the business. Reducing property tax increases cash flow, which increases profit, thereby increasing NOI. A better NOI can result in a higher resale value for the property at the time of sale.

How do County Appraisers Value Property?
County appraisers use several pieces of data to value commercial property, including but not limited to:
• Current and past two years’ profit and loss (P&L) statements,
• Actual Income, Market Income, and Expenses to obtain Income Generated Value,
• Recent sales of similar properties,
• Uniformity approach,
• Cost approach for new property,
• Occupancy/average daily rates (for the hospitality industry).

There is no “one size fits all” formula to valuing property. Therefore similar properties may not be assessed with similar values. Once the tax assessor’s office values all commercial properties in the county, it sends a notification to property owners indicating the assessor’s value.

How do Commercial Property Owners Challenge an Assessment?
After property owners receive the notice from the tax assessor’s office, there is a small window of time in which they can challenge the assessment. The key is timing—failure to file a timely appeal results in a forfeiture of appeal rights for that tax year. Once an appeal is filed, some counties may offer property owners or their representatives an opportunity to negotiate informally with the county appraiser. If negotiations fail, or if this is not an option, both the county appraiser and the property owner (or their representative) present their arguments to an impartial board called the Board of Equalization. The board determines the final value after hearing both arguments, and such value holds for two to three years.

Even after a negative ruling from the Board of Equalization, a property owner can appeal the decision to the Superior Court. In order to file the appeal, a tax payment equal to the prior year’s taxes must be made to the assessor’s office.

Due to the subject matter and complexity of filing an appeal with the tax assessor’s office, businesses may consider using professionals who are familiar with the ins and outs of the appeal process. These firms negotiate on your behalf, and many of them operate on a contingency basis. This means that their fee is based on the tax their clients actually save. It may be worth the time to evaluate if your property tax can be reduced.

Guest columnist Raj Shah is the founder and president of Property Tax America, LLC, located in Decatur, Georgia. Business Insights is hosted by the Law Firm of Kumar, Prabhu, Patel & Banerjee, LLC.

Disclaimer: This article is for general infor- mation purposes only, and does not constitute legal, tax, or other professional advice.

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