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By Popular Demand – More on Property Tax Appeals

A recent post on on steps taxpayers can take on their own for relief during the COVID-19 crisis has led to several inquiries from taxpayers hoping to learn more about the property tax assessment appeals process. Their wish is NTU’s command.

Earlier, we explained that the appeals process for challenging a property tax assessment requires attention to deadlines and details.

It’s important to remember too that property taxes rarely adjust to realities of economic downturns on their own. When families make less money, they move into lower tax brackets and buy only necessities that tend to carry lower sales tax burdens. Not necessarily so with property taxes. According to Census Bureau statistics, during the worst years of the Great Recession (2007-2010), state and local personal income and sales taxes dropped by 10 percent and 7 percent, respectively. Property tax collections rose over the same period, by 18 percent.

But whether the taxpayer is business- or residential-based, localities provide property assessment appeal mechanisms for taxpayers that are terribly underutilized. In some areas of the country, the share of inaccurate or inflated assessments can reach 30 percent or even more. Yet, typically fewer than 5 percent of homeowners go through the process of challenging their valuation. The challenge rate for businesses is somewhat higher, but with a few exceptions, still not in line with the share of properties that are improperly assessed.

For more than 30 years NTU has published a homeowner’s guide to appealing an unfair property tax assessment (see our checklist from that guide here). The process is relatively straightforward. Homeowners should first get ahold of their assessment “property card” or assessor’s working documents as well as review the assessment they are sent via mail or online. This is the point at which to check for inaccuracies in the assessor’s assumptions – too much inhabitable square footage of living space, failure to account for a roof in need of replacement, or listing three bathrooms when there are actually only two. It’s also prudent to investigate whether there are certain homestead exemptions or tax circuit breakers for which the homeowner qualifies. Many of these tax relief provisions are not automatic; the homeowner must apply for them or claim them on a state income tax return.

Beyond this basic check-up, the homeowner can then compare their assessed value with that of similar homes in the neighborhood or on the block. Then, it’s a matter of adding and subtracting differences in their property versus others, as well as calculating tax assessments per square foot of living space among “comps.”

How could any of this research possibly be done during a nationwide lockdown? The good news is, much of it can. Many assessor records are available electronically upon request, and quite a few national realty and home finance consultation sites offer help with initial research on comparable properties. Most jurisdictions allow homeowners to ask for corrections of outright errors in their assessments without a face-to-face meeting. If instead the appeal is based on comparability with other properties, some jurisdictions will allow the initial application to be filed by mail or online. The next stage of comparability challenge is usually a hearing before a local appeals board. Quite a few jurisdictions are postponing these proceedings until after COVID-19 passes, but some are making provisions to continue them via online meetings.

It gets more complicated for businesses, which can be assessed not only on sale values of comparable properties, but also on replacement costs or income producing potential (and sometimes a blend). And because no two businesses are exactly alike, the assessor’s opinion can be especially subjective. That’s why it might pay for a business owner to contact a local professional experienced with commercial property tax issues. These experts might even work on a contingency fee based on the tax savings obtained. Background on how commercial properties are assessed and how to get help can be found through numerous online sources, including here, here, and here.

The key with property tax appeals is not to miss deadlines for filing – in some places, the window for making a challenge after the bill is received can be as short as a few weeks. A few states are extending those appeal deadlines, but it is vital to check right away. Property owners who have already missed this year’s deadline should not fret – the research they do now will give them a head start for the next appeal cycle.

So taxpayers can take heart – regardless of where they live or when they choose to take advantage of the process, investing a little time in researching the feasibility of an appeal could go a long way to discovering additional tax savings.