As you start the New Year off fresh, it’s an ideal time to get your business’s financial house and tax obligations in order. Thinking ahead can ensure you don’t miss important deadlines and help you avoid overpaying on business property taxes. For 2018, here are 10 things that are critical to keep in mind about your property taxes:
1. Listing Your Real Property.
If you own a house or your business owns real property, you probably have already received a notice about listing your real property. In the old days, a real property owner was supposed to list its real property every year. Now there is a permanent listing system, which relieves property owners from having to list their real property every year. However, you are still required to list improvements to your real property made over the last 12 months. Failure to list improvements can result in a “discovery” and the imposition of additional taxes and penalties.
2. Listing Your Business Personal Property.
Personal property not used in a trade or business [for example: household furniture] is generally not taxable. Personal property owned by a business [machinery and equipment; furniture, computers, etc.] is taxable. Business personal property is essentially revalued each year, so the taxable value of your business personal property will generally change from year to year. You are obligated to list your business personal property on prescribed forms each year, generally by January 31. Failure to do so can result in penalties being applied, in addition to the tax due.
3. Forsyth County Property Values.
North Carolina counties are required to revalue real property at least once every 8 years. Many counties do so more frequently, usually on a 4-year cycle. Forsyth County is on a 4-year revaluation cycle. 2017 was a revaluation year in Forsyth County, which means that the county will not revalue real property again until 2021. Given that, the tax value of your real property should be the same for 2018 as it was for 2017, unless there was some physical change to it [for example, an addition built onto an existing building].
4. How is Your Property Taxed?
For property tax purposes, property is valued at its fair market value, which is the value that the property would sell for between a willing buyer and a willing seller. It must also be valued equitably — at a value consistent with other like properties. The determined value is multiplied by the applicable tax rate to determine the tax you owe. The tax rate is determined by taking the county tax rate and adding to it any applicable municipal or other district rates. For example, if the property is in Winston Salem, the city-county combined tax rate for 2017 was approximately $1.32 per $100 of value. The tax rate is subject to change each year in June when the localities set their budgets.
5. Who Is the Party Responsible For Payment of Taxes?
As far as the tax office is concerned, the party responsible for the payment of property taxes is the owner of the property as of January 1 of each year. This is true even if the property was sold to another party on January 2. Generally, when property is sold, property taxes are pro-rated and the buyer assumes responsibility for payment of property taxes in the year of sale. This is, however, just an agreement between the buyer and seller and does not bind the tax office.
6. When Are Property Taxes Payable?
Tax bills usually go out in mid to late summer. Property taxes are technically due on September 1 of each year. Property taxes can, however, be paid as late as January 6 of the following year without interest or penalty.
7. Appealing the Tax Value of Your Real Property.
If you don’t think your property is valued at fair market value, you have the right to challenge the value through an appeals process. It is best to challenge the value in a revaluation year, because any reduction applies going forward, but not retroactively. However, if, for whatever reason, the value was not challenged in the reval year, you can still challenge the value in subsequent years. While you may get less of a benefit than appealing during a revaluation year, it may still be worth it financially to pay taxes on a reduced value rather than waiting for the next revaluation cycle.
8. The Appeal Process.
The first step in the property tax appeal process is to file an appeal with the local Board of Equalization and Review (BER). In Forsyth County, this is a five-member board of citizens appointed by the Forsyth County Commissioners. If you are not satisfied with the decision of the BER, you can appeal to the Property Tax Commission (PTC) in Raleigh. The PTC is a five-member board that hears appeals of property values from throughout the State.
9. Appeal Deadlines.
The deadline for a real property appeal to a county BER generally varies from year to year and from county to county, but is usually sometime during the second quarter of the year. In Forsyth County, the deadline is typically June 30. I generally advise property owners to file by March 31, just to be safe. The appeal deadline for a personal property appeal is usually 30 days from the date on the tax bill which usually comes out in mid to late summer. Whether for real or business property, an appeal to the PTC must be filed [mailed as evidenced by a USPO postage mark, not a postage meter postage mark] no later than 30 days after the date on the BER decision letter [not the date it is received]. Filing late, either to the BER or the PTC, means your case will be dismissed.
10. Do You Need an Attorney to Appeal?
If you are the individual property owner or the principal in the business that owns the real property, you aren’t required to have an attorney to file the appeal or even to handle the case before the BER or PTC. Given the complicated nature of property tax matters, an attorney can help expertly navigate the appeals process to increase the chances of a successful appeal.
About the Author
John A. Cocklereece, Jr. is a director and attorney at the law firm of Bell, Davis & Pitt, P.A., with offices in Winston Salem and Charlotte. One of his principal areas of practice is the representation of property owners and counties in property tax appeals. Cocklereece is a former Chairman of the North Carolina Property Tax Commission.