Property Tax Legislative Updates:
Arkansas, Ohio, Minnesota and the Changing California Personal property Audit Landscape
The Arkansas legislature has enacted legislation that will “stay” the collection of delinquent real and personal property until the resolution in a circuit court Court of Appeals or a state Supreme Court. Additionally, no penalty or interest charges will be assessed during this period. Upon resolution of the matter, the taxpayer will have 30 days after final disposition of the appeal within which to pay the taxes without penalty.
However, for personal property matters, the tax payer must pay the county tax collector the amount the tax payer claims is owed an amount equal to the difference between the personal property tax assessment and the amount the taxpayer claims is owed.
Act 1057 (HB 1308), Laws 2015.
An Ohio property was valued for tax purposes based on the purchase price despite the owners claim that half of the purchase price was for personal property. The bill of sale that listed all the tangible (personal property) included failed to allocate real property and personal property adequately. Documents from the seller were considered hearsay. Expert testimony regarding the allocation in addition to the expert’s appraisal was not corroborating indicia of the allocation and failed to rebut the principal that the best evidence of “true value in money”.
The Rising Cost of Personal Property Tax Audits in California
As a result of a declining tax base during the recent recession, jurisdictions across the U.S. and especially in California have increased their efforts in seeking additional avenues to offset the substantial decline in property tax revenue. Several counties in California have been aggressive with their audits of business personal property. Taxpayers should be cognizant of the latest trends and issues that have been raised during audits. The key to minimizing any potential exposure during an audit is to be proactive and vigilant in responding to the concerns of the auditor so that no reduction or appeal opportunities are lost.
In 2009, the California State Board of Equalization, in its Letter to Assessors No. 2009/003, outlined a change in policy to mandatory audits. County assessors are no longer required to audit all taxpayers once every four years that have trade fixture and business tangible personal property holdings of $400,000 or more. Instead, the county assessor is now required to annually audit a significant number of taxpayers engaged in a profession, trade, or business who own, claim, possess, or control locally assessable trade fixtures and business tangible personal property.
In determining which taxpayers should be considered as part of the pool for the significant number of audits, 50 percent of a county's audits must be conducted on taxpayers that have the largest assessments of locally assessed trade fixtures and business tangible personal property. The remaining 50 percent of a county's significant number of audits must be selected in a fair and equitable manner from among all taxpayers. Although the change in policy represents a switch to a significant number of audits instead of all taxpayers with holdings of $400,000 or more, the result has been negligible if a taxpayer has any substantial business personal property tax liability. Small businesses have seen a decline in audit requests, but almost nothing has changed for big businesses.
In its Letter to Assessors the California State Board of Equalization provided a draft of a new handbook (AH 506) that provides guidance for assessors on how to develop and improve their property tax audits.
A property tax appeal was properly dismissed because the property owner failed to provide actual Income & Expenses for the income producing property. Under the “mandatory disclosure” rule, taxpayers contesting the valuation must provide items such as year-end financials no later than August 1st of the taxes payable year.
In this matter, a billboard on the property generated rental income and that part of the subject property was leased, thus generating revenue. The fact that the billboard lease had expired was immaterial. The court, based on the disclosure provision ruled that there was no merit to the argument the subject was not subject to this provision because it was owner occupied.
Sadat v. County of Scott, MN Tax Court
Property Tax matters are complicated, legally confusing and very time consuming. Please contact us to assist you on resolving any issue so you can focus on your core business.
For more information contact:
Hilco Real Estate Appraisal