Protesting Property Tax Valuations: Reasons to Protest

Previously this Blog has discussed the Key Dates and Deadlines to remember for 2020 when protesting property valuations, and the process of protesting property valuations. This post will explore the reasons to protest the county’s assessed valuation of your property and considerations to make when deciding whether your property has been overvalued.

Property valuations are a local government’s way of determining the amount of the following year’s property taxes on an individual’s real property. A lower valuation generally means lower property taxes, while the opposite is true for higher valuations and taxes. A valuation should accurately reflect current market value and should be comparable with other similarly situated properties in the area.

There are several ways a property owner can prove or find evidence and support of the current property value of their real property. A recent sale can help prove current value, or alternatively a property owner can research sales for comparable properties. Property owners can check their county of residence’s property records, and also research assessed valuations for similar properties.

Once you have proven a valuation of your property, there may be numerous reasons why the county’s assessed valuations on your property are wrong. Below are just a few examples of scenarios in which a property valuation may be overvalued by the county and need to be protested:

• Real property may be overvalued when it is damaged, such as a cracked foundation or a damaged roof, and not be included in county’s valuation.
• Real property may be overvalued if the county makes a mistake and miscalculates the square footage of a building.
• Real property may be overvalued if it sits on the market too long and is at a price different than the county’s previous valuation.
• Office buildings may be overvalued if there is less leasable space than the county’s records show.
• Office Buildings or Multi-Family Properties may be overvalued because the county compares them other similar buildings, but does not take into consideration that the overvalued building may be equipped for less tenants than the buildings compared against.
• Multi-Family or Commercial Hospitality Properties may be overvalued because the county miscalculated the valuations when considering income, expenses, and vacancy rates of the buildings.

If you have property that you believe has been overvalued, you should take a few steps before filing a protest with the county during the protest time period each year. First, as mentioned above, gather information about your real property, to see if a protest of the assessed value is warranted.

• Verify information such as the dimensions, square footage, age, and condition of structures on your property.
• Research the assessed valuations of properties in the area around your own property.
• Monitor the real estate market to see what houses in your area are selling for.

If, after doing your research you conclude the assessed valuation is overvalued, set up an informal discussion with the county assessor to attempt to resolve the issue with your property. The county assessor should be able to explain to you the assessed value of your property, answer questions you have, and review additional information you can provide. If the issue is not resolved after discussions with the county assessor, then consider the formal protest process with your respective county’s Board of Equalization.

The property tax valuation protest process at times can be complex and daunting. Attorneys at Vandenack Weaver can assist you at any step of the protest process and help identify why the county’s valuation is wrong and help you, the property owner, save money on property taxes for the upcoming tax year.

VW Contributor: Ryan Coufal
© 2019 Vandenack Weaver LLC
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Department of Labor Delays Implementation of the Fiduciary Rule

Last year, the Department of Labor (“DOL”) issued a final rule, expanding the definition of a fiduciary, making many broker-dealers and insurance agents fiduciaries. This rule, issued April 2016, was set to become effective June 2016, but was then delayed until April 10, 2017, with certain provisions delayed until January of 2018. However, President Trump ordered a review of the new rule and the DOL issued another delay, of 60 days, to complete the review. With the delay, the expanded fiduciary definition will become effective June 9, 2017.

Under the rule, a person or firm that is deemed a fiduciary is required to act in the best interests of their clients. This includes an obligation to avoid conflicts of interests, or otherwise receive compensation that creates a conflict between the interests of the fiduciary and the client. The new rule poses several issues for certain professionals that will be deemed a fiduciary under the new rule. For example, sales commissions would be deemed a conflict of interest, creating an especially problematic situation for broker-dealers that engage in principal transactions with clients. However, the DOL recognized the issue and created several principal transaction exemptions, but the exemptions require additional burdensome steps. This issue, among others, are central to the review causing the rule to be delayed.

Despite this delay, and the DOL admitting the review will not be complete by June 9, 2017, the expanded definition of fiduciary will be implemented at the end of the 60-day delay. Therefore, broker-dealers, insurance agents, and others that will now be deemed a fiduciary, should be prepared for the additional requirements on June 9, 2017.

© 2017 Vandenack Weaver LLC
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Unbundling Fiduciary Fees

Recently, the Internal Revenue Service (IRS) issued final guidance on Internal Revenue Code (IRC) Section 67 as it pertains to a 2 percent floor for miscellaneous itemized deductions. This is important to fiduciaries of non-grantor trusts and estates because it will impact what fees can be deducted for the taxable year. The issue stems from several court cases, including a United States Supreme Court case, that placed confusion regarding the generally held notion that all fees and expenses associated with trust and estate administration were deductible.

The specific question pertains to a 2 percent floor and whether administration expenses, in aggregate, must exceed 2 percent of the adjusted gross income prior to being deductible. Before this confusion, a fiduciary could simply bundle all their administration expenses, classify it as such, and not concern themselves with the 2 percent floor. However, the various court interpretations have interjected confusion regarding fee bundling and whether each fee inside the bundle is subject to the 2 percent floor.

The guidance issued by the IRS attempts clarify the problem. Although the expenses can still be bundled, they must be bundled as expenses subject to the 2 percent floor and expenses that are not. This is much simpler in theory than in practice. Determining whether an expense falls into one category or the other remains tricky. Ultimately, this means that all expenses incurred by fiduciaries in the administration of a non-grantor trust or estate must be unbundled and classified. Although the IRS guidance lists specific expenses, it is not an exhaustive list. Unfortunately, there is not a perfect solution to this process and great care must be taken in the classification process.

© 2014 Parsonage Vandenack Williams LLC

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Are There Any Exemptions to the Estate Tax?

There are exemptions to the estate tax. The federal estate tax exemption for 2014 is $5,340,000 and that pertains to each American citizen; therefore, between yourself and your spouse you have over $10,000,000 in exemption. In addition to that, there is a skip generation benefit equal in value which means that you can not only pass down to your spouse and to children, but also down to future generations by use of the skip generation with it.

© 2014 Parsonage Vandenack Williams LLC

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Trusts Can Be Excepted From Passive Activity Losses Related to Real Estate

The IRS has historically argued that trusts are categorically excluded from obtaining an exception to the passive activity rules for rental real estate activities. A recent Tax Court ruling has contradicted this position and indicated that a complex trust engaged in rental real estate activities can qualify for an exception to the passive activity rules.  In determining that the exception was available, the court looked to the activities of the individual trustees and determined that the material participation trust was satisfied. This is an important ruling in the trust income tax regime and creates the opportunity to limit trust exposure to the tax on investment income.

© 2014 Parsonage Vandenack Williams LLC

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IRS Allows Extension of Time to File Estate Tax Returns

The IRS has issued Rev. Proc. 2014-18 to provide relief to certain estates that failed to file a federal estate tax return in order to elect portability of a decedent’s unused exclusion amount for the benefit of the decedent’s surviving spouse.

The Revenue Procedure limits the relief provided to estates of decedents that died during 2011, 2012 or 2013 that failed to file a return within the time required by law to elect portability of unused exclusion amount to the decedent’s spouse. The relief is only available if the estate is not otherwise required to file an estate tax return.

Estates that are not eligible for relief under Rev. Proc. 2014-18 may request an extension of time to make the portability election by requesting a private letter ruling pursuant to the procedures set forth in Rev. Proc. 2014-1.

The full text of Rev. Proc. 2014-18 is available at: http://www.irs.gov/pub/irs-drop/rp-14-18.pdf.

 

© 2014 Parsonage Vandenack Williams LLC

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Government Shutdown Has No Impact on Tax Deadlines

The IRS has issued a notice that the partial shutdown of the federal government does not affect federal tax law requirements.  Taxpayers with six-month extensions to file a return that expire on October 15^th are still required to comply with this deadline.  Individuals and businesses are also still required to file tax withholdings and make deposits with the IRS as required.

© 2013 Parsonage Vandenack Williams LLC

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IRS Issues Same-Sex Marriage Guidance

The IRS recently issued Rev. Rul. 2013-17 providing guidance on how the Windsor ruling (finding Section 3 of DOMA unconstitutional) affects tax issues related to same-sex marriage.

First, the IRS announced it will determine marital status based on the laws of the state or country of celebration of the marriage, not the state of residence of the affected persons. Therefore, same-sex individuals who marry in Iowa (or any other state that recognizes same-sex marriages) and live in Nebraska (or any other state that does not recognize same-sex marriages) will be considered married for federal tax law purposes.

Second, the IRS analyzed the use of the terms “husband”, “wife” and “husband and wife” in the Internal Revenue Code (Code) and indicated that it interprets those terms as gender-neutral. This interpretation permits same-sex couples to be, individually and collectively, “husband”, “wife” and “husband and wife”. The IRS will legally recognize same-sex married individuals as spouses, husbands and wives wherever those terms exist in the Code.

Third, the IRS determined that domestic arrangements not legally identified as marriage under state law will not be a marriage for purposes of the IRC. Same-sex partners in a civil union or a domestic partnership are not married for federal tax purposes.

Lastly, the IRS reviewed the timing for applying the Windsor decision. Rev. Rul. 2013-17 applies prospectively from September 16, 2013 forward. In addition, affected taxpayers may rely on the guidance for any open tax year, which will permit amending previously filed returns.

© 2013 Parsonage Vandenack Williams LLC

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Tax Implications of Supreme Court Decision Holding DOMA Unconstitutional

The Supreme Court recently  struck down the Defense of Marriage Act (“DOMA”).  Tax breaks that will now be available to same sex spouse include the ability to file a joint return, the opportunity to obtain spousal health insurance for the same sex spouse; and qualification as a surviving spouse to stretch out distributions under an IRA or qualified retirement plan. There are some unanswered questions after the ruling. For example, it is unclear how a same sex couple married in a state allowing for such marriage will be treated when living in a state that does not allow same sex marriage.

© 2013 Parsonage Vandenack Williams LLC

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Expiration of Bush Tax Cuts Likely Will Raise Income Taxes for Everyone

If The President and Congress do not act before the end of the year, many significant tax cuts from the Bush era will expire. One of the significant tax increases will be in the area of estate taxes.  If action is not taken these tax laws will revert back to what they were in 2001, and the exemption for bequests at death will drop to $1,000,000.

Additional taxes that will increase, if action is not taken, include income taxes (by removal of the 10% bracket and increases in the 25% or higher brackets) and long-term capital gains (which will be increased to 20%).  Many favorable tax breaks, such as bonus depreciation, will no longer be available.

Tax planning strategies are extremely important to ease the transition into 2013. A good year-end tax plan could make a huge impact on taxes paid after the first of the year. With a successful strategy, the ill-effects of the Bush Tax Cuts expiration will be lessened.

© 2012 Parsonage Vandenack Williams LLC

For more information, contact info@pvwlaw.com