Is filing a property tax return straightforward?
Depending on the number of states that your business penetrates, number of locations, plants, stores, etc., and the dollar value and volume of fixed assets, compliance can quickly become a burden. Inventory is taxable in some states and must be reported as of the assessment date, which also varies. If you ship a portion of your inventory out of state, there may be freeport exemptions available that require annual applications.
Distinguishing between real and personal property can also be challenging depending on how projects are capitalized. If a real estate item such as an HVAC system is classified as machinery and equipment on your property tax return, then you are most likely creating a double assessment. Pollution control-related equipment may also be exempt, providing the assets are certified by the proper authority.
As with any tax, it is best to be proactive and understand each state’s laws and reporting requirements in an effort to minimize your tax liability.
How do I know if my property tax value is fair?
All property owners should at some point conduct an asset review. Make sure you understand all of the costs that are being capitalized and verify that they are considered part of the property for tax purposes.
Tour the facilities and talk with the plant managers, engineers and IT specialists. Ask questions regarding the condition, physical life, upgrades, repairs and utilization of equipment.
As you become more familiar with the assets and the various state laws, filing requirements and exemption opportunities, you will better understand the fair value of your company’s assets, which will enable you to minimize your tax liability and audit risk.
How much can I save with a personal property review, and what are some other benefits of doing one?
Savings can vary, depending on the accuracy of the fixed-asset listing and existing filing positions, but typically, an asset review can save upward of 20 to 25 percent.
Secondary benefits include cleaning up your asset listing, updating filing positions and identifying changes to your capitalization policy that will allow you to maximize your savings for future years.
Jenna Kerwood is a principal and leads the property tax practice at Brown Smith Wallace LLC. Reach her at (314) 983-1360 or [email protected].
