Appealing a Property Tax Assessment
It is important for CFOs and their accounting teams to focus on property taxes for several reasons. First, businesses tend to own a significant amount of real property, and tax rates on commercial property are generally much higher than the rates on comparable residential property. Second, many states and local municipalities levy taxes not only on real property such as land and building(s), but also on tangible property such as furniture, equipment, and machinery and in some cases, intangible property such as patents and trademarks.
Late last year, the Council on State Taxation and the State Tax Research Institute, in a collaboration with Ernst & Young LLP, released their annual study of state and local taxes. The data contained in the report was from the fiscal year 2021, which for most states is the period July 2020 through June 2021. Here are a couple statistics that caught our eye:
- Revenue collections from the taxing of business property grew by 11.9% from the prior period to $368.8 billion.
- Property taxes made up 38.8% of all state and local taxes paid by businesses, the most of any category.
- Businesses primarily pay property taxes at the local level, where they account for 77.8% of all business tax revenue, while property taxes only make up only 2.6% of business tax revenue at the state level.
Property values are reassessed at least annually. A few states reassess on a two- to seven-year cycle. As an example, Connecticut reassesses every five years. Once assessment notices are sent to property owners, there is a limited window of time to file an appeal. And with the example of Connecticut, if an appeal deadline is missed, businesses could miss out on significant tax savings.
The assessed values on real property continue to increase at a significant pace, which increases not only the property tax burdens to businesses, but also potential returns to investors. Colleague Jack Schindler has over 20 years of experience in this area. Call him today to see if a property tax appeal might be right for you and your property.
Sources: Council on State Taxation, State Tax Research Institute
- Carey M. Heyman, CPA
- Managing Principal of Industry - Real Estate
- CliftonLarsonAllen LLP
- Century City (Los Angeles)
Carey is the Managing Principal of the Real Estate Industry at CLA. He is a trusted advisor with close to 20 years of experience providing accounting, assurance, tax, and consulting services to real estate industry owners, operators, family offices, developers and syndicators. Carey has a strong track record of helping clients build and retain capital by leveraging tax- and cost-saving strategies and employing tax credits and incentives. He also consults with high net worth individuals, large family groups, and owners of closely-held businesses on all aspects of tax planning, estate planning, and retirement planning.
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years remaining on the lease.
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