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