| "Collecting more taxes than is necessary is legalized | | | | asset listing, which includes the original cost and date of |
| robbery." These words of wisdom, spoken by the 13th | | | | acquisition for every asset purchased. However, a |
| president of the United States, Calvin Coolidge, still ring | | | | fixed asset listing is not required. This is good news for |
| true in today's society for homeowners and business | | | | small businesses that do not maintain a fixed asset |
| owners. Robbery may seem like a harsh word, but | | | | listing. |
| what would you say if someone tried to sell you | | | | Unequal appraisal |
| one-year-old motel sheets for 90% of the original | | | | Assessed values for BPP accounts often range from |
| cost? Based on the appraisal district's depreciation | | | | ten-times to fifty-times on a per square foot basis for |
| schedule, this is a fair deal. | | | | companies in the same industry. For example, real |
| Most people would not consider this a fair deal and | | | | estate brokerage offices, which have 10,000 square |
| either reject the offer or request a lower price. This | | | | feet of office space, may have assessments ranging |
| should be the same thought process when the | | | | from $10,000-$500,000. It seems unlikely that the |
| appraisal district overassesses your business personal | | | | computers and furniture in one brokerage office are |
| property (BPP). Texas law requires business owners | | | | 50 times as valuable as those in a competitor's firm on |
| to report BPP, personal property used for the | | | | a per square foot basis. |
| production of income, to the appraisal district for | | | | Appraisal districts tend to accept the assessed value |
| assessment and taxation. Although there are no | | | | rendered by property owners. Many large companies |
| criminal penalties for not complying with the law, there | | | | render using fixed asset listings. Appraisal districts use |
| is a penalty of 10% of the taxes. For example, if you | | | | the cost basis information and the Comptroller's |
| have a BPP account assessed for $100,000, your | | | | schedule to calculate the "market value" for property. |
| annual BPP taxes are $3,000, based on a 3% tax rate. | | | | The valuations for these rendered accounts tend to |
| The 10% penalty for this BPP account would be $300 | | | | grossly distort the actual value of these properties. |
| ($3,000 times 10% equals $300). | | | | Property owners who do not render have values on |
| The huge range of assessed value for business | | | | the lower end of the range of value. While it seems |
| personal property (BPP) makes obtaining substantial | | | | intuitive that appraisal districts would penalize owners |
| property tax reductions highly probable. It is not unusual | | | | who do not render by sharply increasing their |
| for the range of assessed value for BPP accounts for | | | | assessed values, the practice is the opposite. Appraisal |
| similar properties to vary by 5,000%! For example, | | | | districts tend to reward property owners who do not |
| furniture and computers for companies within the | | | | render by leaving their assessed values at modest |
| same office building sometimes vary from $1 to $50 | | | | levels. This creates a disincentive to render. It also |
| per square foot. Market value and unequal appraisal | | | | unequally taxes property owners who render with a |
| are two options for appealing BPP assessments. | | | | fixed asset listing. These factors have caused a high |
| Given the inequity in BPP assessments and the | | | | degree of dispersion in BPP assessed values. |
| subjectivity of valuing BPP, property owners have a | | | | How To Appeal On Unequal Appraisal |
| high probability of success when properly prepared for | | | | Contrary to popular belief, it is possible to appeal BPP |
| a BPP assessment appeal. Protest both market value | | | | utilizing unequal appraisal, a concept that is fairly new. |
| and unequal appraisal. | | | | Most property tax consultants and large property |
| How to appeal? | | | | owners have not considered or utilized unequal |
| To appeal your BPP, you can either use the | | | | appraisal regarding BPP. Appraisal districts are |
| Comptroller's form, or send a letter to the appraisal | | | | resistant to the concept of appealing BPP based on |
| review board (ARB) on or before May 31st of each | | | | unequal appraisal. (It is inappropriate to tax property |
| year. The protest letter to the ARB should identify the | | | | owners who render using a fixed asset listing at the |
| property and the reason for your protest (section | | | | highest level, based on utilizing the Comptroller |
| 41.44d of the Texas Property Tax Code). | | | | schedule, when allowing property owners who do not |
| Tips: | | | | render very lean levels of assessment.) |
| · Since the appraisal district's staff tends to | | | | Preparing an appeal based on unequal appraisal for |
| become more motivated to resolve appeals later in | | | | BPP is simple and straightforward. Start by obtaining |
| the season versus earlier in the season, it is better to | | | | information on the assessed value, and amount of |
| appeal or protest on May 31st or shortly before the | | | | office space/manufacturing or warehouse space for |
| deadline date. | | | | property owners similar to the subject property owner. |
| · Even if you do not receive a notice of assessed | | | | This is typically done by using companies with the |
| value for your BPP account, it is still important to send | | | | same Standard Industrial Code (SIC) as the subject |
| a written notice of appeal or protest. The appraisal | | | | property owner. You can obtain this information by |
| district does not have to send a notice of your | | | | sending an open records request to the appraisal |
| assessed value if the value does not change by more | | | | district. When appealing, research the assessed value |
| than $1,000. If the notice of assessed value gets lost in | | | | for your competitors. Compile data regarding the |
| the mail, and you do not send a protest notice, you | | | | assessed value and building area for the subject and |
| lose your right to appeal for the current year. | | | | comparable accounts into a summary: |
| When sending a notice of appeal to the ARB, also | | | | When should you appeal? |
| send the appraisal district a House Bill 201 request. | | | | Appeal annually on market value and unequal appraisal. |
| House Bill 201 refers to section 41.461 of the Texas | | | | To effectively appeal on these two options, research |
| Property Tax Code that allows property owners to | | | | unequal appraisal based on assessment comparables |
| obtain a copy of any evidence the appraisal district | | | | on the appraisal district's web site and evaluate the |
| plans to use at the ARB hearing 14 days before the | | | | market value of your BPP. After reviewing both the |
| hearing. This request prohibits the appraisal district from | | | | unequal appraisal and market value options, determine |
| using any information that was not provided to the | | | | your primary focus for appealing your BPP account. If |
| property owner 14 days before the ARB hearing. | | | | neither market value nor unequal appraisal provides a |
| Market Value, Book Value & Comptroller Schedule | | | | basis for appealing your property taxes, you can |
| Three popular options for describing value for BPP are: | | | | withdraw the notice of protest or just skip the hearing. |
| market value, book value, and the Comptroller's | | | | Tips for your hearing (Informal & ARB) |
| schedule. Market value is defined in section 1.04(7) of | | | | Informal hearing |
| the Texas Property Tax Code that reads as follows: | | | | · First meet with the appraiser and politely explain |
| "Market value" means the price at which a property | | | | the basis for your adjustment. Give the appraiser a |
| would transfer for cash or its equivalent under | | | | copy of your evidence and explain it in a methodical |
| prevailing market conditions if: | | | | way. |
| (a) exposed for sale in the open market with a | | | | · The appraiser will review your information and |
| reasonable time for the seller to find a purchaser, | | | | the information he/she has available, and will then likely |
| (b) Both the seller and the purchaser know of all the | | | | make an offer to settle. Consider the appraiser's offer |
| uses and purposes to which the property is adapted | | | | and explain why your evidence is better than his/her |
| and for which it is capable of being used and of the | | | | evidence, and again request your value or a value |
| enforceable restrictions on its use, and | | | | between your value and his/her value. |
| (c) Both the seller and the purchaser seek to maximize | | | | · You will quickly learn the lowest value the |
| their gains and neither is in a position to take | | | | appraiser is willing to accept. At this point, you need to |
| advantage of the exigencies of the other. | | | | either agree to that value or proceed to the Appraisal |
| Let's compare the differences in value resulting from | | | | Review Board (ARB) hearing. |
| using market value, book value and the Comptroller's | | | | · If you settle the appeal at the informal level, you |
| schedule. The BPP for a typical motel room includes | | | | will not be able to pursue an ARB hearing or a judicial |
| items such as bedding, linens, window air-conditioning | | | | appeal. However, it does resolve the issue in a timely |
| unit, towels and a television. Based on market value, | | | | manner. |
| after one year, these types of items could probably | | | | ARB hearing |
| only be sold for 10% to 30% of the original cost. Book | | | | · Introduction of the two parties at the hearing |
| value, based on federal depreciation schedules, | | | | · Explanation of the hearing process |
| indicates a value of 80% of the purchase price after | | | | · Property description (address any errors in the |
| one year. The Texas Comptroller's schedule for BPP | | | | description of your property after the appraiser's |
| for motels has an eight-year life with 10% depreciation | | | | description of your property) |
| for the first seven years. Hence, the Comptroller | | | | · Property owner presentation |
| schedule indicates one-year old hotel furnishings are | | | | · Questions from the ARB panel members |
| worth 90% of their original purchase price. This is | | | | · Appraisal district presentation |
| clearly inconsistent with market value for these items. | | | | · Rebuttal and closing evidence from the property |
| Inventory | | | | owner |
| There are a number of controversial issues related to | | | | · ARB announces its decision |
| how inventory is assessed. These include shrinkage, | | | | Summary Points |
| damage, functional obsolescence and economic | | | | · Annual appeals will minimize your BPP property |
| obsolescence. For example, what is the market value | | | | taxes. |
| of merchandise returned during the week after | | | | · There are huge differences between the |
| Christmas on January 1st (the effective date for | | | | market value estimated by the Comptroller's schedule |
| valuation)? Since returned merchandise has usually | | | | and actual market value. |
| been opened, damaged, missing parts or may be an | | | | · Based on excessive assessments for BPP for |
| unpopular item, it is worth less than cost in many | | | | companies who render using a fixed asset listing, a low |
| cases. Market value is relevant in determining the | | | | percentage of property owners who render and the |
| assessed value for inventory for Texas BPP taxes. | | | | low assessed values for property owners who do not |
| Preparing A Summary For Your Hearing | | | | render, there are rich opportunities for appealing BPP |
| The appraisal district would prefer to see a fixed | | | | by using unequal appraisal. |