Independent Tax Group
Machine Shop: Double Assessment Client moved into a new building and spent $2.5 million on leasehold improvements which they recorded on the fixed asset listing. The real estate assessor picked up the $2.5 Mil value from the building permit and added that amount to the real estate assessment. The company prepared the annual personal property filing based on the fixed asset listing and reported the leasehold improvement. The personal property section, not looking to see if the $2.5 mil had already been taxed as real estate, taxed the improvements on the personal property bill. ITG consultants showed the assessor the double taxation and removed the value from the real estate roll thus achieving an annual savings of over $25,000
Real Estate Reductions: Bad Information We were asked to take over the appeals from another consultant that had not achieved meaningful results. We analyzed the properties and asked the client about the information requests or discussions they had with the previous consultant. They said that the prior consultant had not asked any questions about the property. They simply wanted the P&L and rent roll. After we analyzed the financial information we sat down with the client to get a better understanding of the properties they manage. By first visiting the properties and then asking questions we uncovered several obsolescence factors that would affect the assessed value. The information gathering process is critical to determining the proper comps to use in valuation.
Property Tax Compliance: Retail Locations Our client had 90 branch locations and was unhappy with their provider. They didn’t believe the current firm was doing any analysis of the fixed assets and was reporting assets that were not taxable or no longer there. The company had gone through a series of major renovations to all their locations and spent almost $40,000,000 revitalizing the branches. Upon closer examination of the property tax filings we discovered that the preparer was reporting all the old torn out improvements as well as the new remodeling. We went through the assets and prior returns and prepared the current year properly. We used that filing as a model to show the assessor that there were clerical mistakes on prior returns and that we would be asking for corrections. We have achieved refunds going back 4 years on approximately 45 of the properties.
Real Estate Reductions: Office Building Client purchased a 50,000 sq ft. office building in 2008. At the time they thought it was a very good purchase. Now the market has fallen. In 2009 and 2010 they attempted to handle their own property tax appeal. Their thought was that they were in the real estate business, understood how to calculate market value, and could talk coherently about the property. They lost both appeals. In 2011 they asked us to step in. The methodology the client used to calculate value was correct for investors but not for property tax valuation. The methodology is similar but the rules are a little different. By knowing the rules of property tax valuation and process we were able to demonstrate to the assessor that a 15% reduction was in order. We used both an income and market approach with the appropriate data to make our case. The assessor agreed with our logic and the reduction.
Non Profit Organization: Property Tax Exemption Our client ran several charities for children and owned their building. A substantial portion of their revenues came from renting out the building which was typically used as a museum. While a non-profit organization will typically be exempt from property taxation the use of the building for fundraising was a problem. We met with the assessor and walked him through the museum. We showed him that although there was a function coming up and workers were setting up the museum to accommodate the event the museum was still open. In fact there were guests walking through as tables were being set up. We convinced the assessor to allow the full deduction saving the charity over $40,000 each year.
Manufacturer: Ghost Assets A food products manufacturer had external tanks that housed many of the ingredients used in the products. When the company moved they did not take the tanks with them. At the new location they installed new tanks and recorded them on the fixed asset listing. However they failed to remove the abandoned assets from the records. For several years they had been reporting both the new tanks they put in place and the old tanks they had abandoned during the move. By thoroughly analyzing the fixed asset listing we were able to determine what they actually had at the facility and which assets should be deleted from the system. We removed $1.9 mil of tanks resulting in tax savings of over $30,000 annually for a $32 million company.