CT property owners should take advantage of the extended 1998 tax appeal deadline.

A number of municipalities in the State of Connecticut have been granted extensions (to March 20) on the deadline for filing real estate and personal property tax appeals payable in 1998. This "window of opportunity" provides good reason for commercial and industrial property owners to take a closer look at what they pay.

Why? Municipalities base real estate assessments on the last revaluation performed. For example, reassessments performed between 1990 and 1995 failed to reflect the dramatic downturn in real estate values during that time period. In one textbook case, Subway Subs, Inc. retained Cushman & Wakefield in 1995 to analyze the property assessment of four office buildings in Connecticut. Subway had never challenged a significant tax increase following a reassessment in 1990. Through the appeal process, we were able to reduce their taxes by 15 percent.

Another good reason to begin paying more attention to assessments is the enactment of the Revaluation Schedule for the State of Connecticut (Senate Bill 1267), signed by Governor Roland last July. The bill has shortened the valuation cycle from 12 to four years. As a result, every municipality in the State must now perform real estate assessments between 1998 and 2002.

The increased frequency of revaluations should more accurately track property value by taking into account current market conditions. And the shortened cycle also precludes the need for property owners to walt 12 years to address undetected flaws in their assessments.

At the same time, assessments performed every four years will likely increase property owners' tax bills with greater frequency. The recent drop in statewide vacancy rates of commercial and industrial properties, and Connecticut's outstanding economic upturn, have resulted in an overall increase in real estate values. Municipalities are expected to raise their valuations significantly in the near term.

Benefiting from the Right to Appeal

Owners have the right to appeal their real estate and personal property tax assessments. And in light of the legislative changes outlined above, they should closely review their tax bills to be sure they are fair and equitable.

Questioning how a property compares with similar properties, as well as looking closely at local market conditions such as vacancy rates, can help to determine if a real estate holding has been accurately assessed. For example, owners should explore whether incomes at rental properties support assessors' estimates; whether assessments properly consider special purpose facilities; and if capital improvements have been taxed at the proper amount.

While the answers to such queries may seem complex, a real estate valuation by an independent, third-party consultant can uncover a property's exact and realistic value. Owners can also benefit from personal property valuation studies, which take into consideration market value, as well as the owner's financial statements and the property's net book value. Municipalities base personal property tax assessments for such items as machinery and equipment, furniture and fixtures, and computer equipment on the taxpayer's declaration that was filed the preceding November.

Again, these assessments may not be accurate, as the depreciation tables used by municipal assessors offices have not, historically, mirrored true property value. For example, in the State of Connecticut, municipal assessments typically take into account that computers will depreciate over five years, with a floor at the end of the fifth year equal to 20 percent of original cost. In reality, however, most five-year-old computers do not retain 20 percent of their original purchase price.

How Does the Appeal Process Work?

Property owners can appeal real estate and personal property tax assessments in an effort to reduce an assessor's valuation by filing a simple application with the local Board of Assessment Appeals. The board must conduct a formal hearing within 30 days and render a decision within another 30 days.

Therefore, property owners in eligible municipalities who file appeals by the extended March 20th deadline will have their decision no later than May 20. If a board issues an unfavorable decision, the property owner has the right to file yet another appeal with their local superior court within 60 days.

Cushman & Wakefield's Tax Consulting Group has been successful in helping dozens of Connecticut real estate owners reduce assessments of their real estate and personal property to actual market and book value for tax savings of five to 20 percent. The potential for such dramatic reductions provides significant incentive to take a closer look at current property valuations while the time is right.