Developers, real estate investors and business owners are appropriately focused on creating profit and high rates of return. Managing property taxes may not be a terribly high priority. However, property taxes are usually the most significant real estate expense incurred by real estate users and have a direct impact on profitability and rates of return. So, when should developers, investors and businesses consider a property tax appeal?
Property taxes in Minnesota are based on the fee simple market value of the subject property. Generally meaning, the amount that could be achieved in a sale between a willing buyer and willing seller without any special benefit or deduction applied due to specific tenancy or lease terms.
The short answer to the question in the title of this post is, if the market value is likely less than the assessed value then you should consider an appeal. It is not practical or economical to have an appraisal prepared every year just to test the assessed value. You can have property tax lawyers like those at Larkin Hoffman conduct a review anytime – Larkin Hoffman offers free property tax reviews – or the following may serve as indications for when to take a deeper look.
- Purchase for less than the assessed value
- Refinance and the financing appraisal concludes to a value lower than the assessed value
- There is substantial deferred maintenance or significant capital expenditures are needed
- The Subject is contaminated
- The property is special use
- The Subject went through a significant renovation or new construction
- The property was under construction on the date of assessment
- Subject is suffering from high vacancy or not yet stabilized
- The market around the subject has changed, such as increasing vacancy, decreasing rents, crime, etc.
- Assessed value is rapidly increasing and little has changed for the Subject
The above list is certainly not exhaustive, but for the developer, investor, and business owner with little time to consider property taxes, the list can be a good cheat sheet for when to consider calling a property tax lawyer.
While valuation is the most important factor for determining and adjusting property taxes, the assessment cycle and appeal deadlines are nearly as important. For example, the deadline to appeal the Pay 2020 value is April 30, 2020. As a result, the following is an outline of the assessment and appeals process.
Minnesota property tax dates from assessment to appeal
|Date of assessment||January 2||Each assessment is the basis for the property taxes payable in the following year. For example, the assessment on January 2, 2019 is for taxes payable in 2020.|
|Valuation notices||March – April||Counties mail notices of valuation in the year of assessment. For example, valuation notices sent in March and April 2019 are for the 2019 assessment payable in 2020.|
|County Boards of Appeal and Equalization||June||Boards of Appeal and Equalization hear informal/administrative appeals of assessments in the year of assessment. For example, a 2019 Board of Appeal and Equalization is for the 2019 assessment payable in 2020.|
|Truth-in-taxation notices||November 10 – 25||Truth-in-taxation notices provide taxpayers with the proposed taxes based on preliminary budgets. They are mailed in November for the taxes payable in the following year. For example, the November 2019 truth-in-taxation notices provide the proposed taxes payable in 2020.|
|Truth-in-taxation meetings||After November 25||Truth-in-taxation meetings are held by the taxing authorities to present the budgets and hear comments from taxpayers. After the comment period is complete the taxing authorities will finalize the budgets, and therefore, the taxes.|
|Property tax statements||March 31 (last day)||This is the date for the year taxes are payable. For example, March 31, 2020 is the last day for counties to mail the statements for property taxes payable in 2020.|
|Property tax appeal deadline||April 30||All property tax appeals must be filed by April 30 in the year the taxes are payable. For example, April 30, 2020 is for the 2019 assessment for taxes payable in 2020.*|
|First Half Taxes Due||May 15||First half property taxes are due.|
|Second half taxes due||October 15||Second half property taxes are due.|
* Minnesota’s property tax appeal deadline is a hard deadline. If an appeal is not filed for that tax year, the value cannot be changed.