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The time is right for reducing your tax assessment. (Tax Issues).

The economy's slowdown has been a cause for concern by most landlords. The demise of dot com companies and the downsizing of certain retail chains have caused an increase in vacancy rates in many parts of the country. In facing these challenges, owners and managers of commercial property would be wise to evaluate their tax assessments and to consider reaching out to their local assessors in the hopes of reducing their property tax bill. If these negotiations prove unsuccessful, it would be beneficial to consider filing a formal appeal or grievance--the timing has never been better. However, to do so, it is essential to understand how the tax appeal process works.

1. Know your annual deadline. Most states have a deadline for the filing of real estate tax appeals. For example, in New Jersey, a tax appeal must be filed by April 1 of the year in question (i.e., April 1, 2002 to appeal the year 2002 assessment). Mark this date on your calendar to make certain you will have sufficient time to evaluate the merits of an appeal.

2. Be aware of the burden of proof and any special rules. Generally, the entity filing the tax appeal will have the burden of proving that the tax assessment is incorrect. In New Jersey, as in most states, the tax assessment is presumed to be correct and the appealing party has the burden of proving that the assessment is incorrect through sufficient and competent evidence that is "definite, positive and certain in quality and quantity." This high standard requires that very sound and convincing evidence is provided to obtain a reduction in the assessment. Contact your local tax board or tax court to inquire about special rules (i.e. whether you must submit proofs of value before the hearing).

3. Consider the risks. In certain states, the local tax assessor has the right to file a cross appeal to raise your assessment. The risk of a cross appeal depends on several factors, including the tenacity of the local assessor and the merits of the appeal. If there are any doubts about the value of the property, have it appraised before the appeal is filed--it is not wise to pick a fight that you never had a chance of winning.

4. Know the amount in dispute. The tax rate will generally be applied to the tax assessment to determine the tax bill. If, for example, you are in a town with a tax rate of $2.50 per $100 of value, a tax assessment of $500,000 will result in an annual tax bill of $12,500. If you believe the assessment should be $400,000, you are actually litigating over $2,500 (tax rate times reduction in assessment), not $100,000. Therefore, if you confuse a $2,500 case with a $100,000 case, you will be a disappointed property owner at the end of the day.

Now is the time to review your tax assessment and the merits of a tax appeal. Do nor wait until the last minute, since you may have to retain an appraiser to assist you in arriving at a value. The "shoot first and ask questions later" approach is a risky strategy, and may result in an increase in the assessment. Competent real estate tax counsel and an experienced appraiser can help an owner or manager navigate the complicated tax appeal process.

Timothy P. Duggan, Shareholder, is an attorney who practices in the Commercial Litigation Group, primarily in the area of commercial bankruptcy (debtor and creditor's rights), condemnation (eminent domain) and real estate tax appeals. Prior to law school, he was a senior business development analyst at Sequa Corporation (formerly Sun Chemical Corporation), located In New York.

RELATED ARTICLE: Need a Tax lip?

Try These Resources

The official U.S. Treasury Department site that includes a section Called Tax Information for You, where you can learn about exemptions, estimating tax liability, and more.

The Tax Foundation is a non-partisan, nonprofit organization that provides information on federal and state tax policy, tax rates and collections and the economics of taxation.

A comprehensive year-round tax resource for individuals featuring daily tax news, new tax law explanations, coverage of pending tax legislation, and access to IRS forms and publications.

A tax news magazine covering local, federal and global tax issues.

Deloitte & Touche's Tax News and Views includes the latest tax news from Washington.

The PriceWaterhouseCoopers, LLP portal, which includes news and research on tax issues and other key insights.
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Article Details
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Author:Duggan, Timothy P.
Publication:Journal of Property Management
Article Type:Brief Article
Geographic Code:1USA
Date:Mar 1, 2002
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