If your company receives a property tax assessment that you think may be unfair, you have the right to file for an appeal. This year is a revaluation year for a number of local counties — Forsyth, Guilford, Davie, Yadkin and Alamance included — and notices should be received shortly if they have not been already. Forsyth businesses will receive their notices closer to the end of March due to a computer glitch.
Paying attention to revaluation years is critical, since assessment reductions achieved through a successful property tax appeal are not retroactive—which means that your opportunity to maximize potential savings from an appeal depends upon filing that appeal during a revaluation year.
Most property in North Carolina is taxed at 100% of its fair market value, which is the price a willing buyer and willing seller would agree upon in a sale (check out our recent Chamber of Commerce article that describes this in more detail).
How to Determine if a Property Tax Appeal Is Worth the Money
If you’re considering an appeal, you’re likely wondering what the cost savings might be. The potential tax savings is equal to the potential assessed value reduction multiplied by the tax rate and multiplied again by the number of years remaining in the applicable revaluation cycle. So, there are just three variables:
1. Tax Rate
2. Years Remaining in the Applicable Revaluation Cycle
3. Potential Assessed Value Reduction
Let’s put the formula to work using an example: You are in charge of the property tax function for an office building in Winston-Salem’s downtown business district. Given this, your tax rate is 1.38%, or .0138. Since your property is in Forsyth County, you’ll receive a revaluation notice setting the assessed value effective January 1, 2017, and that value will generally be in place for four years absent a reduction through appeal. You do your research and determine that your property is worth about $7,000,000, but the revaluation notice says the assessed value will be $10,000,000, yielding a potential assessed value reduction of $3,000,000. Applying these figures to the formula, your potential tax savings from an appeal is about $165,600, or $3,000,000 x .0138 x 4.
If you want to determine your potential tax savings, this article will help you determine the necessary figures.
Moving Forward with a Property Tax Appeal
The appeals process begins once the taxpayer receives the notice of the assessed value of the property. Once that occurs, the company has a period of time (as stated on the notice) to appeal informally to the tax assessor’s office. The taxpayer can meet with a representative of the tax assessor’s office to present information or arguments that he believes establish a different value.
Board of Equalization and Review
If the informal appeal is unsuccessful, the taxpayer can appeal the proposed valuation to the county Board of Equalization and Review. This is typically a local board of citizens chosen by the County Commissioners to hear property tax appeals. Depending on the county, this Board may provide a substantive review of the valuation or merely be a rubber stamp for the valuation of the tax assessor.
A hearing before the local Board is usually informal. The taxpayer and county are both given a chance to present their evidence as to value, and the Board then may ask questions. Often, the Board will render a decision at the conclusion of the hearing and then a written decision will be issued later. However, in some instances, the Board may only issue a written decision.
North Carolina Property Tax Commission
If the taxpayer is not satisfied with the results of his appeal to the local Board, he has 30 days from the determination of the Board to file an appeal with the North Carolina Property Tax Commission. Failure to meet the 30-day deadline means the taxpayer loses his right to any further appeal of that year’s taxes. The Commission is a five member board that typically hears appeals in Raleigh. Members are chosen by the Governor and leaders in the State Senate and House of Representatives. The hearing before the Commission is a “de novo” hearing, where that the determination of the local Board and any evidence or arguments made before it are of no consequence. The Commission bases its decision solely on the evidence presented in the hearing.
An appeal to the Commission is a formal affair, similar to a trial in State Superior Court. There are direct and cross-examinations of witnesses both for and against the taxpayer, and the introduction of documentary evidence. Such an appeal is rarely successful without using an MAI appraisal. The MAI designation is conferred by the Appraisal Institute upon appraisers who are experienced in the valuation and evaluation of commercial, industrial, residential and other types of properties, and who advise clients on real estate investment decisions. It may take as long as a year from the filing of an appeal with the Commission before the case is heard and resolved. There is always the opportunity to settle the case after filing the appeal, but only before the case is heard if the parties can come to a compromise. Decisions by the Commission are appealable by either party to the North Carolina Court of Appeals and, in certain circumstances, to the North Carolina Supreme Court.
When Is It Time to Consult with an Attorney?
As with any legal matter, one must always weigh the costs (appraisal fees; attorney fees) versus the benefits of a reduction in taxes. An attorney can lend their expertise and perspective on your particular case and best advise you how to proceed, as well as act as an advocate for your case throughout the appeals process.
Working with an attorney can help you to avoid common mistakes in property tax appeals, including:
* missed deadlines
* not using the proper valuation date
* not understanding the applicable burden of proof
* not knowing what evidence is relevant and what is not
If you have questions about the listing, appraisal, and assessment of your business personal property or your business real property in North Carolina, we welcome the opportunity to assist you.
About the Authors:
John A. Cocklereece, Jr. is a director and attorney at the Winston-Salem law firm of Bell, Davis & Pitt, P.A. His principal areas of practice are general business law, estate planning and administration, and tax law, with particular emphasis on representation of counties and taxpayers in property tax appeals. Cocklereece is a former Chairman of the North Carolina Property Tax Commission.
Justin M. Hardy is a director and attorney at the Winston-Salem law firm of Bell, Davis & Pitt, P.A. His principal areas of practice are general business law, trademark, and tax law, with particular emphasis on representation of counties and taxpayers in property tax appeals.
John and Justin are the authors of the The North Carolina Property Tax Law Monitor.