The Tax Appeal Process – Part 2 of 5

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The second major “make or break” section of the tax appeal form, the justification for the appeal, is where the petitioner typically makes a reference to exhibits and a detailed synopsis of the key points that warrant an assessment reduction.  This affects others involved with the case as follows:

  • The attorney knows the nuances of the law so what is put here has to relate back to state, county and municipal assessment law.  They have access to everything legal, but they’re expensive.  It isn’t uncommon to limit the attorney’s research time at this stage of the tax appeal process.
  • Tax consultants often understand the law and its nuances but they don’t always have the time or resources to do the background investigations on Lexis Nexis or other sources to see what case law has addressed the key issues that justify the appeal.  It is an ungainly task keeping up with current and past cases, decisions and laws in many jurisdictions and they are not paid by the hour to do so.
  • The appraiser may have a different opinion on the justification for the tax appeal.  For instance, if the petitioner states there is functional obsolescence, the appraiser may not see it that way or may not be able to make a strong enough justification for it within the appraisal report.  The capitalization rate and operating expense ratio selected by the petitioner may not jive with the market data the appraiser finds.  The list of such differences can be quite long.  This is just one reason of many that the appraiser should be hired early in the process rather than at the end.

TaxesThe Basis for Appeal section usually has checkboxes for things like property damage, condition, functional obsolescence, incorrect property record card data, unfair equalization (i.e. it is assessed higher than other properties of the same type and size) or just inaccurate valuation.  Let’s revisit how the participants of the tax appeal process are affected:

  • The biggest area of disagreement in the property record card is incorrect square footage.  With the burden of proof on the petitioner, someone has to be credible when it comes to building size – and that person is the appraiser.  If plans are available, however, having the attorney, property owner or tax consultant submit them with the completed tax appeal form gives them a chance at winning.  Ah…but do the plans say “as built” or its equivalent?  We all know that more than one set of plans can be submitted to the building department and only the final set can result in a favorable ruling (‘been there and done that).  It is not uncommon to have the assessor base his or her square footage on plans and if they were not the “as built” ones, if the as built square footage is less a reduction becomes an easy, simple administrative matter.
  • Unfair equalization can be a deal breaker.  Municipal requirements vary in this area:  one might require a 5 or 10 percent higher assessment over market value for an appeal to even be filed and another might require the petitioner to prove that the assessment is unfairly high compared to other properties.  The rub is if all the properties are over-assessed and the law requires proving that the subject is unfairly assessed compared to them; the burden of proof may be just too great.  This is a gross travesty for property owners in jurisdictions that require unfair equalization for an appeal to be heard.  It takes the “fair” out of fair market value.  The attorney and the tax consultant need to know the law in this area and know how it will be interpreted based on case law.

The last key area of the tax appeal form is the question asking if the property was appraised in the last year or so.  Not all forms have this, so it’s up to each jurisdiction.  If the petitioner answers “yes”, the appraisal is usually required to be attached to the form as an exhibit and the appraised value is disclosed.  I have seen cases where the appeal was filed, an appraisal was done within one year and it was not mentioned to the attorney or tax consultant; as a result, the case imploded before it ever got started.  I’ve also seen cases where the appraiser came in “high” for mortgage purposes and the appraiser was not initially disclosed on the appeal form.  He did not want to deal with defending the value in a tax appeal case and we were called upon to come up with a defensible “market value” that was, understandably, lower than that reported by the prior appraiser.  You can imagine the problems that result for everyone in the tax appeal process.

Part 3 is all about the day everyone shows up before the tax board.  Let’s have some fun!

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