November 30, 2017 4 Ways to Cut Commercial Property Taxes

Property taxes can represent up to half of the operating costs for manufacturing facilities. That sounds like a lot—because it is.

By Seth Krchmar, Managing Consultant at Paradigm Tax Group

Luckily, this is not a fixed cost. Similar to your bill for water or electricity use, there are ways to influence to a certain extent what your property taxes amount to.

Minimizing costs and increasing efficiency at your facility is crucial. Here are four ways you can do just that by cutting commercial property taxes.

Know the Guidelines and Deadlines

Keep track of deadlines, regulations, taxes owed, and property tax guidelines specific to your county. In doing so, you won’t miss crucial dates needed to successfully appeal and reduce property taxes. There are several different deadlines to mark on your calendar: assessment, compliance and appeal deadlines. Since these vary by county or state, research yours and put them on your calendar. There are also different paperwork required by the assessor’s office depending on location and what type of property, so it’s important to know what your specific location requires.

Understand the Different Types of Property Taxes

Understanding the two parts to commercial property taxes is essential when determining how to lower them. What makes manufacturing facilities unique in commercial real estate is that they are given two separate tax bills in most states. The first bill is for the land that the property is on, also known as the real estate tax. This mainly accounts for the value of the land and building. The second bill is for the equipment, also known as the business personal property tax. This takes many more factors into account including technological advancements, standard depreciation of assets, ghost assets, and intangible property. Understanding the purpose and breakdown of these two tax bills can help you save money as there can be duplicate taxation. Duplicate taxation is where a specific asset is included on both assessments, since manufacturing facilities are really being assessed through two systems, so facility owners may find themselves getting taxed twice when they shouldn’t be.

Know Your Local System

Regulations or procedures for appealing property taxes are not the same across the board. They vary by state or county, so knowing your local regulations is crucial. Each locality has its own exemptions and credits that you can be eligible for. Several department of revenues for each state have made their property tax laws, deadlines and guidelines to classifying assets, accessible online. That’s a great place to start. Additionally, your local assessor will have information on paperwork required, tax deadlines and any other relevant information you may need on their website. Paradigm Tax Group also has local consultants that can help you navigate this process.

Appeal Your Taxes

Similar to winning a court case, it is best to have as much knowledge and evidence during the appeal process as possible. You can develop strong arguments in your appeal case by citing evidence that highlights industry changes and trends; this can be from a credible newspaper or trade publication. This, combined with other factors including real estate value and facility enhancements, make up an appeal package. By backing up each part of your appeal with evidence, you can strengthen your argument. Being attentive and thorough with your property taxes can also help you catch any mistakes from previous appeals or property assessments to have them corrected and reduce your taxes.

About the Author:
Seth Krchmar, managing consultant specializing in manufacturing facilities at Paradigm Tax Group, a national property tax consulting firm.

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