Businesses face any number of headwinds. High interest rates, inflation, work shortages, and supply chain problems are just a few. Don’t let this list include overpaying on your property taxes.
As the saying goes, the only certain things in life are death and taxes. But that doesn’t mean you have to accept your property taxes blindly. The amount of property taxes you pay is based on a percentage of your property’s estimated market value. If the property is overvalued, then you are paying unnecessary tax on that extra value.
Factors Leading to Overvaluations: Mass Appraisal Techniques and the Effects of the COVID-19 Pandemic
Assessors set a property’s estimated market value using a system referred to as mass appraisal. At its essence, mass appraisal uses statistical analysis to compare your property to similarly situated properties. Mass appraisal is most effective when there are large sets of properties that have highly similar characteristics, such as single-family residential. But it is less accurate when there are fewer similar property types in the surrounding area, your property has unique features, or it is built-to-suit. Properties that are generally more difficult to value include retail, industrial, and commercial properties.
For taxes payable in 2024, there are additional factors leading to overvaluations. As we emerge from the COVID-19 pandemic, changes in the economy and the way businesses will continue to operate are coming into focus. The shift to remote and hybrid work schedules is causing a much higher vacancy rate in office space, yet assessors seem to be valuing office buildings the same as they did pre-pandemic.
Should You Appeal Your Property Taxes?
How do you know if your property taxes are too high? Indicators that you might be paying too much in property tax include:
- You know similar properties to yours recently sold for less than the estimated market value (“EMV”) listed on your property tax notice.
- You have a recent appraisal report that is less than the EMV on your property tax notice.
- The EMV of your property increased dramatically from the previous year.
- A unique feature of your property makes it less marketable.
- The property was specially built for your business’s particular use.
- To raise capital, your business executed a sale-leaseback and the new EMV mirrors the sale price.
- You completed a 1031-exchange and the new EMV tracks the 1031 sale price.
- Your property has experienced significant depreciation.
To know whether your property is overvalued, you should consult a local property tax appeal attorney. In Minnesota, property is valued as of January 2 for taxes payable the following year. The deadline to file an appeal is April 30 of the year the taxes are due. Failure to meet this deadline is an absolute bar to challenge that particular year’s taxes. To lessen any headwinds your business may be facing, consult with an attorney to make sure your property taxes are fair.