Navigating the commercial property tax world can be a daunting prospect, but it’s an important step for every property owner out there. The simple truth is, property taxes impact your income — whether you choose to protest your valuations or not.
At Lane Property Tax Advocates, we’re firm believers in the idea that the better informed a person is regarding a topic, the better prepared they’ll be to address it. This is especially true as it relates to commercial property tax processes. Whether you're planning to protest your commercial property taxes or simply getting organized for the upcoming season, an understanding of key terminology — and of the resources you have at the ready — makes a difference.
In this blog we’re here to empower you with the knowledge you need to navigate commercial property taxes like a pro. Read on to stand prepared.
Know the Lingo Surrounding Your Commercial Property Taxes
Industry jargon serves as great shorthand for property tax professionals. For those outside the work, however, it’s like a language all its own. Understanding key terms on your property tax bills — or phrases that come into play during your protest process — can go a long way toward helping a commercial property owner build confidence and prepare for what lies ahead. Here are a few phrases you’re likely to come across.
- Abatements: Temporary reductions or partial exemptions granted for a specified period, often for properties undergoing renovations or located in designated development zones. Abatements can reduce your property tax burden.
- Assessed Value: The dollar value assigned to your commercial property by the local tax assessor's office. This value serves as the basis for calculating your property taxes. Assessments typically take into consideration factors such as your local market value, property condition, location, extras and income potential.
- Business Personal Property Tax: An ad valorem fee commercial property owners pay for items that generate income. Business personal property can include anything from company vehicles to heavy machinery, office furniture and supplies.
Lane Lesson: Curious to learn more? We have a blog post that delves into the specifics of business personal property and real property, too.
- Comparable Sales: Also known as comps, these are recent sales of similar commercial properties in the same area. Tax assessors use these sales to evaluate your property’s market value and determine its assessed value.
Lane Lesson: When preparing for a commercial property tax protest, it often helps to research and present comps that demonstrate your property's value is lower than the assessed value.
- Exemptions: Provisions that can reduce your property tax burden. Exemptions are typically offered to certain property owners or property types that meet specific criteria, such as nonprofit organizations, veterans or senior citizens.
- Personal Property: Movable assets not permanently attached to a commercial property owner’s land or building. Business personal property includes equipment, machinery, furniture, computers, inventory and other tangible assets used in business operations.
- Real Property: Elements permanently affixed to your location. Real property includes, but is not limited to, land, driveways, fencing, landscaping and buildings.
- Tax Abatement Protests: Process of disputing property taxes due to an error in the application of exemptions, abatements or other tax incentives, in the hopes of correction and potentially lower one’s tax bill. It's important to familiarize yourself with the specific requirements and deadlines for filing a tax abatement protest in your jurisdiction.
- Tax Assessment Appeal: Also known as a protest, this is a step commercial property owners can take if they believe their commercial property has been over-assessed and their property taxes are too high. A property tax protest involves gathering and submitting evidence such as property appraisals, recent comparable sales and income statements, to contest the assessed value with local taxing authorities and potentially reduce one’s property tax liability.
Lane Lesson: When gone about the right way, the commercial property tax protest is an in-depth and time-consuming process. We recommend trusting a professional firm such as Lane with the work to position your protest for success.
- Taxable Value: The portion of your property's assessed value on which you are required to pay taxes. Your taxable value is calculated by subtracting any exemptions or abatements from the assessed value. As an example, if your assessed value is $500,000 and you have a $50,000 exemption, your taxable value would decrease to $450,000.
Know the Forms, Evidence and Other Items Necessary to Ensure a Smooth Season
Understanding commercial property tax jargon is just half the battle when it comes to making your way through tax season. If you plan to protest your valuation (and remember, we recommend you protest your commercial property taxes annually), you’ll need to present the right evidence.
Even if you don’t plan to protest, you’ll want to have the below information organized and at the ready, just in case you need to reference it at any point. Applicable documents include:
- Account Summary Report (Exhibit A): List of properties included in your property tax protest.
- AIA Documents, General Contractor Contracts & Construction Draw Schedules: Required for properties built or renovated within the past three years. Documents should include dates and construction costs.
- Appointment of Agent Form: Authorization for your chosen property tax firm (hopefully Lane!) to protest and attend hearings on your behalf.
- Builder Blueprints, Appraisals & Inspection Reports: Documentation detailing property information such as square footage, extras, potential deficiencies and additions.
- Financial Documents: Detailed rent roll and profit and loss statements.
- HUD-1 Closing Statement or Deed of Warranty: Charges and credits related to real estate settlements (“sales”) or refinances. Required for all properties purchased in the past three years.
- Property Tax Service Agreement: Contract indicating terms, conditions and obligations related to your working relationship with Lane. Remember, this is an “evergreen” agreement, wherein Lane will continue doing your protest annually unless the property owner advises otherwise.
- Trust Documents, Divorce Decrees & Property Management Agreements: Documentation supporting your signature on the Appointment of Agent Form in instances your legal name has changed and no longer matches what the CAD has on file.
Traversing the commercial property tax world can be overwhelming, especially when faced with complex jargon and unfamiliar processes. By understanding the key terms and concepts above, and knowing what information to pull together you'll be better equipped to handle tax season.
Remember, seeking guidance from a professional property tax firm like Lane can save you time and headaches — and save you thousands on commercial property taxes, too. If you have questions about any of the above, or if you’re interested in learning how Lane’s experts can help you, feel free to reach out at any time. We’d love to work with you!