Know the Dangers
What dangers arise as you think strategically about minimizing property taxes for your company around the country? Over the past 80 years, the Bureau refined strategies to address the multitude of challenges facing corporate tax departments. The topics below reflect our insight into “best practices” for managing property taxes…dangers you may not have considered.
Click on any of the topics below to learn how we work with clients on a wide range of tax matters.
You aren’t sure if your real estate taxes could be significantly lower…
Know the Solution: Real Property Assessment Review
We analyze existing locations to determine tax savings opportunities. This works to prevent over-assessments, while maximizing tax savings.
Negotiating Accurate Assessed Valuation
A southern corporate headquarters, including a research laboratory of over 860,000 square feet, had an assessed value (100% market value) of $96,780,570 when the National Bureau began our service on a four-year agreement.
During the service period, other major companies in the taxing jurisdiction had significant adverse publicity concerning appeals of their assessments by consultants operating on a contingent fee basis. In contrast, the National Bureau successfully obtained a reduction for our client to $71,267,712 without a formal appeal. Our actions resulted in annual savings of more than $250,000 which would have been greater except for the unusually low tax rate of about $9 per thousand.
Our approach of providing the assessor and her outside consultant with cogent evidence regarding the market value of the property well in advance of the appeal deadline prevented any negative publicity. Further, there was no need to employ a local attorney or appraiser.
Identifying Tax Savings Opportunities
A warehousing company retained the National Bureau to review its national portfolio of real estate locations to identify tax savings opportunities. After analyzing their properties, we determined the value was over assessed on numerous locations and established a plan to proactively negotiate the assessed values. In some cases we filed appeals, which resulted in tax savings of several hundred thousand dollars.
You are faced with roadblocks on an appeal…
Know the Solution: Property Tax Appeal Management
We continue to work with the assessor and the appeal body to resolve appeals at the best opportunity. This works to increase chances of a successful appeal by bringing us in as the experts.
Protesting a Valuation & Avoiding a Hearing
A Midwest-based manufacturer of electrical equipment protested the valuation of its 300,000 square foot Central Illinois facility to the county board of review and received a "no change" vote. It then protested further to the Illinois Property Tax Appeal Board (PTAB), to preserve its rights.
After filing the protest, the manufacturer asked the National Bureau to become involved. We determined that the property was over-assessed, and created an appraisal report as evidence. The county asked the State of Illinois to do an appraisal on its behalf. We accompanied the state appraisers on the tour of the facility and used this opportunity to show them several other sales in the county that pointed to a reduced assessment. The state's final appraisal included these sales, and stated value almost the same as ours.
Without waiting for the PTAB hearing, the county conceded the over-assessment in a stipulation. While we got involved after the company had filed the appeal, we managed the appeal process proactively thereafter, which resulted in a 37% reduction in the assessment with an annual savings of over $30,000 per year. This was accomplished without the need for an attorney, because we found a way to resolve the case before the actual PTAB hearing took place.
Tenant Tax Rights
As a tenant you are unsure of your right to appeal property taxes...
Know the Solution: Tenant Control of Negotiation/Appeal Process
Tenants have the right to challenge the assessed value on their leased property in most jurisdictions across the U.S., if you haven’t specifically waived this right in the lease. The Bureau works with your lease administrator to review your appeal rights under your existing lease and include language in new leases that preserves your right to challenge your property taxes. Landlords who have the right to pass all property tax increases along to you, the tenant, does not have the same motivation to attempt to reduce property taxes.
Assessment Ratio Changes
Assessment ratios change annually in many jurisdictions which can cause an unfavorable change in the market value.
Know the Solution: Determine 100% market value by adjusting for a change in ratio
We analyze existing locations to determine tax savings opportunities based on changes in the ratio. This works to prevent over-assessments based on confusion over how a local ratio impacts the 100% market value, while maximizing tax savings.
Frequency of revaluations
More frequent revaluations result in higher taxes…
Know the solutions: ProActive Revaluation Advocacy
We work directly with the assessor/revaluation firm to save taxes. We work in advance of a revaluation notice to maximize tax savings without an appeal.
Case Study: Proactive Approach to Revaluation
An East coast jurisdiction undertakes a revaluation. Property A is a 600,000 square foot owner occupied office complex with a current assessment converted to 100% value equaling $195 per square foot using the jurisdiction’s assessment ratio at the time. We had been retained in the early 1990’s to enroll this property as new construction and had monitored the value each year. When the revaluation was announced, we contacted the assessor to express our interest in working proactively with her to resolve the new value for the revaluation. We took the time to understand the jurisdiction’s goals and their plans for implementing the revaluation, including the involvement of an outside revaluation firm. We established a time line for sharing data, making inspections and finalizing a new assessment. Our goal in this environment is for our staff to share property specific information, valid market data, and other relevant information that can be factored into the work being done by the revaluation firm and assessor. When the new value was published earlier this year the 100% market value was essentially unchanged at $197 per square foot, right where we thought the value should be. Because the average increase in the values was over 25% for the revaluation, the tax rate dropped so that the taxpayer’s taxes decreased by about $325,000. As importantly, the company was not subject to the negative public relations and costs associated with an appeal.
In comparison, in the same jurisdiction a neighboring Property B is a 300,000 square foot owner occupied office complex with a current assessment converted to 100% value equaling $205 per square foot prior to the revaluation. The property is similar in age to Property A, but of lesser quality. The owner did not work proactively. Instead, the owner waited for the revaluation notice and was surprised to see that the 100% value had increased from $205 per square foot to $260 per square foot, a market value increase of 27%. We were referred to this company by the owner of Property A and started our work about 30 days before the appeal date….clearly a reactive environment. We did not have the benefit of helping to set up the ground rules, participating in the inspection with the revaluation firm, attending the informal hearings or doing anything else that is standard practice under our proactive approach. We did proceed to contact the revaluation firm and assessor in an attempt to agree on a lower assessment prior to the appeal date. While a modest reduction was offered, we were still a long way apart on our respective views of where the assessment should be. Unfortunately, the revaluation firm had more or less locked in their value and assumptions in their mind and documented them in a formal appraisal….assumptions that may not have even existed if we had been able to work proactively to educate them on certain aspects of the facility. The relationship, while cordial, is essentially adversarial because we have to demonstrate that the reval’s documented appraisal assumptions are faulty. Pride of authorship starts to become a problem with the revaluation firm who was contracted exclusively for the large commercial and industrial properties.
Therefore, it was necessary to incur the expense of hiring an attorney (statutory requirement) to file an appeal to allow us to continue our negotiations. Significant more time and effort is required on our part to fully document our positions so that the weight of our evidence prevails. Due to the nature of the reactive approach and the magnitude of the reduction we are seeking, we do not anticipate resolving this case until sometime next year. In the meantime, the owners of Property B are paying about 10% more (over $100,000) in property taxes, in spite of the lower tax rate. Further, the owner of Property B is incurring added legal, appraisal and consulting fees. In retrospect, we feel we could have resolved this case similarly to our success with Property A, if we had worked proactively. With both properties, the facts were very similar. The difference is largely in the approach.
Tax escalators in some jurisdictions increase rates 3-4% annually…
Know the Solution: Assessment Index / Escalator Challenges
We minimize escalators by documenting why your property’s value didn’t change. This works to reduce annual tax increases that can otherwise accumulate over time.
Most new construction is enrolled at a value close to cost but higher than market…
Know the Solution: ProActive New Construction Advocacy
We endeavor to enroll new construction at a substantial discount to construction costs. We work in advance of an initial tax enrollment to maximize tax savings without an appeal.
Valuing New Construction
Our client purchased an 800,000 square foot research campus on 430 acres with pre-approval for campus building expansion to 2.8 million square feet. The purchase price was a relatively low $40 million, because the existing structures required comprehensive renovation. At the time of purchase, the assessment reflected a market value estimate of $75 million. We recommended the client not appeal the existing assessment but work cooperatively with the jurisdiction to enroll the renovation work and new construction on a favorable basis.
As the renovation and new construction project progressed over the ensuing years, the purchase price-to-assessment gap was "backfilled" on the existing structures and the new buildings were enrolled on the basis of the value they contributed to the campus as a whole. The result now is an assessment with an implied market value estimate of $126 million, despite a project capital cost of about $250 million—essentially a 50% discount.
Changes in cost basis
A change in cost basis due to a merger or acquisition triggers a tax increase…
Know the Solution: Merger & Acquisition Step-up & Step-down
We help the assessor distinguish between property tax value and your federal tax basis. Works to distinguish between tax value and federal tax basis to maximize tax savings.
Revising Basis Resulting from Business Change
A National Bureau client bought a paper company whose origins dated back several decades. Following the sale, the new owner (with the concurrence of the assessor) continued to file historical costs rather than its more recent acquisition costs. This resulted in a market value of over $25 million.
Informal negotiations with the assessor resulted in a revision of the reporting basis to reflect the more recent purchase of these assets. The resulting market value was less than $12 million, and the annual tax reduction exceeded $300,000. No appeal was necessary to gain this result, and our fixed fee was a fraction of what
would have been paid on a contingency fee basis.
Internal property tax staff are needed on other assignments…
Know the Solution: Property Tax Compliance Administration
We become part of your tax team and relieve your staff of the property tax compliance burden. Works to relieve tax staff of compliance burden, while using experts to identify tax saving opportunities.
Managing Tax Filings & Payments
A chemical manufacturing company that downsized its tax department due to mergers and budget constraints retained the National Bureau to help manage its real estate and personal property. The company has 123 locations across the country and needed a firm to handle all personal property filings, including identifying and filing for specific exemptions and payment of tax bills.
As a result, we identified all the company's locations and built a tax calendar to manage key deadlines, including the appropriate taxing jurisdictions, for timely filings and bill payment. We proactively communicated with the taxing jurisdictions to confirm the appropriate assessments were enrolled and worked closely with client's accounts payable department to ensure bills were paid in a timely manner. The National Bureau managed over $6.6 million in tax liability in one calendar year.
Personal Property Taxes
You are unsure if your personal property taxes are too high…
Know the Solution: ProActive Personal Property Filing & Reverse Audit
We audit existing personal property locations for over-assessments and refunds. We work to analyze existing locations and determine over-assessments in order to maximize tax savings.
Revising Basis Resulting From Business Changes
A North Carolina chemical company had been in business since the early 1900s. Through the years the company invested funds to support the production of many different materials and processes. Over time some of the processes had been eliminated as business conditions and economics changed. The cost of the equipment on the ledgers had grown to over $110 million and the annual personal property tax exceeded $1 million.
The National Bureau conducted extensive on-site inspections and interviews with knowledgeable company personnel. This resulted in proposals to the county assessor to:
- Reflect shorter life assets via accelerated depreciation.
- Revise assets between property classifications.
- Reflect extremely high obsolescence on equipment dedicated to discontinued operations.
- Adjust several other valuations.
The tax payment was reduced by over $230,000. No appeal was necessary to gain this result.
Identifying and Segregating Costs to Reflect Accurate Personal Property Values
A Midwest heavy industrial manufacturer completed a large capital expansion project exceeding $55 million. The National Bureau performed a special consulting project to identify and segregate costs that could properly be excluded from the personal property assessment. We identified four major categories of costs to concentrate our efforts:
1. Pollution Control. In the area of pollution control, we determined that a major gas control system should be eligible for pollution control exemption. As a result, we identified an additional $7 million dollars of cost to be included on the pollution control exemption application.
2. Real Property Items. We analyzed construction costs to determine which costs were related to the real property at the site. After consultation with plant engineers and discussions with the local assessor, $5.5 million dollars was excluded from the personal property assessment.
3. Soft or Intangible Costs. Intangible or no-value soft costs were excluded from the personal property assessment. Financing, start up, and items related to an unexpected event were identified and segregated. The total cost was over $3.6 million.
4. Excess Installation Costs. We identified and segregated excess installation costs, which resulted in excluding $1.7 million from the personal property assessment
Estimated first-year tax savings from this analysis exceed $450,000. Our fixed fee based on our time, effort, and expenses was a fraction of what would have been paid on a contingency fee basis.
You are not sure of the property tax impact of an abatement expiring...
Know the Solution: ProActive Negotiation with Jurisdiciton for New Abatement or Reduction in Assessment
We Proactively analyze the impact of the expiration on your tax liability and work to minimize future tax payments. Often, the assessed value is too high because the valuation was ignored during the term of the exemption when taxes were not incurred.
You aren’t sure what abatements are available and how to apply…
Know the Solution: Tax Abatement Implementation
We evaluate opportunities to determine the best abatement for your situation and assist you in filing applications. We work to get a combination of the lowest assessment with the best abatement.
Finding Hidden Savings
A manufacturing company built a new facility on a green field site in Michigan. The company contracted with the National Bureau to assist in the initial enrollment of both the real and personal property. Uncertain of the tax incentive programs offered by the State of Michigan, our client also asked us to provide expertise in this area. The goal was to obtain the best abatement and to apply the abatement against the lowest, legitimate assessment-the best of both worlds.
After our initial consultation, we determined that the new site qualified for an Industrial Property Tax Abatement (IFT). This program allows new investment to be taxed at a rate that is roughly half the normal rate for a period of up to 12 years. We filed all proper forms and documents with the local and state authorities. Because the actual construction and equipment purchase costs must be revealed in the application process, it is crucial to work closely with local assessing authorities to make them aware of the true value of the property for determining the assessment. On the real estate, we took the position that property cost should not be the basis for the assessment and provided documentation to justify a lower value.
By qualifying this company for an IFT, the annual tax benefits from the reduced property tax rate exceed $400,000. Additionally, when the values for the real property were enrolled at a substantial discount to construction costs, the property tax savings to the company exceeded $150,000. Annual tax savings in excess of a half million dollars are one of the reasons this company has continued to grow and expand each year.
You lack time for special projects like documenting ghost assets and pollution control…
Know the Solution: Special Project Documentation
We help you handle important technical projects for saving property tax on a timely basis. We work to take on special projects to document further tax savings like identifying ghost assets that are on your fixed asset listing but no longer exist at your facilities.
You are concerned about the public relations impact that challenging your property taxes may have within your community...
Know the Solution: Approach the Jurisdiction Proactively
Our Proactive and informal approach reduces, and often removes, public knowledge of our actions to reduce your tax liability. Our sensitivity for public relations is unparalleled.
Gaining Support & Avoiding Negative Publicity
A major corporation is adverse to publicity that would accrue by appealing its real estate assessments in its headquarters city. To mitigate any negative publicity, the corporation hired the National Bureau to work proactively with the assessor to remove the multiplier which was applied to all properties in the jurisdiction.
The National Bureau worked proactively with the assessor and school system business manager to gain support, via market analysis, for the removal of the multipliers on the larger properties in the jurisdiction on almost a rolling basis. This brought the assessment down to market value over time in an incremental fashion that resulted in a win-win situation for all parties involved—with no publicity. Each year the company saved an additional $50,000 to $150,000 on its property taxes.
Personal property audits
You face a personal property audit which exposes you to higher tax liability, possible penalties and fees...
Know the Solution: Approach the Jurisdiction with Fresh Valuation Data to Minimize or Eliminate Exposure
We minimize exposure at the time of an audit to either reduce the supplemental tax bill or generate a refund. We offset taxes on unreported assets by documenting over-valuation in other areas.
Case Study: Reviewing & Challenging a County Tax Audit
A plastic goods manufacturer located in the Western United States received an audit deficiency notice from the local County Assessor. This audit covered several back years and stipulated that additional personal property taxes of $317,000 were now due.
The company retained the National Bureau to minimize this exposure. We reviewed the work of the County Assessor's auditor and challenged many of the methods and conclusion. Additionally, the National Bureau discovered numerous non-existent or "ghost assets" still listed on the company's ledgers.
As a result of our efforts, the audit liability was reduced to $80,000 from the $317,000. Further, the same plastic goods manufacturer contracted with us to perform reverse personal property audits on several more of their locations throughout the United States. These reverse personal property audits generated an additional annual tax savings in excess of $200,000.
Our team of tax professionals works with clients to identify the dangers and structure around the risks associated with any tax strategy.